China's leading logistics company Sinotrans Ltd says it will
embark on a spending spree this year for port and transportation
facilities as a way to quickly gain a competitive edge.
This year's investment budget is 2.5 billion yuan (US$312.5
million), compared to 1 billion yuan (US$125 million) spent over
the past three years, said Zhang Jianwei, executive director and
president of the Hong Kong-listed company.
"We have been too cautious (in investments) in the past three
years," he said yesterday before an opening ceremony for the
company's Tianjin container yard.
He added the company's performance in the capital market lacked
momentum.
The 2.5 billion yuan will be used mostly to buy infrastructure
facilities in targeted areas.
In China's big coastal port cities such as Shanghai and
Shenzhen, Sinotrans will focus on container yards and container
freight stations, where they will receive, assemble, hold, store
and deliver containers, according to Zhang.
"We will not compete with large liners to buy container berths
in these big ports as they are expensive and take a long time to
produce returns," he added.
A container berth in Shanghai's Yangshan port will cost more
than 1 billion yuan (US$125 million).
But Zhang said the company would consider some smaller berths in
other cities along the Yangtze River Delta and Pearl River
Delta.
Sinotrans also plans to build some delivery centres around
railway stations in some key cities in Central and western
China.
"When completed, the company will have a good logistics network
in the country," said Zhang.
These purchases will not be completed this year, but are
expected to be finished in five years and will require further
investment, according to the company's development plan.
Part of the money for the purchases will be gained through
additional shares. A shareholders' meeting will be held in May to
vote whether to provide flexibility to the company directors to
issue more shares when needed, which will not exceed 20 percent of
the issued share capital of the company.
As part of the company's network building, it kicked off
operations for its container yard in Tianjin's Binhai New Area,
which covers an area of 210,000 square metres and is expected to
have a yearly turnover of 500,000 TEUs.
Tianjin was China's fifth largest container port last year and
has huge potential.
The central government has listed the development of the city's
Binhai New Area as part of its national strategy.
Like other local logistics companies, Sinotrans faces strong
competition in 2006.
China opened up its logistics market completely in December
2005, which will draw other logistics giants to share in the
promising market, including Fedex, UPS and Maersk.
Besides big purchases, Sinotrans is set to optimize its
resource-allocation, step up its development of new products,
improve services and efficiency and strengthen its internal
control.
It posted a 6.6 percent yearly increase in net profit for 2005,
reaching 857 million yuan (US$107 million).
The company's turnover surged to 28.8 billion yuan (US$3.6
billion), a jump of more than 30 percent year-on-year.
Its core businesses did well in 2005, with freight forwarding
and express services recording a year-on-year surge in turnover of
31.9 percent and 36.7 percent respectively.
(China Daily April 27, 2006)