Sunday, June 28, 2009

Stable logistics cost seen till year-end

The cost of logistics for land transport and warehousing is expected to remain stable throughout the year, according to industry players.

This is because Malaysia’s logistics cost for the two segments is already among the lowest in the region and, therefore, not severely impacted by the drop in import and export volumes.

Logistics players are more concerned about the slower turnaround time of goods in their warehouses and distribution centres due to sluggish demand.

The slower turnaround time in warehouses has affected logistics firms’ in come.

Freight Management Holdings Bhd (FMH) managing director Chew Chong Keat told StarBiz that fees in the local logistics scene would remain stable in the second half of the year.

However, he said, the company would continue to monitor fuel price movements, which is one of the three major factors that influence the cost of logistics.

“The other two major factors are financing or borrowing rates, which have seen no huge increase in Malaysia, and manpower, which is sufficient currently compared with last year.

“Some local logistics providers are only seen to provide discounts of 10% to 15%, depending on the package and volume of goods,” he said.

Chew noted that the turnaround time of goods in warehouses had been slower compared with the pre-global crisis period.

Going forward, he sees a slight improvement in the volume of goods compared with the 10% to 15% drop in the first quarter of this year.

On its results for the third-quarter ended March 31, which saw a 14.3% drop in net profit to RM2.8mil year-on-year, Chew said extraordinary gains of RM1.1mil from the disposal of a barge in the previous corresponding quarter contributed to the decline. “At the operating level, we are still better than 2008 for that particular quarter,” he said.

On the performance for the full-year ending June 30, Chew said FMH expected to remain profitable although the growth momentum might not be as bullish as last year.

Similarly, Century Logistics Holdings Bhd deputy managing director Mohamed Amin Kassim saw little change in logistics cost in the country amid the weak economy.

“Our rates are already among the lowest in Asia and a further decrease will only hurt local players.

“However, container haulage rates may have dropped from last year, with the current rates generally lower than the guidelines provided by the haulage association,” he said.

Air and sea freight had also recorded a slight drop in rates, he added.

Amin said the more pressing issue was the slower turnaround time of goods in warehouses, which had affected income.

“Usually, the turnaround time is 10 days to two weeks but now, some goods have been sitting in our warehouse for a month.

“Due to the slower turnaround, logistics players lose out on cargo-handling fee,” Amin said, adding that some brands of fast-moving consumer goods were still recording healthy turnaround time.

On Century Logistics’ weaker results for the first-quarter ended March 31, he said they were due to the high base effect from special logistics projects done a year ago, coupled with the drop in volumes early this year.

The company saw its net profit shrinking to RM1mil in the first quarter from RM9.8mil in the previous corresponding period.

“But in the second quarter of this year, we have seen an uptrend in volume for certain logistics activities due to our diversified services and value-added products. I hope this positive development is sustainable,” he said.

Source: StarBiz

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