- Singamas, the world’s fourth-largest container manufacturer, has announced plans to increase revenue from container leasing instead of box sales.
- This strategic shift comes as liner operators seek greater flexibility in managing inventory amidst economic uncertainties and a tonnage overhang.
- Despite a significant decline in net profit for 2023, Singamas observed healthy growth in income from container leasing, attributing it to more flexible production and timely delivery capabilities.
- The company anticipates leasing operations to serve as a potential long-term growth driver, emphasizing its commitment to investing resources in this business segment.
Singamas, a prominent container manufacturer, has unveiled its strategy to prioritize revenue generation from container leasing over traditional box sales. This decision reflects the evolving needs of liner operators seeking enhanced flexibility in managing inventory amid prevailing economic uncertainties and surplus vessel capacity.
Financial Performance and Sales Decline
Singamas reported a substantial decline in net profit for 2023, plummeting by 60% year-on-year to $22.49 million. This downturn was primarily attributed to a significant decrease in sales volumes and revenue from box sales. Sales volumes declined to 106,000 TEU from 242,000 TEU in the previous year, accompanied by a 53% reduction in sales revenue to $352.19 million. The average selling price of a 20ft container also experienced a notable decline, contributing to the overall decrease in revenue.
Focus on Container Leasing
Despite the decline in traditional box sales, Singamas noted a remarkable 80% increase in income from container leasing, reaching $2.79 million in 2023. Singamas Chairman and CEO, Teo Siong Seng, highlighted the significant growth in the leasing business, attributing it to synergies with manufacturing operations and enhanced overall margins. The company’s manufacturing facilities enable flexible production and timely delivery of containers to leasing customers, allowing Singamas to capitalize on market opportunities effectively.
Long-Term Revenue Stability
Singamas emphasized the potential of container leasing operations as a long-term growth driver, citing the stability of revenue derived from long-term leasing arrangements spanning three to over ten years. Mr. Teo expressed confidence in the leasing business’s ability to generate relatively stable revenue amidst market fluctuations, indicating the company’s commitment to allocating additional resources to develop this segment further.
Market Outlook and Caution
While the Red Sea crisis has temporarily constrained vessel supply and maintained elevated freight rates, Mr. Teo exercised caution regarding container demand outlook for the current year. He highlighted the dependency of the dry freight container industry performance on global trade recovery and anticipated stimulus from new vessel deliveries. However, concerns over capacity overhang in the dry freight container market persist despite potential market stimuli.
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Source: The Loadstar
