Sinotrans plans asset-buying spree

PUBLISHED : Thursday, 27 March, 2008, 12:00am
UPDATED : Thursday, 27 March, 2008, 12:00am

Sinotrans, the country's largest freight forwarding company, plans to invest 10 billion yuan (HK$11.05 billion) in the next three years to strengthen its logistics business.

The firm disclosed the plan as it announced a 30 per cent jump in net profit last year to 804 million yuan, or 19 fen per share, on a 20.7 per cent rise in sales to 38.9 billion yuan, amid strong growth in freight forwarding, storage and terminal services.

'We would like to acquire warehouses, depots and terminals along the Yangtze River from our parent company this year,' said executive director Zhang Jiangwei yesterday.

The company said it would acquire assets in Shanghai, Zhejiang, Jiangsu, Tianjin and overseas in the next three years after taking over 1.1 billion yuan worth of assets - ranging from warehouses to stockyards and terminals - from Sinotrans Group in December last year.

The company said it could improve its profit margin through acquisitions. Sinotrans margins average only 2 per cent against the international average of 4 per cent. In a country where more than 10,000 freight forwarders operate, margins are squeezed by fierce competition.

Mr Zhang said the firm would expand its two weak divisions, marine transport and air freight, through mergers and acquisitions.

Sinotrans' air cargo joint venture with Korean Airlines is pending approval.

Losses in the marine transport division were reduced 41 per cent to 148 million yuan last year due to a route reshuffle. The company plans to shut its long-haul routes to Europe and reallocate more ships to domestic and short-haul routes.

Profit in the express service segment dropped 22.4 per cent further to 350 million yuan last year. Management said it was due to declining demand from the United States and a rise in connection fees levied by courier DHL on the company.

The stock closed 8.6 per cent up at HK$2.14 yesterday. At one point, it traded 13 per cent higher before the market closed.