TTA taps Singapore incentives
Laem Chabang _ Thoresen Thai Agencies (TTA), a SET-listed shipping company, has shifted responsibilities for expansion in Asia to its wholly owned subsidiary in Singapore to enjoy tax incentives offered by the island state.
Managing director M.L. Chandchutha Chandratat said the Singapore-led growth strategy began last year when the Singaporean unit ordered nine new vessels for TTA. Thoresen Shipping Singapore Pte (TSS) was established a year ago to operate the same business as TTA.
''Our nine new vessels, when the building finishes, would be owned by TSS and carry the Singaporean flag,'' he said.
''This strategy was created for TTA to enjoy lucrative incentives given to the shipping industry in Singapore. Supports given by the Thai government are not equal to those granted by Singapore.''
For example, in Singapore the capital gains tax is zero, compared to 30% in Thailand. The city-state also waives withholding tax on loans for shipbuilding, said M.L. Chandchutha.
In addition, Singapore has more double taxation agreements with other countries than does Thailand, he added.
''We will continue to promote activities and business transactions through TSS in growing our business in the region, while decreasing the role of the Thai headquarters,'' he said.
TTA in its 2007 fiscal year ending in September posted 42% growth in net profit to 4.96 billion baht on revenue of 21.3 billion, up 25% from a year earlier.
M.L. Chandchutha said the company expected the percentage growth to be considerably lower this year due mainly to slower growth in freight charges. Marine freight rates rose 29% last year to peak at US$15,410 per ship per day on strong demand for bulk carriers, he said. ''It is unlikely that the freight rates will increase by that much this year as supply has been catching up with demand.''
M.L. Chandchutha said a US economic slowdown would have a minimal effect on TTA, and high oil prices were manageable. Fuel costs comprise about 20% of the company's operating expenses.
''Our key markets are Asia and the Middle East. Absolutely shipments to the US from China, for instance, would drop, but those headed to the Middle East would remain buoyant on strong demand from oil-rich countries,'' he said. ''Competition, however, will remain stiff among operators in the region, so we have to be the most efficient company even though the size of our business is smaller than those of our rivals.''
To improve efficiency, TTA has allocated 100 million baht to install a new IT system that connects its 43 dry-bulk carriers with headquarters.
IT servers would be installed aboard all 43 carriers in the next six months to upgrade vessel maintenance and inspection, navigation, safety and crew management, as well as equipment and spare parts purchasing, he said.
The IT upgrade would help TTA to increase its revenue by 30-40% or six to eight billion baht a year starting in 2008 without having to add manpower, M.L. Chandchutha said.
TTA shares closed yesterday on the SET at 40 baht, down 1.50, in trade worth 868 million baht.
Source: Bangkok Post by Nareerat Wiriyapong
Tuesday February 05, 2008