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Steamships Trading Company Ltd.

Steamships Trading Company Ltd.

P.O. Box 1
Hunter Street-Champion Parade
Port Moresby, N.C.D. 121
Papua New Guinea
Telephone: (+675) 322 0222
Fax: (+675) 321 1786
Web site: http://www.steamships.com.pg

Public Company
Incorporated:
1919 as Steamships Ltd.
Employees: 4,000
Sales: PGK 370.04 million ($126.66 million) (2005)
Stock Exchanges: Port Moresby Australian
Ticker Symbol: SST
NAIC: 311520 Ice Cream and Frozen Dessert Manufacturing; 312140 Distilleries; 325611 Soap and Other Detergent Manufacturing; 339999 All Other Miscellaneous Manufacturing; 421320 Brick, Stone, and Related Construction Material Wholesalers; 421390 Other Construction Material Wholesalers; 421710 Hardware Wholesalers; 444130 Hardware Stores; 483113 Coastal and Great Lakes Freight Transportation; 484110 General Freight Trucking, Local; 484121 General Freight Trucking, Long-Distance, Truckload; 484122 General Freight Trucking, Long-Distance, Less Than Truckload; 484230 Specialized Freight (Except Used Goods) Trucking, Long-Distance; 48832 Marine Cargo Handling; 531110 Lessors of Residential Buildings and Dwellings; 531120 Lessors of Nonresidential Buildings (Except Miniwarehouses); 551112 Offices of Other Holding Companies; 72111 Hotels (Except Casino Hotels) and Motels Steamships Trading Company Ltd. is involved in a broad range of activities in Papua New Guinea. Originally an operator of merchant ships and stores, the venerable company is still active in the freight industry but also supplies the local population with power tools, hotel rooms, office space, soap, and liquor. Steamships owns the country's only manufacturer of ice cream (Laga Industries, makers of the Gala brand). The company's stock was the first one listed on the Port Moresby Stock Exchange. The Swire Group has a majority holding in Steamships, which is the largest non-mining company in Papua New Guinea.

ORIGINS

Steamships Trading Company Limited was started in 1919 when retired sea captain Algernon Sydney Fitch (born 1881) left his Tasmanian apple farm to lead a £5,000 salvage operation to recover a grounded barge called the Southern Cross. Unfortunately, this was lost in towing by the small, coal-powered SS Queenscliffe, which had been built in 1855. In 1924 the company listed shares on the Sydney Stock Exchange and launched a trading venture connecting Port Moresby with Papua New Guinea's isolated outposts. The first cargo was 25 coconut fiber sacks, about 15 pounds of tobacco, and a case of condensed milk.

Fitch originally traded out of his house in Port Moresby. A branch store was opened on Samarai Island in 1926; within a few years it was doing about £50,000 a year in business. Trading was difficult in the global recession but by the mid-1930s, the enterprise had grown to a chain of several stores. The company acquired a coconut plantation in 1935.

Operations were suspended during World War II, and the company's Cosmopolitan Hotel in Samarai was torched due to a scorched earth policy. The company promptly set out to restore its retail operations after the war.

POSTWAR REBUILDING

Steamships founder Fitch retired in 1952 to be succeeded by 20-year company veteran E.V. Crisp. In the same year, Steamships became the Papua New Guinea agent for a new service being launched by the China Navigation Company of Hong Kong. This was the beginning of a long association with China Navigation's parent, the London-based Swire Group. Swire bought a small interest in Steamships in the early 1960s.

The 1962 acquisition of Collier Watson (NG) Limited included the company's first stores and plantations beyond Papua New Guinea (PNG). Over the years, however, it tended to invest exclusively in domestic enterprises. Also in 1962, Steamships reentered the hotel business for the first time since World War II by buying a stake in the Lamington Hotel.

The company's subscribed capital exceeded £1 million in 1964. During the year, E.V. Crisp stepped down as head of the company and was succeeded by H.D. Underwood. The company was diversifying in the mid-1960s. The Brown River Timber Company was acquired and sheet metal fabrication and industrial gas plants were established. Steamships also continued its traditional activities, buying coffee plantations and opening the Melanesian Hotel in Lae. Steamships became a Coca-Cola bottler in 1967.

Steamships sold several unprofitable rubber plantations in 1979. Within a couple of years, turnover exceeded PGK 100 million, and profits reached a record PGK 4 million in 1981. Steamships then employed 5,000 people, about 11 percent of them expatriates. In the first half of the decade, Steamships landed a massive contract to provide logistics for the Ok Tedi gold and copper mine, while opening PNG's largest department store in the relatively isolated community of Tabubil.

