STRENGTHENING THE CORE 2019 ANNUAL REPORT DAVAO HEAD OFFICE Stella Hizon Reyes Road Bo. Pampanga, Davao City 8000 Tel. +63 82 224 5373 MANILA OFFICE 18th Floor, Udenna Tower Rizal Drive cor. 4th Avenue, Bonifacio Global City, Taguig City 1634 Tel: +63 2 8403 4015 Fax: +63 2 8403 4022 We are committed to deliver value. We have strategically positioned ourselves as a PhP 6.5B 12 builder of business, and we Total Revenue from Brand-new Shipping Services vessels acquired believe that with our Group which was 34% since 2015 synergy and adaptability, we growth year-on-year will see us through the ups and downs of the industry. PhP 2B 29% year-on-year increase in EBITDA STRENGTHENING THE CORE 2019 ANNUAL REPORT Original Proponent Status (OPS) Received OPS for Davao Sasa Port and Davao International Airport Modernization Projects 500,726 PhP 8.7B 19% increase in 27% growth in the Worklink's delivery Company's Total Assets transactions PAGE 4 PAGE 1 CHELSEA LOGISTICS AND CHELSEA LOGISTICS AND INFRASTRUCTURECONTENTS HOLDINGS CORP. INFRASTRUCTURE HOLDINGS CORP. 01 02 06 08 Vision Message from President Our Mission the Chairman & CEO’s Businesses & Values & Founder Review 09 10 12 14 Conglomerate 2019 Financial Shipping & Map Milestones Highlights Transport 24 28 Logistics & Areas of Distribution Operations Shipping 30 29 Corporate Social 33 Areas of Responsibility Corporate Operations Governance Logistics 48 49 42 46 Statement of Report of Board of Management Management’s Independent Directors Team Responsibility Auditors 56 64 132 144 Consolidated Notes to Management’s Our Financial Consolidated Discussion & Business Financial Statements Statements Analysis Partners PAGE 4 PAGE 1 About the Cover CHELSEA LOGISTICS AND CHELSEA LOGISTICS AND INFRASTRUCTURE HOLDINGS CORP. We are only as solid as what we build on. INFRASTRUCTURE HOLDINGS CORP. focused on strengthening our foundation to ensure that the shipping and logistics businesses were built on solid rock, not on sandy soil. Solid. Strong. Spirited. The cover of this Annual Report, the core, vividly manifests how our business core brings life to the bold vision we committed ourselves to. works will result in a more reliable and sustainable Company, bringing long-term value to stakeholders. VISION MISSION We transport passengers, cargos, petroleum, logistics company known for its oil, chemicals and other bulk products. unrivalled customer service. We satisfy our customers’ needs through We constantly challenge ourselves to do better and to perform beyond what is expected. We care for the community and the environment by applying the best practices in ship management, adhering to global standards. We deliver superior returns to our stakeholders through prudent stewardship of our resources. INTEGRITY We adhere to the highest ethical and professional VALUES PASSION We are motivated and driven in what we do. ENTERPRISE We seize opportunities to enhance our growth. TEAMWORK We work as one to deliver our commitments. EXCELLENCE We deliver unsurpassed performance in all our endeavours. STEWARDSHIP We utilize our assets responsibly. PAGE 2 PAGE 3 CHELSEA LOGISTICS AND CHELSEA LOGISTICS AND INFRASTRUCTURE HOLDINGS CORP. INFRASTRUCTURE HOLDINGS CORP. MESSAGE FROM THE CHAIRMAN & FOUNDER 2,648 Total number of employees as of 31 December 2019 [Chelsea Group] 132% increase in warehouse space PAGE 2 PAGE 3 CHELSEA LOGISTICS AND CHELSEA LOGISTICS AND INFRASTRUCTURE HOLDINGS CORP. INFRASTRUCTURE HOLDINGS CORP. Dear fellow shareholders, The shipping industry in the Philippines faced a rough In October 2019, we acquired SuperCat to strengthen year. Under the Tax Reform for Acceleration and Inclusion our shipping portfolio and support Chelsea Logistics’ Law (TRAIN), excise tax on fuel further increased to PhP business direction. But more than just increasing our 4.50 per liter; due to this, cost of vessel operations hiked. fleet size, we saw this acquisition as an opportunity to With a total of 77 vessels, the increase in the cost of fuel operate in more strategic areas, open new routes, and affected the Company’s operations with bunkering taking serve more passengers nationwide through SuperCat’s up the largest position in Chelsea Logistics’ operating high-speed vessels, which currently serve Batangas, costs. The Over-Tonnage Policy that was implemented Bacolod, Cebu, Iloilo, Ormoc, Calapan, and Tagbilaran. on domestic vessels also had a huge impact on the Company’s tanker business as this resulted in a cut- On the other hand, the unprecedented growth of our throat competition on freight rates. logistics business was truly promising. It has been bringing our service levels to new heights with the The year that was, taught us that there’s truth to the addition of 12 trucks and seven warehouses in 2019, saying “no