Singamas H1 profits drop 24% to $10.1m on flat demand, lower prices

"The demand for containers rose modestly as the further decline in material costs, especially corten steel, placed pressure on the selling price of containers," Singamas said.

The low selling price boosted orders, despite the slow trading environment in China, with container demand remaining stable.

Over the first half of the year, Singamas produced 336,581 teu, an 11% rise over the 302,852 produced in the previous corresponding period. However, the Average Selling Price plunged from $2,147 to $1,880 year-on-year.

Singamas' container manufacturing operations generated revenue of $688.2m during the first half year, up from $662.5m previously. Operating profit for this segment, which makes up the bulk of the group's business, declined 42% to $12.4m from $21.5m during the same period last year.

Singamas pointed out that the May ruling by the US International Trade Commission that overrules the suspension of entry of domestic containers from China into the US will be a positive development for all China container manufacturers, especially since the D53 domestic dry containers is a segment that has enjoyed a steady rise in demand, and accounted for 5.4% and 8.2% of total revenue of the group for the 2013 and 2014 financial periods respectively.

"The demand for such containers is expected to further rise as the economic recovery in the United States gathers momentum," Singamas said, noting that significant effort has been placed on increasing the production and sale of specialised containers over the last few years.

The proportion of revenue from dry freight containers and specialised containers changed to 67.0% and 33.0% respectively, from 72.4% and 27.6% for the same period last year.

Singamas is also making inroads in the logistics space, with the Group signing a Strategic Cooperation Framework Agreement with Guangxi Beibu Gulf International Port Group in March, which involves developing a container freight station in Guangxi and exploring opportunities relating to container manufacturing and cold chain operations.

Looking ahead, Singamas said: "The outlook for the second half year is expected to be lacklustre for the container industry as China’s export growth will continue to be slow. Despite the flaccid outlook, the container industry will benefit from the significant number of ultra large container vessel deliveries that are scheduled from 2015 through to 2017. Moreover, the replacement cycle of old containers must be addressed by shipping companies, thus warranting the order of new containers in the near future."