Letter to Shareholders

Now, I hereby thanks to every shareholders on behalf of T3EX group for your cares and support. The Company still keeps the strong business foundation and sensitive market insight through the quick and clear management policies to expand the business scale and increase global operating locations including Taiwan, Hong Kong, China, Japan, Korea, Vietnam, Thailand, Cambodia, Singapore, and Indonesia. By effective group resource integration, the Company not only can provide an international logistics services but also can provide comprehensive logistics such as customs declaration, warehousing, delivering, and supply-chain management. Via deep local culture cultivation and more potential markets development, the Company anticipates that the brand will step to a level of global market leader.

2015 Review

In 2015, the unexpected low global growth, the decrease of international trade activities and the decline of oil price, caused the low freight in sea and air logistics. Under the circumstance, the Company integrated its group resources through the following subsidiaries- through T.H.I. Logistics(THI) to offer long-distance sea and air freight services to international clients, through Taiwan Express(TEC) to provide logistics management services for upstream component supply chain in Asia, through Shanghai Yaohwa (YHI)to provide import customs services, through T-Cube Logistics(T-Cube) to offer warehousing and distribution services, through Shanghai Exer Logistics(EXer) to provide delivery services, and through THI online(e-thi) to provide online customer service and cargo tracking. In order to realize the goal to provide clients the one-stop-shop logistics services so as to achieve synergistic effects.

Expressed in thousands of New Taiwan Dollars
  2015 2014 YoY
Revenue 9,736,912 9,729,513 0.08%
Gross Profit 1,877,272 1,659,065 13.15%
Gross Margin 19.28% 17.05% 2.23%
Operating income 312,196 225,141 38.67%
Profit before tax 397,257 273,906 45.03%
Profit after tax 303,900 206,665 47.05%
EPS(Dollars) 2.70 2.14 26.17%

2015 gross margin significantly grew to 19.28% from 17.5% from 2014, with a record-high net profit and an EPS of NT$2.7. The key reasons to the profit growth are as follows:

  1. Developing high-margin long-distance sea freight services: The sea shipping prices started decreasing month by month on marked growth in ship freight supply since 2Q15. Compared with the same period of 2014, the Company’s long-distance sea freight business posted a mild growth. Meanwhile, China’s 2015 total import/export trade volume was down 7% on the back of global economy’s slow growth and sluggish demand growth, according to statistics from the Customs Administration. Hence, the Company’s sea freights slightly decreased amid the unfavorable global economic conditions. Despite decreasing shipping prices and flat freight growth, the Company still saw increases in gross profit and gross margin, mainly thanks to the Company’s continuous efforts to develop the high-margin long-distance sea freight business for imports/exports to and from the U.S. and Canada as well as strong bargaining power to reduce costs for better earnings performance compared to the previous year.
  2. Developing the CFS and LCL businesses with the collection hub model: The CFS and LCL businesses are expected to blossom following the trend of smaller, lighter, thinner, and diversified products. Therefore, the Company uses major airports and seaports as hubs for traditional cargo collection as well as emerging CFS and LCL businesses to create new cost-effective business opportunities. The hub service may help clients deal with problems caused by unexpected production delays, transportation changes, and coordination difficulties of supply chain. With a tight-knit network in the Asia-Pacific region, we provide SMEs services to send products to anywhere in the world.
  3. Developing integrated logistics services: We provide integrated one-stop-shop services for international shipping, domestic trade warehousing, freight transportation, supply chain management, to e-commerce logistics. We aim to turn “logistics” from a factor for cost management to a creator for value-added services to help enterprises integrate all available internal and external resources to reduce costs, enhance efficiency, and increase market share.

2016 Outlook

Looking forward this year, the speed of global economic growth is as same as last year, the demand of international cargo market is still sluggish, and the oil price is still in the valley. The Company predicts the possibility of rebound of sea and air freight is quietly small. To face this difficult situation, the main strategy of T3EX group as follows:

  1. For the area development plan, the Company aims to continue maintaining strong relations with its 400 plus oversea agencies and building new relation in Middle East and Africa Market. In Asia-Pacific region, the Company will keep on establishing comprehensive locations. And already set up location in Malaysia in 2Q 2016. In 2H, the Company will build joint venture in the Philippines and India.
  2. For the product development plan, the Company aims to focus on horizontal and vertical integration in China. For horizontal integration, the Company will keep looking for targets of supply chain management to extend the deep of comprehensive logistics products, and make import, customs declaration, warehousing and transportation perfect in China. For vertical integration, the Company will target on air freight forwarding companies in China to expand air business scale, and develop more international customers which can bring more one stop solution of import business.
  3. In addition, the policy, “One Belt and One Road”, is still undertaking by China government. Now is the best timing for T3EX to develop the cross-border rail freight business amid policy implementation period. Rail is a competitive new tool, saving 70% cost than airplanes and 50% time than ships. Now, the Company is setting up rail project team in China’s Zhengzhou, Suzhou, Chendu, Chongqing, Hefei, Harbin, and Shenyang to actively promote the new business channel. In the meantime, T3EX has also earned long-term business contracts with several major import/export enterprises.

Looking forward the future, we will continue tracking the goal to become the Great China biggest and best total solution logistics company by strong integration ability. Through the holding structure with multiply-market and diversified products, we can provide customers total solution services such as sea, air, land, customs declaration, warehousing, and transportation. We will continue to strengthen our expertise and create greater values for our shareholders.

Chairman & CEO: David Yen