Impact of container dehiring policy felt in results as company pushes to diversify
Chalmers Industries managing director John Carew has resigned effective immediately after the company incurred a net loss of $573,000 for the 2017-18 financial year, after recording a profit of $481,000 the year before.
Company chairman Graham Mulligan will become executive chair “to affect an orderly transition to Chalmers’ next phase”, he writes in a letter to shareholders following the release of the company’s preliminary final report.
The company says the result was a “disappointing performance”, particularly in light of the $68 million it generated in revenue, up $1.2 million on the year before.
“The failure of this revenue increase to result in an improved financial performance is due to a changed sales mix when comparing the 2017 financial year to 2018,” it states.
Chalmers attributes much of the loss to the poor performance of its empty container parks in Melbourne and Brisbane – at a combined revenue of $13 million they are $6 million below the previous year’s result.
“Combined, the two parks made a $1.2 million loss for the 2018 financial year versus a $1.3 million profit for the 2017 financial year,” the company says.
“Much of the cost to run a container park is tied up in equipment leasing costs and property costs – neither of which can be rapidly downsized to an appropriate scale to fit the level of business activity.”
However, the company adds that there are site-specific reasons for the fall in revenues, with Chalmers’ Brisbane facility still struggling to regain clients they lost after 900 containers toppled when a storm hit the park in late 2016.
In Melbourne, Chalmers says a new directive from shipping lines causing empty containers to be dehired directly at the terminal has hurt all empty container parks in the city.
As the containers still require a timeslot at the terminal before they can be de-hired, they must be transferred to Chalmers’ transport facility – a practice Chalmers says transfers an unfair cost burden on to transport operators.
While the company now charges a fee for empty de-hires, this and other initiative do not offset the revenue through the lower throughput, Chalmers says, adding that it is not likely to do so.
“The Chalmers executive is prosecuting new opportunities in order to improve the financial performance of the Chalmers container parks,” the company says.
“New management has been appointed for both Brisbane and Melbourne transport operations.
“This is expected to introduce new lines of business, diversify its operations, increase efficiency and be better able to service customers.”
In Melbourne those new business lines included diversifying into cotton storage and packing, which Chalmers says has exceeded expectations during its first quarter of operations.
“We look forward to a full year of operations,” it says.
Chalmers Tank Services experienced a $7 million increase in revenue and a $1.9 million increase in profitability, driven by work resulting from a major chemical clean up, while the Brisbane warehousing and logistics operation had also improved its financial performance by $800,000, the company says.
In his letter to shareholders, Mulligan praises Carew’s time at the company.
“John is a stalwart of our industry, his relationship with Chalmers extends to nearly 20 years and he leaves a strong legacy,” he states.
“It was John who led Chalmers expansion into Queensland, where he built up the Chalmers’ operations from nothing.
“It was during this developmental time that John’s talents and vast industry knowledge were noticed in the Chalmers board, which he was invited to join in 2007.
“After managing Chalmers’ Queensland operations for more than a decade, John was appointed to managing director in 2013.”
Mulligan also notes Carew’s accomplishments, particularly related to staff well-being and focus on safety.