Giving some insight into the tough trading environment, the container manufacturer said that despite strong demand for dry freight containers, increase in material costs, especially corten steel and intense competition in the market, which put a cap on its ability to pass on increased material costs, affected margins. Meanwhile, the rapid appreciation of the Renminbi against USD in the first few months of the year further depressed the profit margin, Singamas added in a stock market announcement.
Read More: Buoyant lines, advance orders help Singmas back to H1 profit
Looking ahead, Singamas said: “With trade tensions between the US and the People’s Republic of China (“PRC”), economic downside risk is therefore expected to increase. This may affect the trade volume between US and the PRC in the second half of 2018, which may in turn affect the demand in, and the average selling price of, new dry freight containers.”
However there were some sparks of optimism as the group’s order book is full till August and material prices are expected to stabilise in the second half while the Renminbi is also seen weakening, which will help moderate production costs. Nevertheless Singamas still expects the remaining two quarters of the year to become increasingly challenging due to adverse developments in the trading environment.
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