Freight Management braces for challenging year ahead

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KUALA LUMPUR: Freight Management Holdings Bhd, which saw 21.6% of its revenue for the financial year ended June 30, 2014 (FY14) coming from overseas operations like Australia, Indonesia, Singapore, Vietnam, Thailand and India, is gearing up for a challenging year ahead due to the uncertainties in the global economy.

“However, the US economy is showing signs of recovery. And with India’s new prime minister and government, the confidence factor in the country has gone up,” group managing director Chew Chong Keat told reporters after the company’s annual general meeting yesterday.

He said the company’s strategy is to focus on strengthening its presence in Southeast Asia, and that the implementation of the Asean Economic Community in 2015 is expected to be a significant growth contributor to the region.

“There are still some Asean countries [in which] we don’t have a presence yet, like Cambodia, Laos and Myanmar. But we will plan for [having a presence there],” said Chew.

Freight Management is also looking forward to contributions from its new offices in Chennai, Mumbai and Calcutta in India, as well as in Colombo, Sri Lanka.

“However, like any new operation, there will be a gestation period for our Indian and Sri Lankan [businesses],” said Chew.

In 2013, the company teamed up with Scomi Energy Services Sdn Bhd to provide marine vessels for oil and gas operations across Southeast Asia. With current falling global oil prices, there are concerns that the venture may be affected.

“With regard to our joint venture (JV) with Scomi, it is still a new business to us and we don’t see significant impact from the lower oil prices. As for our logistics services, the impact is via fuel and bunker surcharges, which are [passed on] costs that do not have a direct impact on our financials,” said Chew.

For its first quarter ended Sept 30, 2014 (1QFY15) financials, Freight Management reported a 12.5% year-on-year (y-o-y) fall in net profit to RM4.68 million from RM5.34 million, due to higher borrowing costs for a new warehouse and acquisition of a tugboat, the realignment and restructuring of its air freight division, and additional operating expenses from its overseas JV companies.

Revenue for 1QFY15 increased 4% y-o-y to RM103.39 million from RM99.42 million, mainly due to larger contribution from its sea freight division.

 

This article first appeared in The Edge Financial Daily, on November 26, 2014.