Singamas to build new factories after posting US$92m net profit

PUBLISHED : Thursday, 10 March, 2011, 12:00am
UPDATED : Thursday, 10 March, 2011, 12:00am

Singamas Container Holdings, the world's second-largest maker of shipping containers, will spend US$170 million to build two more manufacturing plants near the Yangtze River in a move to raise capacity by over 40 per cent.

The company's share price closed 12.28 per cent higher at HK$3.29 as it announced revenue had jumped four times last year to US$1.37 billion and forecast demand to remain strong for at least the next two years.

The company's full-year net profit reached US$92 million - exceeding market expectations of about US$29 million, thanks to extremely strong growth in the second half of last year. This was compared to a net loss of US$51 million in 2009.

While the company expected the mainland's export growth to slow from about 30 per cent this year to about 10 per cent next year, chief executive Teo Siong-seng said demand for containers should remain strong. 'There were virtually no or very few containers produced between mid-2008 and late 2009. As the economy continues to rebound, the industry will spend this year and the next filling up the void, and the momentum will go into 2013 fuelled by rising demand to replace old containers.'

Teo said although a container can be used for up to 15 years, most are replaced during their 10th. At the moment no one is giving up their old boxes because of the shortage.

Their two new factories in Qidong, Nantong city are expected to boost the company's annual capacity to produce common dry freight containers by 300,000 teu (twenty-foot equivalent units) when they start operation in 2012. Combined with capacity to produce an extra 60,000 teu of specialised containers, total capacity will rise from a projected 850,000 teu this year to one million teu by 2012.

The company's capital expenditure is expected to reach US$80 million to US$90 million by the end of this year, but it will also raise funds through the debt market.

Teo said the company will eventually boost the revenue contribution of specialised containers from 19 per cent now to 40 to 50 per cent.

'Demand for specialised containers has fluctuated less than that of dry freight containers, and the gross profit margin is usually 4 to 10 per cent higher,' Teo said.

Specialised containers are larger and sometimes carry refrigerated products. While the average selling price of a teu is now close to US$3,000, the company, which has a 25 per cent global manufacturing market share, already had a full order book last month and was now 'filling May capacity'. The company will pay a dividend of 80 HK cents per share.