Hong Kong Stock Exchange-listed ocean container carrier SITC (HKEX: 01308) has reported increases in its unaudited third-quarter results despite a global trade slowdown and the China-U.S. trade war. SITC’s container revenues and volumes have both increased.
Group revenues rose by 6.48% from a total of about US$1.06 billion in the first nine months to September 2018 to US$1.13 billion by the end of the first nine months of September 2019. That’s an absolute increase of US$68.7 million.
Container revenues and volumes
SITC’s revenues rose by 6.4% to about US$1.11 billion for the nine months ended Sept. 30, which is roughly a US$64.7 million increase on the US$1.04 billion generated for the same time period in 2018.
The company reported that box volumes from its ocean shipping and logistics businesses stood at just over 1.8 million twenty-foot equivalent units (TEUs) for the period, which is a rise of 3.6% on the corresponding period in 2018. In the first nine months of 2018, the group handled just under 1.74 million TEUs. That’s an absolute increase of 62,656 TEUs.
Average rates received by the group also increased over the first nine months of 2019 when compared to the same period in 2018. SITC’s average freight rates from container shipping and supporting logistics businesses stood at US$537.0 per TEU from January to September. That’s an increase of about 2.19%.
Osbert Tang is an independent equity long-short analyst who publishes on the Smartkarma platform. Tang pointed out that, although the nine-month 2018 to 2019 comparison of freight rates shows growth, it’s a very different result when third quarter only (July to September) numbers are compared. Tang noted that comparing quarter to quarter (instead of nine months to nine months) shows that there was actually a decline in freight rates in the third quarter of 1.9% to US$520.3 per TEU.
“This is the lowest quarterly growth pace in SITC’s average freight rate in the last 10 quarters. We believe this can be partly explained by the drop in bunker price[s] in the quarter, which may have affected the surcharges that SITC imposed on its customers. Also, the change in container mix may be a reason for the decline in freight rate,” Tang wrote.
However, he added, the lower freight rate is partly offset by an increase in volumes. Overall, Tang views SITC’s freight rate, volume performance and quarterly growth rate as displaying “a healthy momentum amid the slowdown in global economies and the U.S.-China trade war. SITC’s exclusive focus on the intra-Asia trade has helped it to shelter from China’s contracting trade value.”
Dry bulk revenues
Revenues from SITC’s dry bulk and “other” business stood at US$19.8 million by the end of the first nine months of 2019. That’s a 2.1% rise in revenues and an absolute increase of US$2.1 million. As of June 30, SITC operated six dry bulk ships, according to a statement from the group.
The group is active in container shipping and logistics. It runs on 63 trade lanes, which includes nine trade lanes through joint services and 22 trade lanes through a slot exchange, according to a statement from the group. The group said that it handled about 2.4 million TEUs in 2018.
SITC’s network encompasses 66 ports in Mainland China, Japan, Korea, Taiwan, Hong Kong, Vietnam, Thailand, the Philippines, Cambodia, Indonesia, Singapore, Malaysia and Brunei.
As of June 30, SITC operated a fleet of 80 ships with a total capacity of 112,583 TEUs. SITC owned 55 ships with a total capacity of 71,839 TEUs and 25 chartered ships of 40,744 TEUs. The average age of SITC’s container ship fleet was 9.9 years.
SITC also operated 1.14 million square meters of depot and 87.4 million square meters of warehousing space. The group has logistics, warehousing and depots in Qingdao, Shanghai, Ningbo, Tianjin, Dalian, Haiphong, Ho Chi Minh City, Bangkok and Laem Chabang.
The group is active in ship management, ship broking, international freight forwarding, project logistics, customs broking, air cargo and seaport shipping agency, among other lines of business.