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CIMC diversifies to beat container slump

By Ding Qingfen (China Daily)
Updated: 2009-02-18 08:09

Although China International Marine Containers (Group) Co Ltd (CIMC), the world's largest container producer, says dry cargo containers are still its core business, the company has been accelerating efforts to develop other businesses such as manufacturing of road transportation vehicles and energy-related equipment to help it navigate the financial crisis.

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On Jan 23, CIMC announced that its container business, which contributed about 70 percent of the company's sales revenue in 2007, stopped operation in the fourth quarter of 2008, and demand for road transportation vehicles, the company's second-largest business, also fell sharply.

Given the bleak business situation, the company also predicted it will reap a profit of merely 1.5 billion yuan in 2008, down from 3.16 billion yuan in 2007. In the first three quarters, the company posted a profit of 1.7 billion yuan, followed by a loss of 200 million yuan in the fourth quarter.

CIMC, which owns about 55 percent of the global container market, said in early December 2008 that its main business, dry cargo container manufacturing, entered into the low season earlier than usual. Traditionally, the low season is from October to March.

Since January 2008, the company's share has been dropping. It closed at 8.17 yuan yesterday, down by 3.88 percent.

"The business has not bottomed out, and will not be recovering until late next year," said Guo Yaling, analyst from CITIC Securities.

On Feb 9, the company announced it would set up a truck factory in Wuhu, Anhui province, with two other local investment companies. The factory has registered funds of 400 million yuan.

Liu Minna, CIMC's public relations manager, said CIMC has been devoting efforts into the two areas in the past three years in a bid to reduce reliance on its core business.

In 2007, sales revenue from the two sectors account for 20 and 9 percent of the company's total, respectively. Although they are comparatively small, the figures have grown rapidly. In 2002, sales revenue from the road transportation vehicle manufacturing was only 18.05 million yuan, but it jumped to 9.72 billion yuan in 2007.

But containers will "never be replaced as the core business", said Guo.