¡¡¡¡CSG 2007' Newsmaker of the Int¡¯l Marine Transport Sector
¡¡¡¡¡°Success is no quiet street there must be some unusual story just behind or some terrific event beckoning ahead. Each success marks however only a new start for Sinotrans.¡± ¡¡¡¡¡ªAn interview with Zhao Huxiang, President of SINOTRANS
¡¡¡¡Interview by Wang Na &Wang Jing
¡¡¡¡Writting by Wang Jing
¡¡¡¡Photo by Yang Lin
¡¡¡¡Tomany, Sinotrans was
¡¡¡¡ something of a riddle
¡¡¡¡ until 2007, when its relationship with and attitude toward the outside world was gradually revealed bit by bit by its leader, Zhao Huxiang.
¡¡¡¡Advancing
¡¡¡¡shipping services
¡¡¡¡¡°Management¡¯s chief task is doubtless the formation of the most appropriate strategy for a company. That was exactly what we did for Sinotrans in 2007.¡± said Mr. Zhao.
¡¡¡¡No uniform strategy existed for the whole operation system of Sinotrans before 2007, and the latest design of integrated logistics was made by Mckinsey only in 2006, and approved by the State-owned Assets Supervision and Administration Commission of the State Council (SASAC)one year later.
¡¡¡¡But today we have also a second major engagement, namely shipping. Far from a last-minute decision, this addition was the result of much discussion, research and argument.
¡¡¡¡Shipping has seen great prosperity especially in the last two years. Within Sinotrans, its profit upped by around 40% in both 2006 and 2007, boosted by a fleet expansion to more than 10 million DWT.
¡¡¡¡To avoid a head-on conflict with major container carriers, Sinotrans instead stresses the carriage of dry bulk goods against oil and other products, and accordingly 90% of the fleet is made up of bulk vessels, which is expected to grow to 20 million DWT in capacity by 2010 when all forces, controlled or owned, are taken into account. ¡¡¡¡Got each a capital operation platform
¡¡¡¡Both Sinotrans major businesses are now listed on the stock market, which played a vital part in advancing the position of shipping.
¡¡¡¡Preparation for the listing was initiated in May 2007. A work panel was set up in June, the plan was approved by SASAC in July, and trading began at the HK United Exchange Institute on Nov. 23, raking in 11.4 billion HKD for the IPO. That figure set a new international record for its class. Complete listing of the two leading businesses got each a capital operation platform and set for both a clear chart for future development.
¡¡¡¡As to the importance of listing, Mr. Zhao said, a strong company need not necessarily be listed, but getting listed is indeed beneficial to engagements like shipping, which is characterised by strong internationalisation in service, periodic business fluctuations, heavy investment and high risks. Using the stock market costs less than borrowing from the banks and involves smaller risks as all dangers are shared by shareholders. What¡¯s more, at a time when everyone is trying to get a taste of stock profit, those who delay without reason could only do so at their own cost, and in most cases face obvious disadvantages in competition. Capital operation simply provides more room for strategic manoeuvres, said Mr. Zhao. The change undergone by Sinotrans both before and after being listed can serve as a most convincing example, he added.
¡¡¡¡Sinotrans was launched on the HK market in Nov. 2007 when BDI, the world¡¯s capital market and investor confidence had all reached record highs, and the circumstances had helped to make it a big success.
¡¡¡¡¡°However, every peak period is inevitably followed by a correction. And at the end of 2007 when depression indeed hit on the global stock market, it hit Sinotrans fair and hard, plunging its stock value straight down to below its initial offering price. That was it. What could one say? What could anyone say? This is market. Nobody is strong enough to control the market. But as the biggest shareholder, we were obligated to do what we could to improve the situation, which included two fundamentals: firstly, try to better company performance under a complete corporate governance structure, and secondly, remain in close contact with all shareholders to keep them always well informed about the company situation.¡± As part of that commitment to communication, Zhao then disclosed that China National Charter Corporation will inject its shipping business into the listed company in 2008.
¡¡¡¡Always to be the ¡°No.1¡±
¡¡¡¡Something Zhao considers even more important than financing is management quality.
¡¡¡¡Sinotrans engages in logistics services by air, land and sea, with branches and subsidiaries distributed at all foreign trade ports and in all fairly large cities around the country. Thanks to its long-term efforts, it has become quite a well-known brand in China.
¡¡¡¡¡°Sinotrans biggest advantage is its nationwide network, and its disadvantage is a serious lack of central control. Thus it is sometimes found that two or three Sinotrans branch companies are fighting fiercely against each other for the same bid,¡± lamented Mr. Zhao. ¡°That means only one thing, it is not yet as strong as it is large in size. That¡¯s why we have become very determined to rearrange logistics services by a fixed standard, and to inject it into one listed company to make full use of the advantages available.¡±
¡¡¡¡Guided by that rationale, Sinotrans¡¯ first consolidation project was implemented by Dec. 2007, involving 63 companies with a combined asset value of 1.106 billion Yuan. At present, stage two integration is also under way, covering more than 20 group corporations located both at home and abroad. The work will be completed in 2008.
