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China driving factor for ILB group earnings

COMPANY FOCUS, STARBIZ, MONDAY, 16TH AUGUST 2004

By: Sidek Kamiso

For Integrated Logistics Bhd (ILB), the burgeoning China economy is where its future lies.

It has fought hard to be in China. Its first venture into the country almost failed when the 1997 currency crisis hit many companies, including ILB.

Now, the growing demand for logistics solutions, aided by the increasing presence of multinational companies (MNCs) in China, is the driving factor for the group's earnings growth.

Chief executive officer Tee Tuan Sem said China operations were expected to contribute some 60% to the group's total earnings this year.

"And the number is set to grow in future as the company completes its expansion plan," he said.

The company currently has a total of 92,000 sq meters of warehousing facilities located in two cities, Shenzhen and Shanghai. Two additional warehouses (Shenzhen - 62,000 sq meter; Shanghai - 20,000 sq meter) will be completed by April next year.

The additional warehouses will increase ILB's capacity in China by 70%, making it one of the leading logistics providers in the country. Its total worldwide capacity is 427,000 sq meter.

By the end of the year, the company will open offices in Dalian, Tianjin, Suzhou and Guangzhou.

"Demand for logistics solution is high in China as MNCs continue to open up their bases in the country. The future looks good for ILB as we are among the pioneer logistics companies to set up business there," he said.

According to Tee, the company provides a complete logistics solution to these MNCs at competitive rates.

"We are not competing with the local players. We are somewhere in the middle in terms of pricing, but the services we offer are competitive," he said.

Most MNCs are used to the idea of outsourcing their logistics requirements and they expect the same good service in China.

However, the standard of logistics services between local and international players is poles apart.

Most of the local operators provide very basic warehousing facilities while the multinational logistics operators provide high-end services.

Tee said the company was promoting its corporate image as a leading logistics service provider in the country.

"One of our objectives is to develop best practices and achieve best-in-class services among competitors in the country," he said.

Now, ILB boasts clientele such as Panasonic, IKEA, Hitachi and IBM.

As more MNCs set up their operations in China, more people would demand such services, said Tee.

One of the key success factors for ILB in China is its ability to adapt to the changes demanded by MNCs. Now more MNCs are outsourcing their logistics requirements to third parties. "We are not selling just empty warehouse space, but we provide them with a complete solution from storage to their entire supply chain operation," he said.

Tee said despite having planned well for Shenzhen and Shanghai, demand was expected to outstretch supply for warehousing space in China.

"We are currently renting some of our facilities because some of the land in Shenzhen and Shanghai are not big enough to accommodate the company's requirement," he said.

In Shenzhen, one of ILB's clients occupies two levels of the company's warehouse, uses as its production line, an indication of space constraint in the warehouse space.

Company continues to invest in local operations »
I survived the 1997 economic crisis, says Tee »