Letter to Shareholders

Now, I hereby thanks to every shareholders on behalf of T3EX Holdings for your cares and supports. T3EX Holdings has been keeping work hard to be the provider of total solution of logistics supply chain management.

2020 Performance Review: From Deep Downturn to Big Rebound, T3EX’s Performance Breakthroughs a Record High.

Expressed in thousands of New Taiwan Dollars 2020 2019 YoY
Revenue 15,160,243 11,258,071 34.66%
Gross Profit 2,467,887 2,014,229 22.52%
Operating Expense 1,771,981 1,717,569 3.17%
Operating Profit 695,906 296,660 134.58%
Profit after tax 570,727 241,363 136.46%
EPS(Dollars) 4.72 2.15 119.53%
Gross Margin 16.28% 17.89% -1.61%
Opearting Profit Margin 11.69% 15.26% -3.57%
Net Income Margin 3.76% 2.14% 1.62%

Owing to the full products layout, which includes ocean freight, air freight, rail transport and domestic logistics, even under the severe impact of Covid-19, T3EX still performed well and enjoyed tremendous growth despite adversity in 2020. Last year, the company’s consolidated revenue reached NTD$ 15.16 billion with a 34.66% YOY growth; the gross margin reached NTD$ 2.47 billion with a 22.52% YOY growth; the income profit after tax reached NTD$570 million with a 136.46% YOY growth and EPS reached NTD$ 4.72 dollar with a 119.53% YOY growth.

In the analysis of business breakdown, the revenue of ocean freight takes up 52% of the total revenue, while Europe and the US long-haul constitute over 70%. Since the second half of 2020, the freight rate of US route started to rebound, after that, owing to the severe lack of container, space and labor, the freight rate of all routes increased dramatically, thus making T3EX’s ocean freight gross profit reaching NTD$1.34 billion with a 22% YOY growth.

With regard to air freight, due to the influence of Covid-19, passenger flights decreased drastically as well as belly cargo capacity. However, thanks to the strong and urgent cargo demand for medical supplies in the second quarter of 2020, both cargo volume and freight rate increased dramatically. In the second half of 2020, led by the strong demand of supply chain for electronic industry, the demand for space booking enjoyed huge increase, which sustained the freight rate at a high level. The overall 2020 gross profit reached NTD$706 million with a 33% YOY growth.

As for China-Europe/ China-Russia railway transport, due to the severe space shortage of ocean and air, large amount of cargoes that intended to be transported by ocean and air, tend to railway. In the year 2020, the freight rate of China-Europe railway rose by 80%~100%. Moreover, T3EX`s year-round volume increased four times compared with last year, while the gross profit enjoyed a 88% YOY growth.

For the domestic logistics, China’s domestic market began to recover in Q2, 2020 and strongly rebound since Q3, 2020, which propelled the growth of import, customs, warehousing and transportation. T-Cube Logistics, the Company’s domestic logistics subsidiary, began to gain profit in Q3, 2020 and achieved its annual profit goal.

Last but not least is the revenue breakdown by region. Owing to the strong demand of medical supplies and inventory supplement from China to Europe and the US, the Company’s 2020 China revenue enjoyed a 39% YOY growth; in favor of the supply chain transfer & import and export demand increase caused by the China-US trade war, along with the global freight rates surge caused by the imbalance of ship and space, the Company’s Southeast Asia revenue enjoyed a 36% YOY growth; due to the manufacturing return and increase of supply chain logistics activities in intra-Asia, the Company’s Taiwan revenue grew by 23% compared with last year.

2021 Outlook: Riding the Winds and Waves to Embrace a Bright Future.

In the post-pandemic era, enterprises` mentality for supply chain will change from “just-in-time inventory” to “safe inventory”, which will make factories build their safe inventories in a vigorous way. Also, the ease of Covid-19, increase of vaccination rate and the government’s poverty alleviation grants have triggered the expenditure growth in US, thus making the export demand from Asia to Europe and the US remain strong.