In the mid-1980s, Steamships' ownership came to be dominated by two groups: John Swire and Sons Investment Ltd., which raised its holding to 33.3 percent, and Goroka-based Collins and Leahy Investments Limited, which acquired another third interest. Lean years followed, particularly in the freight and steel fabrication divisions, while hotels were flat in spite of the creation of a new marketing office to promote tourism.

Steamships rounded out the decade with new investments. It was a partner in a new toothpaste plant built in PNG by Colgate Palmolive in 1987. In 1988, Steamships acquired the bankrupt Papua New Guinea Shipping Corporation (PNG Shipping), which was active in trading with Australia.

LATE 20TH-CENTURY REORGANIZING

PNG's national economy was upended by political turmoil after rioting at a copper mine in Bougainville in the late 1980s. Following the unrest, Steamships reevaluated the strategic fit of its various holdings. PNG was reducing tariffs on imported goods, making Steamships more vulnerable to foreign competition in some manufactured products such as soap.

Steamships divested its bottling operations to an Australian affiliate of Coca-Cola for PGK 27 million (AUD 36 million) in 1991. The next year, it bought the retail and hardware stores of rival Burns Phillip (BP) for AUD $24 million. BP's retail business dated back 100 years.

According to the Australian Financial Review much of Steamships' hotel business was tied to the mining industry. In the early 1990s the company had about 3,000 employees.

The company was a dealer for Honda and Mitsubishi autos and in 1993 acquired New Guinea Motors Ltd., the Isuzu and Land Rover dealership for PNG. Steamships also bought out Laurabada Shipping Ltd.

COMPANY PERSPECTIVES

Papua New Guinea's premier trading company. Offering competitive goods and quality service through the group's activities to our customers/clients throughout Papua New Guinea. Supporting PNG human resources by providing employment to over 4,000 Papua New Guineans.

Chris Pratt led the company through the last half of the 1990s. Toward the end of the decade, Steamships sold the Smuggler's Inn in Madang while building a new hotel at Boroko (Round House). The coastal shipping fleet was augmented with the purchase of a couple of new vessels.

FIRST ON POMSOX IN 1999

Steamships was the first company listed on the Port Moresby Stock Exchange (POMSoX), which opened in 1999. Its shares continued to trade on the Australian Stock Exchange. Steamships was PNG's leading enterprise outside of the mining industry.

The workforce was being composed of an increasing percentage of the native population over the years. By 2003, only 70 of Steamships' 4,000 employees were expatriates.

In 2003 the company exited the car rental business it had been operating in affiliation with Hertz Rent-A-Car. It also left the Kwikshop convenience store partnership with Mobil Oil Limited. The company's traditional shipping business was thriving, bolstered by renewed offshore drilling.

Steamships was operating in a difficult economic environment, with the local interest rate (16 percent) more than twice that in Australia, its managing director John Dunlop told the PNG Post-Courier. Dunlop, in charge for four years, was replaced by David Cox in 2004.

The company's Coral Sea Hotels unit added another property in 2004, buying the Ela Beach Hotel from Kumul Hotels Ltd. The next year saw the division renovating other hotels and leasing some new apartments.

STABILITY IN 2005

In May 2005, Steamships' shareholders voted to acquire its sister company Collins & Leahy. The company also acquired virtually all the remaining shares of Melanesian Soap Products. A Transport division was subsequently created from the Shipping division.

In October 2005, the company sold its Merchandise division to City Pharmacy Ltd. for nearly PGK 20 million. This included the well known Stop 'n' Shop chain of stores.

The Hardware unit acquired Mitre Hardware from Collins & Leahy in early 2005. At the end of the year, Steamships bought out its partners in the Trade Winds Liquor joint venture, whose facility was rebuilt after being destroyed in a fire in 2004.

Revenues were PGK 370 million in 2005; consolidated profit rose 173 percent to PGK 40.2 million. Steamships benefited from the country's strong, stable economy led by demand for PNG's minerals, particularly copper. Inflation had dropped considerably.

