Over 200 million yuan! Cross-border sales require shipbuilding

The big seller is going to spend a huge amount of money on shipbuilding! Is cross-border logistics too profitable?

Since the outbreak of the COVID-19 pandemic, cross-border logistics prices have skyrocketed, but delivery times have become slower and slower. In order to further improve the delivery time of e-commerce shopping, a cross-border listed seller is going to build its own container ship, with a total planned cost of 207 million yuan.

It costs more than 200 million RMB to build a ship!

Recently, the cross-border listed big seller Lege Co., Ltd. stated that the company plans to sign a contract with a first-class domestic shipyard to build a 1,800TEU container ship, with a total construction cost of US$32.6 million (about RMB 207 million in total) . The new ship construction has been reviewed and approved at the 37th meeting of the fourth board of directors of the company held on January 27, 2022. The delivery time is March 31, 2023.

The editor learned that Huanghai Shipbuilding Co., Ltd., a partner of Lechuang Co., Ltd., has a registered capital of 1.1 billion yuan and total assets of 4 billion yuan. It can repair and build various high-tech and high-value-added ships below 50,000 DWT . In 2014, the registered trademark "Huanghai Shipbuilding" was approved as the only "well-known trademark" in the national shipbuilding industry.

Lechuang shares detailed that since 2020, the global COVID-19 pandemic has continued to spread, the efficiency of overseas ports is generally low, and the security, timeliness, reliability and economy of the supply chain have been severely challenged. At present, international trade is in a period of transformation and development from OEM to brand export, the trend of online consumption of consumer goods e-commerce continues to strengthen, and the company's online business is growing steadily and rapidly.

In order to further enhance the user experience of fast delivery of e-commerce shopping, shorten the delivery cycle, improve inventory turnover, promote the integrated operation of the company's public overseas warehouse business and first-leg shipping, drive more small and medium-sized enterprise brands to go overseas, and reduce the disturbance of logistics costs to brand operations, the board of directors has decided that the company intends to strengthen supply chain security, improve supply chain efficiency, and reduce transportation costs through shipbuilding or chartering. The container ship to be invested and built this time is expected to be delivered in 2023 and will not have a substantial impact on the company's operating conditions in the short term.

Regarding the source of funds for shipbuilding, Lejia Co., Ltd. stated that it mainly comes from the net profit from normal production and operation and moderate bank loans.

The editor learned that in the first three quarters of 2021, Lejia Holdings' revenue was nearly 2.1 billion, a year-on-year increase of 72.27%, and the net profit attributable to shareholders of listed companies was 124 million, a year-on-year decrease of 23.46%. Among them, the revenue in the third quarter was 703 million, and the net profit attributable to shareholders of listed companies was 39.58 million, a year-on-year decrease of 57.58%. An important reason for the decline in the company's net profit is that the overall environment is relatively unfavorable compared with last year, such as soaring shipping costs , rising raw material prices, fluctuations in international exchange rates, and the epidemic.

No ships or containers to rent, just build ships! Lege responds to questions

After the news of the cross-border listing and the shipbuilding was announced, a large number of netizens expressed their admiration for the company, saying it was really awesome and rich! However, many netizens also expressed their confusion about the move of Lege Shipbuilding:

Why build a ship? It would be better to just buy an existing one!

It is better to buy a ship than to build it, and it is better to rent a ship than to buy it . Doesn’t Le Ge understand this?

The most expensive thing is maintaining the ship, and maintaining the ship after it is built is also a huge cost.

Once the ship is built, it may take 30 years to recover the cost of shipbuilding .

…

It is reported that many netizens think that Lejia Shipbuilding is not a cost-effective business. They believe that the delivery period of a ship is very long. If cross-border shipping is in a downward cycle when the ship is delivered, Lejia may end up selling the ship at half the price . In terms of operation, industry insiders also said that the operating costs are very high. Whether it is crew, postage, tolls or maintenance fees, it costs a lot of money, and compared with many professional shipping companies, Lejia does not have much competitive advantage.

