Port equipment manufacturer hopes to harbor profits
Shanghai's pilot free trade zone will offer opportunities for companies seeking to tap overseas markets, expand their business, lower capital costs and currency exchange risks, and increase international competitiveness, according to Shanghai Zhenhua Heavy Industry Co, China's biggest port equipment manufacturer.
Having already set up a shipping arm in the FTZ, ZPMC has high expectations for its growth under the plan.
The company - formerly known as Shanghai Zhenhua Port Machinery Co - established a presence at Yangshan Free Trade Port in 2012, and the area was later incorporated into the FTZ.
This makes it a value-added asset in the zone, where it has access to favorable policies and greater freedom in operating there, said Wang Hexu, an industrial analyst from Huachuang Securities Brokerage Co Ltd.
Song Hailing, the company's chairman, said the FTZ will expand investment channels, speed up diversification of trade modes, deepen financial reforms and innovation, and propel the development of the city's international shipping business.
The expanded investment scope should bring more profit growth to ZPMC.
"Taking the policy about non-monetary asset investment as an example, ZPMC can now directly invest in its own machinery, which will not only diversify investment modes but will also reduce capital pressure and investment costs," said Song.
Covering 28.78 square kilometers, the Shanghai FTZ was launched at the end of September after getting final approval from the State Council, China's cabinet, in August. It will be built on the basis of existing bonded zones - Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area and Pudong Airport Comprehensive Free Trade Zone.
According to Song, the financing platform within the FTZ will allow companies to expand sales channels by providing more financing solutions to clients from their branches within the special area. Future policies should enable them to capitalize on overseas business.
"Although no detailed policies have been announced yet regarding the offshore business, it is almost certain that a trial run of international trade settlements will greatly reduce risks in currency exchanges" Song said.
The further liberalization of the capital account and financial services, including interest-rate reforms and greater convertibility of exchange rates, will lower costs and strengthen the international competitiveness of companies within the FTZ.
As a bonded duty-free area, goods can be handled, manufactured, altered and exported without interference from customs.
In addition, export duties probably won't be levied. Such beneficial tax policies will serve as a boon to domestic companies operating overseas.
"The FTZ will also help ZPMC secure more orders from overseas due to the lower financing and operational costs," said Wang of Huachuang Securities.
Founded in 1992, ZPMC accounts for more than 70 percent of the global port equipment production market, according to local media reports.
With ZPMC already dominating the saturated market for global port equipment, it is now exploring related industries, including steel fabrication and marine engineering, Song said.
During ZPMC's heyday in 2011, marine engineering accounted for 40 percent of its total orders. The company now expects to see strong returns from its offshore drilling platform business due to its collaboration with Friede Goldman United Ltd (F&G), the US-based designer and service provider for drilling platforms. ZPMC's parent China Communications Construction Co Ltd acquired Friede Goldman in 2010 for $125 million.
Unlike some Chinese maritime engineering companies that build their own hulls and depend on imported parts, ZPMC focuses heavily on research and develops key pieces of equipment itself, according to local analysts.
Its self-developed products include cranes, spud leg jacking systems, locking systems and hydraulic driven sliding systems.
The company - formerly known as Shanghai Zhenhua Port Machinery Co - established a presence at Yangshan Free Trade Port in 2012, and the area was later incorporated into the FTZ.
This makes it a value-added asset in the zone, where it has access to favorable policies and greater freedom in operating there, said Wang Hexu, an industrial analyst from Huachuang Securities Brokerage Co Ltd.
Song Hailing, the company's chairman, said the FTZ will expand investment channels, speed up diversification of trade modes, deepen financial reforms and innovation, and propel the development of the city's international shipping business.
The expanded investment scope should bring more profit growth to ZPMC.
"Taking the policy about non-monetary asset investment as an example, ZPMC can now directly invest in its own machinery, which will not only diversify investment modes but will also reduce capital pressure and investment costs," said Song.
Covering 28.78 square kilometers, the Shanghai FTZ was launched at the end of September after getting final approval from the State Council, China's cabinet, in August. It will be built on the basis of existing bonded zones - Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area and Pudong Airport Comprehensive Free Trade Zone.
According to Song, the financing platform within the FTZ will allow companies to expand sales channels by providing more financing solutions to clients from their branches within the special area. Future policies should enable them to capitalize on overseas business.
"Although no detailed policies have been announced yet regarding the offshore business, it is almost certain that a trial run of international trade settlements will greatly reduce risks in currency exchanges" Song said.
The further liberalization of the capital account and financial services, including interest-rate reforms and greater convertibility of exchange rates, will lower costs and strengthen the international competitiveness of companies within the FTZ.
As a bonded duty-free area, goods can be handled, manufactured, altered and exported without interference from customs.
In addition, export duties probably won't be levied. Such beneficial tax policies will serve as a boon to domestic companies operating overseas.
"The FTZ will also help ZPMC secure more orders from overseas due to the lower financing and operational costs," said Wang of Huachuang Securities.
Founded in 1992, ZPMC accounts for more than 70 percent of the global port equipment production market, according to local media reports.
With ZPMC already dominating the saturated market for global port equipment, it is now exploring related industries, including steel fabrication and marine engineering, Song said.
During ZPMC's heyday in 2011, marine engineering accounted for 40 percent of its total orders. The company now expects to see strong returns from its offshore drilling platform business due to its collaboration with Friede Goldman United Ltd (F&G), the US-based designer and service provider for drilling platforms. ZPMC's parent China Communications Construction Co Ltd acquired Friede Goldman in 2010 for $125 million.
Unlike some Chinese maritime engineering companies that build their own hulls and depend on imported parts, ZPMC focuses heavily on research and develops key pieces of equipment itself, according to local analysts.
Its self-developed products include cranes, spud leg jacking systems, locking systems and hydraulic driven sliding systems.