KEY DATES

1919:
Sea captain Algernon Sydney Fitch comes out of retirement in an unsuccessful attempt to salvage a grounded barge.
1924:
Steamships lists on the Sydney Stock Exchange; Fitch operates a trading route from Port Moresby.
1926:
The first branch store is opened.
1942:
Operations are suspended during World War II.
1952:
Steamships becomes the Papua agent for Swire Group's China Navigation Company.
1962:
Collier Watson (NG) Limited is acquired, adding the first stores and plantations outside PNG; Steamships buys its first hotel interest since World War II.
1964:
Brown River Timber Company is acquired; a metal and timber fabrication plant is established.
1965:
Steamships builds an industrial gas factory; buys Korfena Coffee Plantations.
1967:
Lae's Melanesian Hotel is opened; the company begins bottling Coca-Cola.
1979:
Two rubber plantations are sold.
1980:
Steamships merges with diversified manufacturer New Guinea Industries Ltd., buys ANG Timbers, and adds to its hotel interests.
1981:
Turnover exceeds PGK 100 million; the company has 5,000 employees.
1986:
Swire and Collins and Leahy each amass one-third of shares.
1988:
Steamships acquires PNG Shipping Corporation.
1991:
The soft drink bottling operations are divested.
1992:
The retail and hardware business of rival Burns Philip is acquired.
1993:
Auto dealer New Guinea Motors Ltd. Is acquired.
1999:
Steamships is the first company listed on the Port Moresby Stock Exchange.
2005:
The company buys out a liquor and soap joint venture, and acquires Mitre Hardware; the Merchandise division is divested.

There still remained considerable challenges to doing business in PNG, bemoaned Steamships' 2005 annual report. International telecommunications services were expensive and broadband Internet access was lacking. The country's shipping, transportation, and power infrastructure also needed updating.

PRINCIPAL SUBSIDIARIES

Bird of Paradise Hotel Ltd.; Coral Sea Hotels Ltd.; Five Star Packaging Ltd. (68%); Goroka Soft Drinks Ltd. (68%); Henganofi Hotel Ltd.; Kavieng Port Services Ltd. (60%); Lae Port Services Ltd. (51.5%); Laga Industries Ltd. (68%); Laurabada Properties Ltd.; Laurabada Shipping Services Ltd.; Madang Port Services Ltd. (60%); Melanesian Soap Products Ltd.; Monier (PNG) Ltd.; Monier Allied Products Ltd.; North Solomons Stevedoring Ltd. (50%); Pacific Novelty Products Ltd. (68%); Papua New Guinea Shipping Corporation Ltd.; PNG Mainport Liners Services Ltd.; Port Services PNG Ltd. (51.5%); Progressive Traders Ltd.; Steamships Ltd.; Tanubada Food Processors Ltd. (88%); Trade Winds Liquors Ltd.; Windward Apartments Ltd.

PRINCIPAL DIVISIONS

Hardware; Hotels; Shipping, Transport; Manufacturing; Property.

PRINCIPAL COMPETITORS

MBf Carpenters Limited; P&O PNG Ltd.

FURTHER READING

Adamson, Graeme, "Top of the Stocks Defeat the Odds," Australian Financial Review, August 27, 1992, p. 36.

Bromby, Robin, "Britons Storm the Bridge As Trader Changes Course; Steamships Turns Page on PNG History," The Australian, December 6, 1999, p. 37.

Callick, Rowan, "Fallout from PNG Share Raid," Australian Financial Review, June 4, 1996, p. 25.

, "Last of the Big Traders," Australian Financial Review, September 21, 1992, p. 51.

, "PNG Group Urges More Local Involvement for Job Creation," Australian Financial Review, December 16, 1987, p. 29.

, "PNG Minister the Mastermind in Share Raids," Australian Financial Review, June 3, 1996, p. 23.

Dougherty, Bridget, "Acquisition Helps Steamships," Australian Financial Review, March 30, 1988, p. 26.

Flynn, Matthew, "Swire Box Service First," Lloyd's List International, November 11, 1997.

"Hotel to Be Renovated," PNG Post-Courier, June 21, 2004, p. 38.

Killen, Heather, "Collins Issue to Buy Slice of Steamships," Australian Financial Review, May 21, 1986, p. 26.

Mengel, N., "PNG Retail Operation Is Sold Off," Courier-Mail, June 23, 1992.

Mitchell, Sue, "Coca-Cola Buys Steamships' PNG Business," Australian Financial Review, May 22, 1991, p. 24.

Tapakau, Eric, "Steamships Face Winds of Change," PNG Post-Courier, December 16, 2003, p. 31.

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