By Sharina Ahmad
THE Covid-19 outbreak has caused supply chain disruptions in the last three months, said port operator Westports Holdings Bhd.
Its CEO Eddie Lee (pic, second from left) said its duration is very much dependent on how long the virus outbreak lasts.
“Now it is already the third month of the virus and I believe that not only the shipping industry has been affected, but other industries too.
“If Covid-19 lasts until the end of this year or next year, the impact will be more distressing,” he told FocusM.
According to Lee, the virus outbreak has started to topple a series of dominoes.
He said the domino effect was the failure to reopen Chinese manufacturing facilities in Wuhan and Hubei in China following the annual Chinese New Year closures.
“We can see the supply chain was disrupted in the first month of the virus outbreak. Most of the containers were stuck there (China).
“This created a massive shortfall in Chinese exports and, therefore, a drop in container demand,” said Lee at the company’s ground-breaking ceremony for Westports Logistics Centre (warehousing facilities) officiated by Selangor Menteri Besar Datuk Seri Amirudin Shari on March 12.
He added that sharp drop in demand led container carriers to cancel numerous sailings.
Based on a report by SeaIntelligence Consulting – a company in Copenhagen, Denmark which specialises on the container shipping industry – the number of blank sailings announced by carriers equated to a staggering estimated total demand shortfall of 1.7 million twenty-foot equivalent units (TEUs).
The report also said the new blank sailings will inevitably lead to a raft of blank sailings for export cargo back to Asia anywhere from three to 10 weeks into the future, depending on transit times and the timing of the headhaul blank sailing.
But according to Lee, a few weeks ago, the traffic at China port began moving.
“Hopefully, it will get better soon but we don’t have a crystal answer as for now. Surely, the shipping industry will be affected.
“Similar to the airlines which have cancelled their flights and reduced the number of flights to the countries that have a significant number of Covid-19 cases, shipments of goods around the world have also been cut,” he noted.
Asked on the number of shipping operations that has affected the company, Lee declined to reveal for now as the announcement will be out on April 2.
At this point of time, Lee said, Westports is focusing on building up a logistics centre and eyes more partners from local and international warehouses as well as logistics companies.
The groundbreaking ceremony forefronts Westports’ wholly-owned subsidiary Westport Malaysia Sdn Bhd that will accommodate local and international warehouse and logistics companies, including Infinity Logistics & Transport Sdn Bhd, Syarikat Logistik Petikemas Sdn Bhd, Alfred Talke Logistic Services, Sea Hawk Global Lines Sdn Bhd and SH Cogent Logistics Sdn Bhd.
Westports’ net profit for the fourth quarter ended Dec 31, 2019 (4QFY19) fell to RM125.43 mil from RM145.54 mil a year ago despite posting a higher revenue of RM452.82 mil versus RM418.01 mil.
However, the company’s full FY19 net profit rose 11% to RM590.9 mil from RM533.47 mil in the previous year while revenue increased to RM1.78 bil from RM1.61 bil.
It attributed the improved results mainly to the higher container volume handled and a modest increase in the cost of sales under the new accounting rules, Malaysian Financial Reporting Standards 16 (MFRS 16), despite impairment made for a vessel incident.
Westports achieved another consecutive record-breaking container throughput level during 4QFY19, handling 2.82 million TEUs while the 12-month volume increased by 14% to 10.86 million TEUs from that achieved in FY18.
The company’s share price closed 1.41% lower at RM3.50 sen on March 12, giving it a market capitalisation of RM11.94 bil. – March 12, 2020
