Depressed market almost halves Singamas 2013 profit

Soft demand for new containers, due to lower growth in global trade and the continuously depressed liner market, pulled revenue down 16.5% to $1.28bn.

The depressed market was aggravated by stockpiling of new containers during the first half of the year. "With the modest demand, a slow recovering global economy and excess supply of containers in the low season, the traditional peak season in the second half year failed to materialise," Singamas chairman Teo Siong Seng said.

He noted that new container inventory had amounted to more than 1m teu at its peak during the second quarter of the year, although this began to decline to a more modest level of approximately 600,000 teu by the end of the year. At a press briefing, he added that the downward inventory trend has continued into 2014 and is now at a level around 500,000 teu, which is considered a low level and a positive indicator of a market recovery.

The decline in revenue was also due to the lower average selling price (ASP), which fell 10.5% to $2,195 per dry teu from $2,452 in 2012 as the higher inventory levels weighed on market prices. Lower production and sales of dry freight containers not only decreased revenue but also had an adverse impact on profit margins, which fell to 3.7% from 6.3% in 2012, as operating efficiency dropped and overheads rose.

Singamas has consolidated production lines and increased productivity and expanded into a new business segment to prepare itself for the eventual upturn expected this year. Teo pointed to its joint venture with offshore container specialist Modex Asia as holding good potential for the future.

"Though we are cautiously optimistic about the container industry and expect prospects to gradually pick up in the second half of this year, we're well prepared to adapt to market conditions and capitalise on opportunities that emerge by adopting a series of measures," he concluded.

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