7th Apr 2014 12:43
LONDON (Alliance News) - Chinese logistics company, China Chaintek United Co Ltd Monday said revenue and profit rose in 2013, driven by its logistics services division, and said construction for its new logistics park, which is key to future growth, will take roughly 18 months to complete.
China Chaintek, the provider of logistics for consumer goods makers in China, said its pretax profit rose 12% to RMB284.9 million in 2013 from RMB253.5 million the prior year.
It said that revenues in the year increased by 2.9% to RMB350.6 million, compared with RMB340.6 million in 2012, which it said was driven by its current customer base and its logistics services division.
The group said that it is confident in future growth prospects for the business. Signalling its confidence, it declared a final dividend of 4 pence - proposed in the form of a scrip issue with a cash alternative - giving a total dividend for the year of 6 pence per share.
Management said the group still intends to adopt a progressive dividend policy, six times covered.
"This year we achieved our target, and paid what we promised," Chief Financial Officer Derrick Wong told Alliance News on Monday.
During the year, the group made a final payment on the land use rights for its proposed new logistics park. The land use rights were acquired for a total of RMB273 million, and the company said that construction will take approximately 18 months before the commencement of operations.
The company's existing logistics centre is running at capacity. The company told Alliance News that it was having to turn down some new business because it doesn't have the space to handle it.
It is building the new centre on a 145,600 square metre plot of land in an industrial zone in Jinjiang, about 14 kilometres from its existing operational headquarters.
"The new Logistics Park will enable China Chaintek to satisfy the growing demand from manufacturers for outsourced logistics. The board expects the logistics park to be at full capacity within three years of completion and it will provide China Chaintek with the ability to double its turnover once full capacity has been reached," the firm said in a statement.
The group paid for the logistics park from its own cash resources, as sale and lease back is not currently an option in China at present. The company said it has sufficient resources to fund the estimated RMB600 million construction costs to complete the whole project.
However, Wong told Alliance News that the group may require further fundraising or a credit facility further into the future.
Wong said that the group will open a new regional distribution centre at the end of this year, with a further two to open within the next three years.
China Chaintek also has an inventories unit, which provides warehousing services such as storage and packaging. The division operates from a central distribution centre in Jinjiang and two regional distribution centres.
As well as acquiring the site for its new logistics park, China Chaintek also has been busy further developing its Inventory Solutions business and investing in IT systems.
"We will be investing around RMB60 million in these after we have completed the logistics park," Wong said Monday.
China Chaintek said its logistics service division, the main revenue driver for the group, continued to develop strongly and during the year won a total of 16 new customers, including a big contract with VIPshop, an online discount retailer for brands.
The company also said that it is still in advanced talks with a number of major e-commerce companies, including Amazon China, China-based electrical appliance retailer Suning Appliance, and Chinese e-commerce company Yhd.com, which is majority-owned by Wal-Mart Stores Inc.
It said that shoes and apparel, which accounted for 72% of the division's revenues in 2012, reduced to 69% in 2013. The group said the customer list of the logistics division remains broadly based with about 300 customers, 75 of whom account for the majority of revenue, with 10 accounting for 34% of revenue.
"Ideally we see the ratio of shoes and apparel in the future being between 60% and 65%," said Wong.
China Chaintek said that it is confident in the potential for future growth for the business, supported by growth in the e-commerce sector, China's growing consumer sector and the easing of the country's one child policy.
"With the accelerating rate of growth in the e-commerce space, as well as the government's investment into infrastructure and the reforms that are anticipated to drive growth in the consumer sector in China, and consequently the logistics sector... The outlook for the sector is positive, and the board is confident that ChainTek's potential for further growth is strong," the company said.
The group said it held cash of RMB319.3 million at the end of the year, down from RMB342.7 million a year earlier.
China Chaintek shares were trading 1.9% higher Monday afternoon at 129.90 pence per share.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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