¡¡¡¡Mr. Zhao agreed business combination is no simple task, and takes time. Stage one integration took nearly one year, what with application for official approval and with unification of internal thoughts. Yet with all blocks now removed, such as those mentioned above, the stage two operation will certainly be faster and more effective.
¡¡¡¡Opportunities
¡¡¡¡never overlooked ¡¡¡¡For a while in 2007 the air had been dense with rumours that Sinotrans would soon take action and combine with China Changjiang National Shipping (Group) Corp. (CSC). A series of reports on the progress had also appeared in certain media, which were said to have originated from none other than CSC itself. No positive reply however was ever heard from Sinotrans. Regarding this, Mr. Zhao said, ¡°We have indeed spent much time in recent years on strategy study, integration of resources and stock listing as well as recombination, merger and take-over strategies etc. There¡¯s certainly no problem with merger or combination with us: the SASAC has no disagreement, neither is there a lack of objects, and of course we have sufficient quality assets and enough money and hold a leading position in the logistics field in China. So conditioned, it is unlikely Sinotrans will be eyed for acquisition by any others at the moment. As to merging with others, no opportunities have ever been thrown away. Our eyes are always wide open on the market!
¡¡¡¡¡°The fact is that for Sinotrans small-scale acquisitions and mergers continued without stopping from 2007 to 2008. Ships, both new and second-hand, have been bought, and small businesses continually acquired partly with financing from the stock market. Even expansion abroad through direct take-over is actively under consideration. So, we have been overlooking nothing. I can only say so much at present. Many things are possible and could happen. We won¡¯t refuse to do whatever is good to all and is good to Sinotrans in particular.¡± confirmed Sinotrans¡¯ President.
¡¡¡¡Dialogue with Zhao Huxiang ¡¡¡¡CSG: Why did Sinotrans Shipping choose the H-stock market?
¡¡¡¡Zhao Huxiang: The first reason is that our fleet is registered in Hong Kong. The second reason is related to time. Good time won¡¯t last forever for either the shipping or the capital market, and it takes less time to get listed on the red chip market. Thirdly, the HK stock market is, in comparison, more mature and efficient. ¡¡¡¡CSG: Will you push forward on Sinotrans¡¯ terminal operation?
¡¡¡¡Zhao Huxiang: It is already late for us to seek for terminal investment in large artery or sea ports, especially container ports. Terminal investment stresses density and full networking, and takes time. Presently, warehousing terminal operation constitutes a major part of our logistics service, centred mainly along the Yangtze and Pearl rivers. They form part of our service network and benefit the company in an important way. Moreover, we are considering investment in the ports of certain neighbouring countries. ¡¡¡¡CSG: What¡¯s your goal in internal trade service in 2008?
¡¡¡¡Zhao Huxiang: First of all, to build a platform to push container carriage to a higher volume than achieved in 2007. Sinotrans positions itself to be a container carrier only on the home market and in offshore areas. ¡¡¡¡CSG: What measures do you take in service internationalisation?
¡¡¡¡Zhao Huxiang: Two steps will be taken. Step one is to become a logistics service provider of the first choice for customers from both home and abroad, and on that basis to expand this service worldwide. In 2008 and after, more effort will be made in internationalisation. Overseas branches will be injected into the listed company, foreign businesses will be bought, and development into regionally important countries like Vietnam and India will be taken into account.
¡¡¡¡CSG: What are the most important factors in company development?
¡¡¡¡Zhao Huxiang: For my part, it is first the drawing of a clear and appropriate strategy, and second the recruitment of high quality personnel. The reason is obvious: strategy, however excellent, must be carried out by people, and we need more people who know shipping.
¡¡¡¡About Zhao Huxing
¡¡¡¡Born in 1955 and graduated from Dalian Maritime University in 1980, Mr. Zhao is a Senior Engineer with an MBA degree from the University of Louisville, USA, 1997. He started his career in the Marine Bureau of the Ministry of Communications of PRC and then moved to Hongkong to serve in China Merchants Group where he acted as General Manager of Hoi Tong Machinery Supplies Limited, General Manager of China Merchants Holdings (International) Company Limited and later as Director of the Board and Vice President of China Merchants Group. In December 2005, Mr. Zhao joined Sinotrans and has been the Executive Director and President of the Group ever since. He has been concurrently sitting in the boards of Sinotrans Limited and Sinotrans Shipping Limited as Chairman since March 2006 and August 2007.
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