Turning loss into gain in full strength
I n 2010, China’s export value amounted to USD 1.5 trillion, second only to European Union whose export value was ranked first worldwide. The robust real economic growth of 10.3% and strong export achieved by China last year led Singamas Container, specializing in the container manufacturing operations, not only to turn loss into gain last year, but also to reach a record-high net profit of USD 92.54 million and quadruple turnover of USD 1.373 billion, surprising the management and investors. Teo Siong Seng, the President and Chief Executive Officer of Singamas Container Holdings (716), said when receiving the interview the haze of the financial crisis in 2008 has granted the market a great opportunity to sift the wheat from the chaff. Today, Singamas Container Holdings has become one of the best container manufacturers worldwide. Together with its logistic auxiliary services of vertical integration, Singamas (“Winning Lion” in Chinese meaning) is revealing its mighty paws as before 2008.
Regaining right track of trade in 2009 end
The domino-like financial crisis in 2008 plunged the global trade until the summer of 2009 when the economy showed some signs of recovery. However, the overall transaction volume of trades was still low, global traders, above all, were still waiting to see if the economy at that moment was really having a reversal, or simply a flash in the pan. Unfortunately, in average 2 million to 4 million new 20-foot TEUs were produced annually in mainland China and a mass of empty containers were shipped back from the U.S. and Europe to the mainland amid of the economic downturn those years. As a conservative estimate, during March and April of 2009, six to seven million 20-foot TEUs were stockpiled in the mainland, frustrating the entire container manufacturing industry which then fell into an unprecedented ice age. By the end of 2009, the management saw signs of a thawing economy. Ahead of a seeming reversal in sight, workers were re-transferred back in order from rural and urban area.
In May and June of 2010, the Group gradually recovered a “taipan” shift of capacity to cater to the very first sunshine after the snow. However, the global import and export season is usually in the second and third quarters, the Group would make use of the worker capacity of the two “taipan” shifts from March to September to meet the market demand for containers. In October to February, a capacity of one “taipan” shift would be put back in practice. While it is true that the container industry is closely related to the export trade, it is entirely not affected by the shipping cost. Accordingly, the peak season of the container industry, every March to September, is just in step with that of the export trade. He pointed out that due to the introduction of the new labor law in the mainland, which makes enterprises difficult to instantly mobilize workers, and soaring demand for containers by the leasing companies amid of the economic recovery, most of the leasing companies chose to place their orders in the low season since the financial crisis, willing to pay additional interest to ensure their reservation during the peak season.
Five keys to turn loss into gain
The Group results turned loss into gain last year, he explained: first, there came a break of container manufacturing about one and a half year after the financial crisis; second, during the financial crisis, more than 1.5 million used containers were sold in the market, further reducing the supply; third, the Group last year produced 630,000 20-foot TEUs, achieving a very cost-effective plant production occupancy rate of over 80%; fourth, the raised container price offset part of the high cost of human resources and enhanced the Group profits; fifth, the economic rebound in 2010 led the long repressed demand to rocket.
From the viewpoint of an investor, Teo Siong Seng thinks that the container manufacturing industry is subject to great changes at this stage. The number of the mainland competitors has been substantially reduced and the market is no longer oversupplied, rather, it is turning into a shortage situation. Besides, the Group capacity can be flexibly adjusted with the actual needs of the market, making the cost control more effective. He stressed that it is now nip and tuck between Singamas and CIMC, who are taking 75% of the mainland and even the world total container capacity respectively. Mr. Teo admitted that outsiders who intend to compete directly with the Group or CIMC have to set up at least seven or eight factories, and more importantly, the container industry is a restricted one where forty million US dollars is required to be paid for the license, almost making outsiders impossible to get into the competition.