China Merchants Group

China Merchants to bill shippers in yuan at Shenzhen West ports

PUBLISHED : Wednesday, 16 April, 2008, 12:00am
UPDATED : Wednesday, 16 April, 2008, 12:00am

China Merchants Holdings (International) said its Shenzhen West ports would charge shipping companies in yuan instead of Hong Kong dollars in order to lessen the negative impact from the yuan's appreciation.

The change would start next month, the company said after announcing a 39.6 per cent increase in net profit to HK$3.55 billion for last year. Earnings per share rose 36.6 per cent to HK$1.49. A final dividend of 45 HK cents per share was proposed.

The port operator also said an increase in port charges in Tianjin and Ningbo, and growing trade between the mainland and Europe, could provide a cushion against the economic slowdown in the United States.

'The US economic downturn will not decrease demand for low-priced necessities [which are transported by ship],' said China Merchants chairman Fu Yuning yesterday. 'Trade volume between China and the US has fallen to below 30 per cent; the negative impact will be limited.'

Earnings before interest and taxes (ebit) at China Merchants' port division, which account for 75 per cent of total ebit, rose 33 per cent to HK$3.93 billion. Throughput, mainly in Shanghai, Shenzhen and Hong Kong, rose 19.8 per cent to 40.1 million 20-foot equivalent units (teu) last year.

But in the first quarter, throughput growth slowed to 15.3 per cent. It handled 20 per cent more boxes in Shenzhen West and Ningbo, 12.2 per cent more in Shanghai and 8.1 per cent more in Hong Kong.

Mr Fu said he was comfortable with the growth, given that exports were partially paralysed by snowstorms in February on the mainland. He was confident that mainland ports would maintain double-digit growth this year.

'No doubt there will be double-digit growth in throughput, but lower double-digit growth,' said a transport analyst.

The central government has forecast that total throughput will increase to 150 million teu in 2010 from 113 million last year. That represents 13 per cent compound annual growth, less than last year's 20 per cent.

Shanghai International Port Group, of which China Merchants holds 26 per cent, has projected throughput growth of 15 per cent for this year, from 20 per cent in 2007.

But China Merchants is optimistic about its earnings because of higher port charges in Ningbo, Shanghai and Tianjin. Ningbo and Tianjin have raised rates by 10 per cent this year, while Shanghai lifted rates by up to 20 per cent in October last year.

Mr Fu said the firm hoped to sign an agreement for a project in Vietnam with the local government after more than a year of negotiations.

'The delay is related to site selection as the port is adjacent to a local oil company, which is also in need of the coastline to build terminals,' said Mr Fu.

China Merchants plans to invest HK$4.5 billion on four port projects - in Ningbo, Qingdao, Shenzhen and in Vietnam.