About ocean freight market, as port congestion and container shortage of the US caused by the pandemic remain unsettled, large amount of vessels are waiting on sea, thus unloading time is greatly postponed. As the export demand from Asia continues to grow, causing the scarcity of ship and space, the long-haul rate will sustain at high level. But it is predicted that the container and space shortage will alleviate in the second half of the year. But only if the business structure of ocean industry could transform, high freight rate will become normal. What`s more, as worldwide Covid-19 vaccination rate increases, global economy may gradually recover from H2, 2021, at that time, we will enter the traditional booming season in Q3, so shipping industry will remain prosperous this year. However, we should still observe three indexes: container turnover rate, GCSP (Global Carrier Schedule Performance) and global Covid-19 vaccination rate.

For air freight market, remote communication become the new normal, E-vehicle, 5G, and AI are carried forward in succession, thus the demand for semi-conductor and related electronic components increases. In addition, manufacturers have enhanced their inventory storage, thus we predict the certain cargo demand will keep growing. On the other hand, as more and more Covid-19 vaccines acquired permission to go on the market, they will demand and consume most of the air capacity. Before the cancellation of international travel restrictions, almost 50% of the passenger and cargo flights are grounded, so air freight rates will remain at a high level owing to the 20%~30% capacity gap.

Since the cost of China-Europe/China-Russia rail transport being much lower than air and close to ocean, while, its transportation time is one third of ocean, railway becomes the main transportation method for many customers after the pandemic. So far, China has become the EU’s largest bilateral trade partner. In 2020, China-EU bilateral trade amount reaching EUR 586 billion, surpassing the US-EU bilateral trade amount of USD 555 billion. Due to the rapid growth of demand, trains and containers become tight, thus we could positively foresee an increase for this year.

About China domestic logistics market, as the domestic spending continues to grow, plus the supply chain restructuring caused by China-US trade war, China forms the “dual circulation economy” with both manufacturing and consumption, so, it is foreseeable that demand for domestic warehousing and transportation will also increase.

For Southeast Asia market, the China-US trade war resulted in a restructuring of the global supply chain with Taiwan and Southeast Asia produce for the US consumer economy. In addition, with the benefits of demographic dividend, land, and tax advantages, there is a chance for the Southeast Asia market to boom.

Generally speaking, the global pandemic is slowing down. With the increase of Covid-19 vaccination rate, global economy will recover gradually at a stable pace. Thus, the overall logistics market will enjoy a further increase, the 2021 outlook is still optimistic.

Future Strategy Plan: Raising Sufficient Capital to Expand Market Share in the Post-Covid-19 Era to Create a New Milestone.

T3EX’s 2020 performance showed the gain of integrated logistics. We will continue to play effectiveness of holding platform via the duo-headquarter module as well as NTD$615 million capital raised from capital market this January. With healthier and more competent financial structure and sufficient cash flow to ally with strategic partners, by merge or joint-venture strategy to integrate vertical industry and expand market, the Company will keep the growing momentum and open a new chapter. The Operating Strategy of Duo Headquarters is as follows:

A. Taipei Headquarter (Non-China Market):

  1. Capture the opportunity of returning Taiwanese manufacturers from China and increase investment in Taiwan.
  2. Increase investment in Southeast Asia market.
  3. Strengthen long haul route business from Asia to Europe and the US.
  4. Expand network locations within Asia.
  5. Deepen collaborations with WPG Holdings.

B. Shanghai Headquarter(China Market):

  1. Enhance one-stop logistics service in China (Import + Custom Clearance+ Warehousing + Transportation + Supply Chain Finance), increase investment in import logistics business.
  2. Develop Africa and Latin America market via JV and closer partnerships with overseas agents.
  3. Develop comprehensive China-Europe/China-Russia/China-Central Asia railway and China-Central Asia transportation businesses.
  4. Expand supply chain finance business.
  5. Establish B2B2C warehousing digital services.

We will continue to strengthen our expertise and create greater values for our shareholders.

Chairman& General Manger: David Yen
Accounting Management: Allen Hou