SITC hopes to boost sales ninefold with Asian trade focus
SITC International Holdings Co. (1308) Chief Executive Officer Yang Xianxiang said he aspires to grow the container-ship operator’s sales ninefold as rising consumer spending and free-trade agreements spur regional cargoes, Bloomberg reports.
Yang said in an interview in Shanghai that he admires companies with $10 billion or more of annual revenue and that SITC has “a chance” of reaching that level. Asked if it could do so in five to 10 years, Yang said that “depends on if the path we take is right or not.”
The company, which operates ships linking about 10 Asian markets, along with trucks and warehouses, boosted sales 22 percent last year to $1.1 billion. At that pace, revenue would grow to about $8 billion in a decade.
SITC’s focus on intra-Asian routes has allowed it to remain profitable as other carriers including China Cosco Holdings Co., China Shipping Container Lines Co. and Neptune Orient Lines Ltd. posted losses as result of a slump in rates on European and trans-Pacific routes. Yang said the company’s volumes may grow as much as 20 percent annually.
“The intra-Asia business is still very robust,” said Geoffrey Cheng, a Hong Kong-based analyst at BOCOM International Holdings Co., who rates SITC a buy. The company’s “management has also done the right things.”
The shipping line rose 3.7 percent in Hong Kong, the most in more than a month, to HK$1.95. China Cosco fell 1 percent to HK$2.89 and China Shipping Container Lines slumped 3.9 percent to HK$1.49. Hong Kong’s benchmark Hang Seng Index rose 0.2 percent
Rising Asia Trade
Hong Kong-based SITC, which operates a network of about 50 shipping lanes, has gained from rising trade within Asia and factories making more goods for local markets rather than the U.S. and Europe. It recently began a service linking Indonesia and Thailand because of customer requests, Yang said. It may add two more destinations to its network this year, he said, declining to elaborate.
“The countries in Asia are growing faster than the rest of the world,” Yang said. “Vietnam, Indonesia, the Philippines and Thailand are all growing more prosperous, and they will all buy more consumer goods.”
The company only operates ships able to carry around 1,000 twenty-foot boxes, which lets it sail on some routes about three times a day, Yang said. That frequency means SITC will be able to compete with larger vessels being moved off crowded Asia- Europe routes, he said.
Bigger Ships
“Bigger ships don’t mean the company is customer- oriented,” he said. “Customers are more interested in speed, frequency, convenience and savings.”
The company is due to take delivery of 11 new ships by the end of the year, helping boost its fleet to 60. This will include 26 owned vessels with the rest chartered in.
SITC has been able to offset a 54 percent jump in fuel prices over the past two years through surcharges, Yang said. It doesn’t hedge purchases.
The company is also planning to expand its logistics parks network by adding a site in Dalian, China, Yang said. It already has similar facilities in the Chinese cities of Qingdao and Shanghai as well as in Ho Chi Minh City, Vietnam.