Business And Operational Overview

The primary objective for which KGT was originally set up was to take advantage of Malta's strategic location within the Mediterranean and act as a transshipment hub for grain and grain products. In addition, the company also catered for the needs of Medigrain Ltd., another government owned company, that used to be the sole local importer up to May 2004. The terminal managed and operated by KGT is the sole grain terminal operating within the Maltese islands.

Contrary to what was envisaged on its inception, KGT’s operations are today mainly earmarked for the local import market. The importation of grains was liberalized in May 2004 and the grain procurement function is now handled by a multiple of grain importers. This has somewhat impinged on the operations and profitability of the company, mainly as a result of the reduced scale economies that used to be generated by Medigrain Ltd.
KGT is being faced by an increased demand for storage facilities as a consequence of the need to segregate individual importer’s products. Profit margins on tariff rates charged to local importers are however relatively subdued due to the following key factors:

• Pressure to keep tariff rates in hand given the adverse effect of tariff increases on the price of essential commodities.
• The costs incurred to handle and store small fragmented batches, coupled with throughput inefficiencies due to idle capacity.

At the same time transshipment business, though more profitable, is yet characterized by competitive rivalry and a declining market. Nonetheless, it may not be amiss to point out that the Company has managed to create a niche in the partially ‘spoilt cargo’, a segment considered more profitable than the transshipment business per se.