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Integrated Logistics looks abroad
By: Kamarul Yunus

HAVING sold the entire equity interest in its Malaysian operation, warehousing logistics provider Integrated Logistics Bhd (ILB) will now focus on expanding its business operations in China and the United Arab Emirates (UAE).

ILB chief executive officer Tee Tuan Sem said it expects to operate two new warehouses in Henan province in China and in Dubai in the UAE by the first quarter of next year.

"These two new facilities are expected to contribute positively to the group's bottom line when they commence operations early next year," he told reporters after ILB's annual general meeting in Petaling Jaya, Selangor, yesterday.

On March 12 , ILB entered into a share sale agreement with AWH Equity Holdings Sdn Bhd to dispose of its 100 per cent equity interest in wholly-owned subsidiary Integrated Logistics Solutions Sdn Bhd for RM170 million. The sale is targeted for completion by June 30.

Tee said the decision to sell its Malaysian operation was because of the lower occupancy rates at its warehouses and thinning margins in the domestic logistics industry.

"The pre-tax loss for the year from the Malaysian operation amounted to RM17.6 million. As a result, the group made a strategic decision to dispose off the Malaysian operation and focus more on overseas markets, which offered better prospects.

"The proposed disposal will unlock the value of the non-profitable assets in the company and channel the resources to higher-growth logistics markets overseas, including China," he said.

Apart from the soon-to-start operation in Henan, ILB also operates warehousing facilities in Shenzhen, Shanghai and Wujiang in China.

"This year, we have put aside some US$25 million (RM81 million) for the development of the 100,000 sq m warehouse in Henan province. The warehouse is expected to commence operation in the first quarter of 2011."

In view of China's high economic growth, the group expects its operation in that country to continue contributing positively to its earnings.

"China is a big market and one of the few countries that have been able to sustain growth during the current global economic downturn. We expect China to continue to grow and we will be able to capitalise on this for another couple of years. We will not be expanding to other countries, other than in China and the Middle East, but will do so if the situation warrants."

On its Dubai operation, Tee said the group is spending RM250 million to set up the state-of-the-art warehouse.

"With the disposal of equity in our Malaysian operation, we now have adequate cash in hand to continue with our expansion plans, particularly overseas."

The group registered RM187 million turnover in the financial year ended December 31 2009 compared with RM214.2 million the previous year. Net profit was lower at RM2.5 million against RM24.8 million previously.