pain, no gain”. Despite the challenges and increasing our warehouse space to 13,973 sqm, up by growing pains in 2019, Chelsea Logistics focused on 132% from 2018. We also expanded our warehouse strengthening its core: business position, partnerships, services beyond Metro Manila to cover key major cities and people. such as Pampanga, Cagayan de Oro, and Bacolod. Strengthening our business position Our infrastructure projects gained more headway this Coming on the heels of acquiring various shipping and year as the Original Proponent Status (OPS) for the logistics businesses, we saw the need to consolidate Davao Sasa Port Modernization was conferred on the and create synergy among these strong brands, Company by the Philippine Ports Authority (PPA) in wherein each is a market leader in the area where the August 2019. The Project targets to deliver among Company operates. We invested our time and valuable others, port capacity expansion, flow improvement resources to streamline, standardize, and improve the of waterborne commerce and inter-island seaborne subsidiaries’ business processes and operations. We commerce and foreign trades, and streamlining, enhancement, and optimization of port maintenance major subsidiaries namely Chelsea Shipping, Trans-Asia, and operations. The Project will also promote regional Starlite, Worklink, and SuperCat, to position Chelsea development through the dispersal of industries and Logistics as a holistic and trustworthy brand, true to its commercial activities throughout the region. PAGE 4 PAGE 5 CHELSEA LOGISTICS AND CHELSEA LOGISTICS AND INFRASTRUCTURE HOLDINGS CORP. INFRASTRUCTURE HOLDINGS CORP. Meanwhile, our Davao International Airport (DIA) of RoRo passengers in the country and also provide Modernization Proposal was cleared by the National Economic and Development Authority - Investment maritime industry. This year, we have launched new Coordination Committee (NEDA-ICC) in December RoRo passenger ferries, Trans-Asia 19 and Trans-Asia 2019. The modernization of DIA is expected to 20, to ply the routes of Cebu-Tagbilaran/Tagbilaran-CDO bring the economic growth of Davao Region and and Cebu-CDO respectively. Starlite Ferries also deployed Mindanao to a higher level through increased trade and its brand-new vessel, Stella Maris, to expand its footprint tourism activities. The scope of this Project includes in Cebu and serve the Cebu-Surigao-Cebu route. construction of parallel taxiway, improvement of airside Chelsea Logistics’ regional partnerships mark its long and landside facilities, installation of modern airport IT standing and ongoing commitment to becoming the systems, and all activities needed to improve airport country’s prime mover of vital goods, cargoes and services of DIA, the primary gateway to Mindanao and people. We look to our business partners as leaders in the third largest airport in the country. their respective industries, whose excellence can bring the Philippines’ local shipping and telecommunications Our telecommunications business, DITO Telecommunity, industry to global standards. Public Convenience and Necessity (CPCN) or ‘Permit Strengthening our people To Operate’ from the National Telecommunications Our tagline: “Together, we serve you better”, motivated Commission (NTC) on July 8. This is indeed a milestone us to not just connect people and move goods, but to not only for us but for the telecommunications industry know customers’ needs and serve them wholeheartedly. and the Filipino community. Because in this era of Guided by the principle, “You don’t build a business; You globalization, telecommunications is vital and is the key build people and then the people build the business,” we to bolstering a country’s productivity. equipped our people with solid business orientation and development programs. Strengthening our partnerships The past three years have seen not only the entry of Our Human Resource Department was tasked to double its effort in making this happen. A total of 93 training but also the development of regional partnerships that seminars and workshops was conducted across the Group to equip our employees with relevant technical The second quarter of 2019 witnessed Chelsea Logistics and soft skills both for land and sea-based personnel. and Udenna Corporation’s partnership with China The Human Resources Group is committed to providing internal and external training programs for the most service and third largest mobile telecommunication important asset of the Company – our people. provider in China. The parties inked a USD 5.4 Billion investment to provide world-class telecommunications The Company has also embraced the philosophy of service in the Philippines. The signing of the investment “leaders
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