The new Managing Director of Steamships Trading Company, Rupert Bray, says the company has ‘performed admirably’ during the COVID-19 crisis. After years of consolidation, he tells Business Advantage PNG the diversified business is now looking forward to a growth cycle.
Business Advantage PNG (BAPNG): How has your business been impacted by the pandemic?
Rupert Bray (RB): Overall, compared to many businesses in PNG – and elsewhere around the world – I think we have performed admirably. We have reported a small profit of K16.1 million for the half-year for a business that predominately is in hospitality and logistics. There won’t be many significant conglomerates in this part of the world that can say this.
BAPNG: To what do you attribute this?
RB: One of the benefits of being a conglomerate is that, normally, we have this degree of counter-cyclicality in our results. COVID’s impact has been unprecedented because, for the first time, there has not been a natural hedge, there has been a broad-based impact. Of course, like everyone in the sector, we have been very hard hit in our hospitality and hotel division.
‘PNG is going through a transition from being a narrow, resource-based economy to a more broad-based economy. There is a danger that COVID distracts from the necessity of that transition.’
The logistics businesses performed better than we feared – and better than we anticipated. But that meagre half-year profit does reflect how tough things are for us and, frankly, the outlook for the rest of the year and the foreseeable future remains fairly subdued.
PNG has found itself less badly impacted than many of our regional neighbours and COVID-19 is perhaps a red herring when considering the country’s larger challenges. PNG is going through a transition from being a narrow, resource-based economy to a more broad-based economy. There is a danger that COVID distracts from the necessity of that transition.
BAPNG: What is happening with your hospitality division, Coral Sea Hotels?
RB: There were two lockdowns – one early on and one in early August – which hit the industry very badly. Although occupancy levels have recovered, we guaranteed the government certain pricing levels to help with the recovery of the PNG economy and we are sticking with those. So that means that the rate, and therefore the yield, or gross operating profit per available rooms is significantly down year-on-year. We are now operating all of the hotels again.
BAPNG: How did you manage the staff situation?
RB: Our preference was a furlough scheme, even though there is no government support for the scheme. Wherever possible, we asked staff to volunteer for this. We did have to make some redundancies in the areas that were particularly hard hit: banqueting, the function side. Most of the people on furlough are now back.
‘Our port business pioneered contactless stevedoring and that has been adopted widely throughout PNG.’
BAPNG: How have your logistics businesses fared?
RB: We have been pleasantly surprised that the logistics business has fared better than we feared. With the benefit of hindsight, perhaps it shouldn’t have been a surprise to us; PNG is, after all, very much a closed economy. Domestic trade operates within a geographically dispersed market with no major land routes; it is absolutely reliant on coastal shipping. All four logistics businesses have done respectably. Consort Express Lines suffered some large swings at the beginning when everyone had to adapt to the new COVID operating environment. Our port business pioneered contactless stevedoring and that has been adopted widely throughout PNG. Not just by ourselves but by other operators at PNG’s ports. We have leveraged our expertise from overseas.
BAPNG: How is the property division, Pacific Palms Property?
RB: Our Harbourside South mixed-use development, including 88 apartments, is on schedule to open in Q2 of 2022.
Property is probably the slowest one to be impacted because a lot of people were obviously in leases. We have received several hundred requests for support: a combination of early exits, rent holidays, discounts and variations. We have addressed those individually. We have had different conversations with different people and tried to be as flexible as possible.
It is an over-supplied market in Papua New Guinea. A lot of people have invested in property and we have seen a huge increase in the supply at a time when demand is weak. Without resource
BAPNG: Is Steamships looking to expand?
Bray: In addition to Harbourside South, we have two large property developments in the pipeline, and we recently purchased Burns Haus in Port Moresby from Nambawan Super.
We are a relatively cash-rich business that is surviving the downturn. With a more mature and diverse economy that is under stress, there will certainly be opportunities for acquisitions. Unlike when the economy was smaller and more resourced-focused, there are now businesses that a large conglomerate might be interested in buying: in the past, we needed to grow them organically. I have tasked our team to be entrepreneurial in their thinking.
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