Modern Terminals continuously reviews our organisation structure and resource levels in light of the market, the external environment and our business priorities. We have been taking a proactive approach to adjusting our organization and management systems over the years. This has not only allowed our company to react quickly to the challenges presented by the global downturn in recent years, but also allow us to continue our strategic development despite the uncertain pace of recovery.

The world market has remained weak with low single digit growth in global GDP in 2012 due to weak growth in the US and fragile EU zone, which have a knock-on impact on emerging market, as their export revenues to developed economies continue to under-perform. The readjustment of global economy has been prolonged. The overall growth in 2013 is expected to be marginally better than 2012, with the EU returning to growth, but will not return to 2010 levels and substantial economic risks remain.

 
Mr. Sean A. Kelly
CEO
Modern Terminals Limited

Heavy oversupply of container vessels continues to impact freight rates negatively. The vessel supply demand imbalance will continue well into 2014. The carrying capacity of new buildings on the pipeline is ever-increasing, setting the stage for intensification of competition among the carriers on the Asia-Europe trade.

It is an imperative that we proactively respond to customer needs and deliver world class service standards in order to remain competitive. The rotation of the Managing Directors across our business units in March aligned the skills and experience of the individuals to the priorities of the business units. Following this, the cross-BU operations skill community was immediately invited to Taicang business unit to conduct a review. A number of quick wins were effected thereafter and further improvement plans have been stipulated.

ˇ§New Horizonˇ¨ project has been launched as one of the major initiatives, whereby Hong Kong and Da Chan Bay business units review operational processes and then implement a new terminal operating system to substantially improve productivity, service delivery and margins. In addition, there is a Business Plan to strengthen customer service as well as carry out an end-to-end review of customer needs and interactions.

Our concerted efforts across business units and functions were best reflected in our successful acquisition of new customers and shipping services at Da Chan Bay business unit around August this year. It has been a highly complicated process in the negotiation with our customer shipping lines and their alliance members. We should all be gratified by our success and teamwork in this round of business acquisition while we continue moving ahead.

The Business Plans for 2013 have been finalized, with quite a lot of work having already started. We are consolidating our strengths and continuing with our foundation work so that when the timing is right, we will be off and running at full sail. Our work on designing business development capability for opportunities beyond our traditional market in China continues.

While we are very focused on growing our business for all BUs, we also continue to deliver our corporate social responsibility. As I am writing this message, here comes the good news of our successfully passing the audit for our renewal of ISO14001 EMS certificate, earning high commendation from the auditors. Our Modern Volunteer Force has been actively participating in social services with activities lined up every month. Our partnership with Cotton Spinners Association Secondary School on Project WeCan continues to flourish. I am as proud as you all to be part of this caring team!

While the medium-term outlook remains challenging, I am confident that we can collectively address these challenges proactively and in a culture that is supportive of each other and our overall goals.

Sean A. Kelly