UASC eyes 300% profit growth by 2012
United Arab Shipping Company (UASC), the largest locally owned carrier of container cargo in the Middle East, is expecting its profit and capacity to grow by 300 per cent by 2012.
The company is riding on the increasing demand for commodity imports to embark on an aggressive expansion programme. UASC is to spend about Dh7.3 billion to purchase new container vessels to raise the number it operates from the present 38 to around 60 by 2012.
“We are raising our ambitions given the current growth in the market. We want to grow at the same pace and to do this we need to increase capacity,” Ken Bloch Soersen, President and CEO of UASC, told Emirates Business.
Between 2006 and 2007 UASC registered a 30 per cent growth, with revenues increasing by 34 per cent and containers throughput by 27 per cent.
The firm’s revenues hit Dh4.7bn last year, compared with Dh3.6bn in 2006.
Through its networks UASC carried 970,000 TEUs (20-foot equivalent units) in 2007, compared with 760,000 TEUs in 2006. This year the company will take delivery of eight new vessels that were ordered in 2005, each with a carrying capacity of 6,919 TEUs.
The new vessels, worth Dh3bn, will help the company achieve a targeted 30 per cent increase in its throughput this year. The first of the eight vessels was delivered last week, while the rest will be delivered in the next 12 months, said Soersen.
UASC was set up in 1976 by six countries to reduce the region’s dependence on foreign shipping lines. The UAE, Saudi Arabia, Kuwait, Iraq and Qatar have equal shares of 19.5 per cent each while Bahrain has the remainder. The shipping company is the largest locally owned carrier of containerised cargo in the Middle East and is one of the largest shipping companies in the world.
“We are aiming at retaining our position in the Middle East container market. Our new expansion programme will certainly give us a larger global footprint in the container shipping market,” said Soersen.
UASC is aiming to reach 3.5 million TEUs capacity by 2012 through its aggressive expansion programme. In this regard, this year UASC is planning to spend more than Dh4bn for purchasing nine new vessels with a capacity of 10,000 TEUs each.
Building of the vessels will commence this year, but delivery is expected in 2011 due to congestion at shipyards. “We are waiting to get the best price offer. The current price for each of the units we are looking at is around $140m (Dh514m),” said Soersen.
He added the company is also investing Dh732m in the purchase of new containers to support capacity. He said the company is gradually moving away from leasing to owning more containers.
“All sectors of the shipping industry in the Middle East have witnessed an average growth of 20 per cent to 25 per cent in the past three years and the trend is expected to continue as regional demand for imported goods and oil prices continue to rise,” said Soersen.
The soaring demand has triggered an increase in ship orders as shipping companies rush to close the demand-supply gap. By the end of 2007 there were a total of 1,556 container vessels on order worldwide, all to be delivered by 2012, according to a report by the Paris-based shipbrokers, Barry Rogliano Salles. With 17 per cent growth expected in Asia, the continent will hit a total throughput of 20 million TEUs this year.
UASC is also investing Dh366m in information technology in the next 10 years. Soersen said the company will financially support its expansion programme through a combination of bank loans and internal resources.
However, he did not rule out the possibility of an initial public offering as the company eyes long-term expansion programmes beyond 2012. “An initial public offering is likely, but not at this moment. Currently we are generating capital to make the company more bigger and attractive.”
In a bid to increase profitability, the company is also embarking on a restructuring programme that will see it acquiring controlling stakes in all its agencies worldwide.
In a move to diversify its services, last year UASC launched a chemical carrier service – United Arab Chemical Carriers – with an initial investment of Dh5.1bn, a quarter of which was raised through a private placement.
The new company, partly owned by local business people, is registered at Dubai International Financial Centre. Last year, it placed orders worth Dh2.1bn for 10 chemical tankers to be delivered in 2012. More orders, worth about Dh3bn, are expected to be announced this year.
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