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Eric Ng

Dichain Systems, the information technology flagship of conglomerate China Merchants Group, hopes to book revenues of more than HK$100 million and turn in its first profits this year, according to its chief operating officer, Li Xinggui.

Set up in 1999 with a registered capital of HK$200 million, Dichain is one of the largest logistics and supply chain management system providers on the mainland.

It provides logistics software and hardware to ports, airports, retailers, banks, schools, customs departments and property management firms.

'We recorded a turnover of over HK$10 million in June alone. We are aiming to exceed sales of HK$100 million this year and to book a profit after breaking even last year,' Mr Li said.

Software accounted for about 70 per cent of its sales, while hardware took up the remainder.

Gross profit margin of hardware sales ranged from 3 to 5 per cent, while that of software was between 80 per cent and 200 per cent, Mr Li added.

The company has branches in Shanghai, Beijing and Shenzhen, and offices in Chengdu, Chongqing, Xiamen, Xian, Wuhan and Guangzhou.

The company has struck an agreement to buy a 55.3 per cent stake in main board-listed Dransfield Holdings, which is engaged in property, manufacturing of edible oils and trading of wine and electrical appliances.

Cash-strapped Dransfield is saddled with HK$75.4 million in bank borrowings and has been under immense pressure to dispose of assets to repay the loans. Dichain's investment would bring in some HK$46 million to reduce the debt burden.

Dransfield's only logistics operation is a bonded warehouse in Shenzhen, which achieved occupancy of only 10 per cent to 15 per cent over the past two years because of stiff competition.

Mr Li said Dichain had no plans to inject assets into Dransfield, but added he believed Dichain was likely to keep its business separate from that of Dransfield.

'It would make more commercial sense for Dichain to continue to focus on fourth-party logistics and Dransfield on second- and third-party logistics,' he said.

'This way we can avoid conflict-of-interest issues,' he said, adding that the impartiality of Dichain was important when dealing with clients who may be rivals if it also engages in second- and third- party logistics.

First-party logistics is carried out by a company that needs transportation services itself, such as a manufacturer.

Second-party logistics providers are operators of logistics facilities, while third-party providers are managers of such facilities. Fourth-party providers engage only in the provision of technology that facilitates logistics services.

Mr Li estimated that China's logistics market would grow 20 per cent to 30 per cent annually from last year's US$250 billion to US$500 billion by 2005, as it becomes a major global manufacturing and sourcing centre.



Dichain Systems lines up to book first profits on $100m turnover