A meteoric year of growth at Sinotrans
China’s greatest grower, in economic terms, among transport companies has undoubtedly been Sinotrans.
It has had a meteoric year following a massive initial public offering, a 50% leap in share price, a slimming down of the overweight organisation and the ability to pick and choose, and dump if necessary, its business partners.
Seemingly, every big express operator has at one time or another courted the mainland’s top logistics provider. Unsurprising really, since no one can match Sinotrans for the sheer size of its network.
The company is China’s largest foreign trade forwarding agent and second largest shipping agent. By March this year the company had set up 42 full subsidiaries, one A-share listed company, an H-share listed company and 263 joint ventures or joint co-operatives, spread over China’s 29 provinces, municipalities and autonomous regions.
It had also established 24 wholly foreign-owned and joint ventures and eight representative offices.
The IPO was eagerly awaited and heavily oversubscribed, raising more than $500m. Further swelling the coffers, first half revenues leapt 30% to Yuan7.7bn ($930m) with net profit up 18% at Yuan346m.
Zhang Jianwei, the president of Sinotrans, explains the rationale behind the Hong Kong listing.
‘The stock company aims at effecting the transformation of the enterprise structure and operation mechanism through overseas listing in addition to the obvious financing purpose so as to speed the establishment of a modern enterprise system,’ he says.
Settled in such a comfortable financial position all of a sudden, Sinotrans felt empowered to end its 15-year business relationship with Dutch courier TNT in May. TNT, interestingly, has now tied up with China Post’s express service provider EMS, a mortal enemy of Sinotrans.
DHL, UPS and OCS of Japan still have partnerships with the sprawling Chinese giant.
However, all this money must be spent wisely yet quickly as the deadlines for World Trade Organisation regulations draw near, allowing foreign companies far greater access to the world’s most populous nation.
UPS, for instance, expects revenues in China this year to rise by 50% to around $300m from $200m last year.
Moreover, Thomas Weidemeyer, chief operating officer at UPS, said towards the end of last month that he foresaw UPS garnering sales of $1bn a year in China alone once Beijing was forced to ease regulations.
Words such as supply chain management have only recently entered the mainland lexicon, something Sinotrans needs to learn from its partners such as DHL while also ensuring that it can act overseas.
It might be able to deliver a package to Chongqing, near the source of the Yangtze, at the moment but it needs desperately to stop relying on its foreign partners for overseas deliveries.
Sinotrans must also decide how to integrate its many constituent parts into a cohesive package while slimming down the number of employees from the 69,000 it had at the beginning of the year.
A large amount of money has been set aside for mass redundancies this year.
