March 18, 2011

Keeping an eye out for new opportunities


Speaking exclusively to IFW, Hotine says Damco’s performances in emerging South American and Africa countries were high points last year. In the Asia-Pacific region the company was able to increase its market share in several countries, including China.

“I think generally there was a good return to growth in core retail areas,” he says. “There was some restocking but also a genuine increase in demand, which impacted our core business.

“We’re also more agile now. Obviously in this industry you have to keep focused on the cost base, but we have a good platform.

“We can see that in customer satisfaction surveys that we’re doing well, especially in South-east Asia where we have some good traction with strategic customers.

“In 2011 I expect growth and profit improvements.”

Damco, the forwarding arm of the AP Møller group, recorded earnings before interest and tax, and before restructuring and other one-off costs, of US$85 million last year, up from $45 million a year earlier. Revenue climbed from $2.2 billion in 2009 to $2.7 billion last year with ocean, supply chain and air volumes all reporting double-digit growth.

Managers put the result, which they claim has cemented the company’s position as the world’s 10th largest global supplier of forwarding and supply chain management services, down to winning market share from its main competitors, improving customer satisfaction and strengthening the company’s cost position.

Hotine admits that the political unrest in the Middle East and the disaster in Japan might dampen forecasts, however.

“The outlook has softened with recent events which are hard to assess as so early on. Clearly all this has an impact on trade.”

Later this year new facilities will be opened in Vietnam and Cambodia and he says the company is also looking for other investment opportunities in Asia. 

He predicts that ocean container spot freight rates on main line hauls will stay soft, as larger ships come onstream, but without the “same rate volatility we have had in the past”.

He adds: “I don’t think volatility is any good for any parties in international trade, it just adds to uncertainty.

“How long might we see softening on the transpacific and Europe? We think things should start picking up in Q2, but I think it will remain in balance. We don’t anticipate big spikes in rates, or that they will drop through the floor.”

The most interesting change in the dynamics of the international trade routes over the last year, says Hotine, was the decision of many customers to use ocean wherever possible and gravitate away from air options, a trend he thinks might continue if the oil price remains high or rises further.

But he says Damco is addressing its previous reliance on ocean by investing in its air products.

“Ocean is our strength today, but over the last 12 months we have improved our air freight product and invested in industry professionals to increase our capabilities. Air freight grew by 24% in 2010 compared with 2009,” he adds.

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