Kumul Consolidated Holdings has released the 2018—and 2019 first quarter—financial results for Papua New Guinea’s state-owned enterprises. Business Advantage PNG investigates.

A management restructure and a clear focus on operating efficiency and staff productivity have helped Air Niugini turn itself around. Credit: Air Niugini

The financial performance results of Kumul Consolidated Holdings (KCH), the holding company for Papua New Guinea’s state-owned enterprises (SOEs), show some overall positives. Total revenues in the first quarter of 2019 are up 8.7 per cent on the previous corresponding period to K815.6 million.

The group recorded a profit of K18.9 million in the first quarter of 2019, compared with a loss of K19.6 million in the first quarter of 2018.

The KCH results come at a time when the Prime Minister, James Marape, has reportedly criticised SOEs for not declaring dividends to the state. He claimed many SOEs are ‘building empires on their own’ and said there would be ‘greater visibility’ in KCH.

Bright spot

Air Niugini has been a bright spot. The company incurred a loss of K61.1 million in 2018, but this was an improvement on the K115.7 million of the previous year. The turnaround has continued in the first quarter of this year, with PNG’s national airline recording a profit of K2.2 million.

The losses in 2018 were attributed to the impact of ‘lower than expected yields associated with a reduced operating schedule’ and ‘increased competition on domestic and international sectors.’ Increased costs were associated with crewing and international aircraft fleet leases and the losses of two aircraft.

‘A significant management restructure is required to build value and restore subscriber confidence, whilst consolidating its network to drive efficiency and security.’

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‘The results of the first quarter of 2019 demonstrate a significant turnaround for Air Niugini, driven by a management restructure, cancellation of loss-making international sectors and a focus on operating efficiency and staff productivity,’ KCH said in its report.

A PNG Power worker at the Yonki Dam hydro power plant. Credit: PNG Power

Losses

The financial performance of Kumul Telikom Holdings (KTH) and PNG Power were less positive.

In 2018, Kumul Telikom recorded a loss of K45.9 million, up slightly on the previous year. This was despite an 11 per cent rise in revenue to K480.7 million.

The losses have continued in the first quarter of this year. The state’s telecommunications company, which includes subsidiaries Telikom PNG, Bmobile, PNG Dataco and EMTV, lost K12.1 million, although this was a slight improvement on the previous corresponding period.

‘KTH’s performance is still dominated by network reliability issues, poor productivity and escalating costs,’ the report said.

‘A significant management restructure is required to build value and restore subscriber confidence, whilst consolidating its network to drive efficiency and security.’

PNG Power

PNG Power’s financials have deteriorated, according to the figures released by KCH. However, PNG Power (PPL) itself has since issued a statement saying that these figures are not final:

‘PNG Power would like to make it clear that the 2018 financial reports are still under review and a final unaudited figure is yet to be released.’

The KCH report reported that the state utility’s losses rose from K27.4 million in 2017 to K197.2 million in 2018. This was despite revenues rising 4.9 per cent to K908.7 million.

Reported losses in the first quarter of this year also worsened. They came in at K22.5 million, compared with K5.8 million in the first quarter of 2018.

‘Water PNG/Eda Ranu, MVIL (Motor Vehicles Insurance Ltd), National Development Bank and Post PNG were all profitable in the first quarter of 2019.’

The report notes the company is in transition, and has to meet ambitious targets.

‘Combined with a comprehensive business model reform program, PPL (PNG Power) have a focus on reducing the reliance on expensive thermal power generation contracts and utilising rehabilitated hydro power and cheaper gas options.’

The report adds that the company has ‘significant challenges’ to build reliability across an ageing transmission network.

‘In 2019, there have been no cash losses and management ensures the company operates within its means,’ noted PPL’s Acting Managing Director Carolyn Blacklock this week.

Dividends

PNG Ports reported profits of K26.6 million on K77 million in revenue in the first quarter if 2019. This suggests that the company’s gross profit margins are high.

Water PNG/Eda Ranu, MVIL (Motor Vehicles Insurance Ltd), National Development Bank and Post PNG were all profitable in the first quarter of 2019.

KCH will present a dividend of K80 million to the state ‘despite the consolidated result’.