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Corporate Information
Business Strategy
(1) Expand and upgrade our Fleet capacityWe believe that the Handysize(1), Handymax(2) and Panamax (3) segments of the bulk carrier sector present attractive demand and supply characteristics as the transportation of cargoes is expected to grow faster than the increase in the supply of these vessels. We constantly monitor the market for the supply of vessels and the demand for our services. Based on our market information, we are confident that there will be strong demand for our services and accordingly, we plan to expand and upgrade our Fleet to capitalise on favourable market opportunities.
We intend to acquire up to four vessels to increase our Fleet capacity for approximately US$25.4 million. The utilisation rates of our vessels have increased from approximately 90% in FY2002 to approximately 95% in FY2004. In the last three financial years, we have experienced customer enquiries for capacity beyond our maximum capacity. Our Fleet capacity has been maximised and therefore the planned expansion of our Fleet size is a timely move to increase our capacity so as to satisfy the demands of our customers which are expected to continue increasing.
In the longer term, it is also our intention to upgrade our Fleet in terms of equipping our vessels with more up-to-date technology such as black boxes, additional safety devices and more advanced navigation systems so that we can better serve the needs of our existing customers and attract new customers.
(2) Secure more contracts of affreightment
In FY2002 and FY2003, the bulk of our charter contracts were contracts (whether time charters, where rates are charged on a per day basis, or voyage charters, where rates are charged based on the weight of goods transported) secured on a spot basis, that is to say, our customers approach us to provide transportation services on a shipment by shipment basis whenever they need to ship cargoes, and we would agree to do so subject to, inter alia, vessel availability and pricing. We intend to continue with our focus on securing charter contracts on a spot basis, whenever possible, as they typically offer premium rates as compared to COAs ( "contract of affreightment" or "COA" : The same as voyage charters but are for two or more shipments over an agreed period of time. This could be over a number of months or years ).
However, by doing so, we may be potentially exposed to possible market fluctuations in charter-hire/freight rates. Accordingly, we intend to limit our potential exposure to short-term fluctuations in charter-hire/freight rates by utilizing part of our capacity to secure COAs.
In FY2004, about 24.1% of our revenue was obtained from contracts of affreightment, where customers commit to two or more shipments with us at an agreed price to be performed over an agreed period not exceeding one year. Going forward, our Group will target, as a business strategy, to derive approximately 28% of our total revenue from COAs, thereby reducing our Group's exposure to the spot market.
(3) Improve margins through securing more back haul cargoes ( Cargoes transported against the standard flow of traffic, i.e. loading in a port situated in what is usually a discharge area, and discharging in a port situated in what is usually a loading area)
With the greater flexibility afforded by a larger Fleet capacity, we aim to secure further volumes of back haul trades in our Group's business, thereby reducing the number of ballast days where our vessels are not utilized to carry shipments. While our capacity utilisation is close to maximum, the decrease in ballast days will serve to maximise our revenue and profit margins.
(4) Expand our network of offices to facilitate expansion of our geographical coverage
Currently, most of our customers deal with us through our existing offices in Hong Kong and Taipei . As we envisage that our business volume and customer base is likely to continue to increase, at least in the foreseeable future, we plan to expand our existing operations in Hong Kong and Taipei and in addition, to establish new offices in Shanghai and Qinhuangdao in the PRC. Our increased presence in Hong Kong and Taipei will enable us to undertake more extensive marketing efforts to customers in these countries and to increase our managerial and operational capabilities beyond the comprehensive range of services that we currently offer.
The establishment of new offices in the PRC will facilitate better liaison with our customers and suppliers in the PRC, including the securing of our crew requirements from the PRC. In addition, this will also serve as a platform for us to increase our business development efforts in this important market, including exploring the feasibility of providing coastal transportation services from the northern parts in the PRC that are commodity-rich to the more industrialised southern parts in the PRC that are experiencing high consumption levels of commodities as well as the import and export trade into and out of the PRC.
(5) Continue to build up a quality customer base
Our focus is to develop and maintain a customer base which will enable us to maximise the utilisation and return on investment on our vessels by securing customers who are able to offer us premium rates for our services. At the same time, we would like to build up a portfolio of established customers so as to enhance and improve the quality of our customer base.
Since the inception of our Group, we have placed significant emphasis on building the quality of our customer base. Due to our credibility and track record, we have currently built up a portfolio ofestablished customers, including multi-national corporations and state-owned corporations, such as Taiwan Power, China Coal Hong Kong Ltd, Glencore International AG Baar and GIC Shipping International Inc., the shipping division of Green Island Cement (Holdings) Ltd.
With a view to strengthening our relationships with our existing customers and gaining new customers, we are constantly looking at ways to add value to, and improve our service offerings. In line with this, we intend to expand our service offerings to include the provision of logistics services. This entails engaging in detailed discussions with our customers on their supply chain planning needs so as to coordinate the deployment of our available vessel capacity in a timely manner to transport the commodity required to the customers' intended destination, with the eventual objective to mutually optimise our customers'shipping requirements and our vessel capacities.
(6) Continue to run cost-efficient operations
As we increase our Fleet size and operations to meet the anticipated increase in demand for our services, we will continue to manage our cost of operations, without compromising the quality of our services.
Historically, we have acquired and operated older second-hand vessels as opposed to new vessels or younger second-hand vessels. Leveraging on the network and contacts of our Directors in the shipping industry, we have been very selective in the purchase decisions for our vessels. Our ability to effectively operate our Fleet is enhanced by our technical management skills and preventive maintenance programmes.
We believe this strategy has enabled us to generate higher profit margins due to the lower capital cost of investment required, and the lower depreciation expenses resulting. Despite the higher cost of operations, repairs and maintenance that one would expect of a relatively older fleet, the technical skills and experience of our Directors have enabled us to effectively contain such costs, such that the cost savings from us purchasing older vessels are not eroded to any significant extent by the higher operating, repair and maintenance costs of an older fleet.
Accordingly we intend to continue to grow our Fleet capacity through the timely and selective acquisitions of well-maintained second-hand dry bulk carriers although we will, over time, reduce the average age of our Fleet through acquisitions of relatively younger second-hand vessels. While we intend to increase our staffing levels as a result of expansion of our existing operations in Hong Kong and Taipei , and the establishment of new offices in the PRC, our staffing cost would still be kept relatively low as compared to the revenues generated.
(1) Handysize: A dry bulk carrier of 10,000 to 39,999 dwt which is commonly equipped with cargo gear such as cranes. This type of vessel carries principally minor bulk cargoes and limited quantities of major bulk cargoes. It is well-suited for transporting cargoes to ports that may have draft restrictions or are not equipped with gear for loading or discharging cargoes
(2) Handymax: A dry bulk carrier of 40,000 to 59,999 dwt used to carry either minor bulk or major bulk cargoes
(3) Panamax : A dry bulk carrier of 60,000 to 84,999 dwt with breadth not exceeding 32.2 metres which permits it to transit, when fully loaded, the Panama Canal . Panamax vessels are primarily used to transport major bulks, although they can be used to transport certain minor bulks such as fertilisers, ores, petcoke and salt.