In response to many doubts, Leckey also publicly responded that the company's shipbuilding has been repeatedly studied and planned for a long time at the strategic level, and it is not a momentary impulse.

As for renting a ship, the cost is very high, and you can buy the ship after renting it for 3 years.

Leckey said that for short-term lease (half a year to one year), the price is close to 100,000 US dollars per day (including labor costs), and generally more than 50,000 US dollars per day; for long-term lease (more than three years), the price is 30,000-40,000 US dollars per day. The annual rent is more than 10 million US dollars, and the ship cost 32 million US dollars. After three years of lease, the ship can be bought.

In addition, shipbuilding can also increase the speed of cargo transportation and reduce operating costs. In the past, the normal US West Coast route also required 1 month of shipping and 2 months of preparation time. Now during the epidemic, many large ships docked at ports require 2 months of shipping time. Cross-border e-commerce companies have to prepare 3 months of inventory, which increases the rental cost and capital cost of overseas warehouses. According to the 2-month shipping cycle plus 3-month inventory, the rental cost of a single container plus the capital cost exceeds US$4,000; 1-month shipping cycle plus 2-month inventory also requires about US$2,800 in costs.

In comparison, the express ship built by the company can reach the warehouse in the west coast of the United States in half a month. Based on the express ship's 15-day shipping cycle plus one month's inventory, the rental cost of a single container plus capital cost is only US$1,300 to US$1,400.

Lechuang also stated that the shipping business is actually an extension of the overseas warehouse business, which accelerates the shipment of goods and the capital flow of enterprises. The editor learned that as the demand for overseas warehouses by cross-border e-commerce remains strong, the utilization rate of Lechuang's overseas warehouses is approaching saturation, and profitability is gradually becoming prominent. Public overseas warehouses will become another key development business of Lechuang in the future, and the revenue share is expected to increase significantly.

According to data, Loctek focused on its overseas warehouse business in 2020 and achieved profitability in the second quarter of 2021. So far, Loctek has deployed 17 public overseas warehouses around the world, with a total storage area of ​​3.2276 million square feet, including 14 warehouses in the United States and 3 warehouses in China, namely Ningbo, Zhejiang, Baoding, Hebei, and Foshan, Guangdong.

Outstanding sales performance! Lege platform and independent station both flourished

Whether it is the overseas warehouse business that has already achieved profitability or the ongoing shipbuilding business, both reveal the ambition of Lechuang to enter the cross-border logistics industry. In fact, as a cross-border listed company, Lechuang's "main business" of selling goods is booming.

The sales model of Lechuang Co., Ltd. covers diversified sales models of multiple types and channels, including domestic, overseas, online and offline, as well as overseas warehouse operation services. Domestic sales, overseas offline sales, overseas online sales, and overseas warehouse sales account for approximately 7%, 34%, 53%, and 6%, respectively .

Among them, overseas online sales accounted for more than 50%, which is an important source of Lechuang's revenue, indicating that Lechuang's overseas online business performed well. When the Amazon account ban wave spread in 2021, Lechuang publicly stated that Amazon's store closure had no impact on the company . The company has always been operating in compliance with regulations. This matter is good for compliance operations and purifying the competitive environment. Only by being honest with consumers can we go further. It is reported that during Black Friday in 2021, Lechuang achieved outstanding results, and its overseas independent brand Flexispot ranked first in the Amazon lifting table category.

In addition to the platform, Lechuang has also achieved remarkable results in the independent station channel. Data shows that in 2020, Lechuang’s cross-border e-commerce sales revenue increased by 192% year-on-year, of which independent station sales increased by 580.64% year-on-year , which is one of the main driving factors for the company's overall performance growth.

The 2021 financial report is about to be released. What kind of results will Lechuang achieve? Let's look forward to it.

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