Sinotrans sees shipping recovery as profit increases

Mainland freight forwarding company cannot predict if rates will rebound in the near future

PUBLISHED : Friday, 23 August, 2013, 12:00am
UPDATED : Friday, 23 August, 2013, 5:45am

Sinotrans, the mainland's largest freight forwarding company, said the shipping industry is recovering but it is too early to predict an upturn in freight rates.

The company saw its net profit increase 15 per cent year on year to 449.8 million yuan (HK$562 million) in the first six months of the year as losses from its marine transport unit narrowed by 74 per cent over the period.

Sales increased 8.4 per cent to 25.1 billion yuan.

"The shipping market started to rebound in the second quarter and is expected to carry on in the third quarter," said Zhang Jianwei, executive director and president of Sinotrans. "But it is unclear whether freight rates would rebound as well."

The growth rate of China's import and export trade accelerated to 8.6 per cent in the first half from 6.2 per cent for all of last year. Container port throughput growth nationwide also increased to 8.3 per cent in the first half from 8.1 per cent on average in 2012.

The company's marine transport division moved 7.8 per cent more containers in the first half to 1.45 million 20-feet equivalent units.

Revenue fell 6.5 per cent to 2.3 billion yuan while net losses narrowed to 35 million yuan from 137 million yuan a year earlier.

Profit from freight forwarding increased 16.4 per cent to 417 million yuan while shipping agency business decreased 18 per cent to 116 million yuan.

The profit margin at Sinotrans' freight forwarding business was 1.9 per cent. The company said it is trying to reach out for more value-added services, such as third-party logistics services, to increase its profit margins.

"Multi-international companies are more inclined to out-source their logistics function to save cost and what we are doing now is providing the domestic logistics knowhow to them," said Gao Wei, a spokesman for Sinotrans.

"We want to provide the logistics solution on the international legs as well which are with higher margin but an area we are not good at right now."

Sinotrans also runs a joint venture with DHL providing international express services on the mainland. The number of packages increased 8.2 per cent year on year to 8.7 million in the first half.

The company's shares dropped 3.47 per cent to HK$ 1.67 yesterday.