Trans-Asia gears for slowdown

TRANS-ASIA Shipping Corp Bhd (Tasco), an integrated logistics solution provider, has embarked on various initiatives to minimise the impact of the global economic slump on its core business.

These include the diversification of its clientele base, postponement of investment projects and cost-cutting measures.

The main-board listed company suffered 30% to 40% drop in the volume of goods handled for the electronics and motor vehicle sectors in January against the same month in 2008.

These sectors account for about 60% of Tasco’s total volume.

Managing director Lee Check Poh said that to diversify its customer base, Tasco had recently clinched additional contracts from tobacco company Philip Morris and a new job from golf set maker Callaway.

“For Philip Morris, we are moving their goods from the ports to factories and the job started last month,” he told StarBiz, adding that Tasco was also responsible for the distribution of goods for Philip Morris.

“As for Callaway, Tasco is entrusted to be the distributor of Callaway products in Asia,” he added.

Additionally, Lee said, Tasco was recently chosen by Perusahaan Otomobil Kedua Sdn Bhd to handle the distribution of the carmakers’ service parts nationwide.

“Hopefully, our efforts will offset the drop in volume that we are currently experiencing although that may not be the case. This is because the drop last month was quite significant,” he said.

Lee hoped the situation was only a “short-term glitch” that might be due to inventory adjustments in the electronics and motor vehicle sectors. “If the volume picks up by March or April, that will be really good news for us,” he said.

Lee said Tasco was also delaying its investment in a new warehouse until the economic outlook became clearer.

Tasco would also accommodate the change in trend by some manufacturers who wanted to focus on cost per unit for logistics services as opposed to a time-based contract, he said.

On a more positive note, Tasco could ride on its strong ties with Nippon Yusen Kabushiki Kaisha (NYK), one of Japan’s largest shipping firms which has a strong logistics arm. NYK, which has a 27.8% stake in Tasco, has 231 offices in 33 countries.

For its international air freight business, Tasco has a strong international partner, Yusen Air & Sea Service Co Ltd.

“With the support of our international partners, we hope to ride through the current economic turmoil,” Lee said.

Tasco has remained resilient financially, with a cash balance of RM46mil as at Dec 31 last year.

It also did quite well in the last financial year ended Dec 31, posting a 12.9% growth in net profit to RM14.9mil while its revenue expanded by 11.1% to RM366.5mil.

According to OSK Research, Tasco expects to show positive growth in net profit in the current financial year despite a drop in sales. This is because it has been granted tax incentives on investments made from 2003 to 2008 totalling about RM100mil.

“Hence, we can expect a significant reduction in effective tax rates over the near term, which we estimate at 11% from more than 25% over the past few years,” the brokerage said in a report.


Source: http://thestar.com.my/maritime/story.asp?file=/2009/2/23/maritime/3305850&sec=maritime, 23 Feb 2009