Singamas plans to widen the use of its shipping containers into vessels for chemicals, solar power and even modular data centres
- Singamas’ first-half revenue fell 39.7 per cent to US$584 million, causing its net loss to balloon 17-fold to US$50.7 million, as the price of shipping containers plunged due to a glut in the worldwide market
- The company is considering a diversification, where its containers can be turned into specialist vessels for chemicals, solar power and even modular data centres
Singamas Container Holdings said it is pursuing a diversification, as its mainstay business of making dry-freight shipping containers suffered from shrinking commerce in the year-long trade war between the two largest economies on the planet.
Revenue fell 39.7 per cent to US$584 million in the first half, causing Singamas’ net loss to balloon 17-fold to US$50.7 million, as the price of shipping containers plunged due to a glut in the worldwide market.
Faced with declining sales and mounting losses, the unit of Singapore’s Pacific International Lines wants to move Singamas’ business to focus on specialised containers used in transporting chemicals, or even to be turned into solar power units or modular data centres, said chairman Teo Siong Seng, who is also executive chairman of the shipping line.
Profit margins are higher in specialised containers, Teo said. Such vessels made up 8 per cent of Singamas’ 2017 production volume, and 15 per cent of revenue, rising to 15 per cent of volume and 30 per cent of sales by the first half of this year, he said.
“Singamas would become a much smaller, more specialised company with no debt,” Teo said at a press conference today in Hong Kong, where the company’s shares are traded. “The switch in strategy was something that Singamas had considered before the trade war even started, he said, but the trade war had accelerated the plan.
The trade war between the United States and China is pushing the Chinese economy toward greater reliance on domestic consumption, away from exports, which opens up new opportunities, Teo said.
Specialist containers have a broad array of uses and potential customers, rather than supplying a standardised unit to go to a few very large customers, which essentially turned dry shipping containers into a commodity, he said. These could even be a part of China’s demand for green energy, as containers that capture solar power could be used to create modular arrays that could be shifted or relocated as the need arises. Containers could be turned into portable electric vehicle power stations.
Teo said his goal was to create a “new Singamas.” The company will switch half of the volume of its output to specialist containers in two years, a drastic move away from the current composition, where dry freight containers made up 68 per cent of first-half revenue.
Singamas announced the sale of manufacturing facilities in May to China’s state-owned shipping and logistics giant Cosco Shipping Financial Holdings for US$565 million in cash. The sale was completed on August 2.
Proceeds of the sale would be used to pay down US$300 million in term loans and another US$100 million would be paid as a special dividend to shareholders, said Teo and Chief Financial Officer Rebecca Chung. The remainder would be used for upgrading production facilities in Shanghai and Huizhou to meet demand for specialised containers.
The sale drastically reduced Singamas’ production capacity from 800,000 TEUs, or 20-foot equivalent units, to 200,000 TEUs. Before the sale, Singamas was the world’s second-largest producer of dry containers, with about 23 per cent global market share, said Teo, who also sits on the board of Cosco.
Singamas’ shares fell nearly 1 per cent to HK$1.03 today in Hong Kong before earnings were announced. The stock has fallen from a high of HK$1.89 per share on September 22, 2017.
