May 2016
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Full Steam Ahead
CENTRE STAGE

Despite economic challenges in Papua New Guinea, Steamships Trading Company’s Peter Langslow says its underlying promise and abundance of resources make it a good place to do business.


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In his introduction to the Steamships Trading Company's official history, the company's former Chairman, Don Harvey, writes that Steamships' founder, Algernon Sydney Fitch, was "a dynamic, dedicated and progressive man, not averse to taking risks and standing up for what he felt was the right course."

Peter Langslow
Peter Langslow

Peter Langslow, Managing Director of the 97-year-old Swire subsidiary since January 2015, believes that summation encapsulates much about what has brought the business to its prominent position in Papua New Guinea's business landscape and economy. "It captures what successive management teams have tried to do, in terms of building a sustainable, modern business that's contributed a great deal to the country's commercial development," he says.

Langslow, 54, moved to the Oceanian country of seven million people having previously spent 29 of his 30 years at Swire working for Cathay Pacific. He is used to moving around the globe: his tenure with the airline included numerous relocations, and he acknowledges that it is fortunate that he relishes new challenges and variety. Neither are in short supply at Steamships.

One of Papua New Guinea's largest private employers, with around 4,000 employees, the company's interests today fall across three operating categories: Logistics, Property and Hotels, and Commercial. For Langslow, that means managing across multiple industries, issues and activities. "When it comes to the range of responsibilities and challenges of the job, as well as the unique characteristics of the place, this is certainly the most diverse and interesting role I've had in my career," he says. "There is no possibility of boredom. One is always engaged and fascinated."


Learn more about the business of Steamships Trading Company.


Swire first acquired a shareholding in Steamships Trading Company in 1977. Today, Swire holds 72% of the conglomerate.


Steamships began life in 1919 as a one-man, one-vessel coastal trading operation. A retired sea captain, Fitch formed a public company in 1924 and rapidly moved into other areas, including general stores, workshops, agency businesses, and hotels. Centred in Port Moresby, Steamships initially operated in the gulf and western reaches of the former territory of Papua, expanding only later to the north into New Guinea and its Highlands. And as Papua New Guinea started to develop and harvest its rich endowment of natural resources, the company's shipping and logistics services were vital. By 1981, it had ten distinct divisions, ranging from shipping and transport to steel, machinery, hotels, beverages and computers.

"Steamships really has been into pretty much any commercial enterprise you can think of here," says Langslow. "In more recent years, however, there's been a more strategic rationalisation of the business. There were some very difficult years at the end of the 1990s and early 2000s, when the country suffered a financial and economic crisis. We're now down to a more coherent focus on the three categories of business, which means we can be more responsive to what is becoming a more modern and advanced economy. For us now it's about focusing on areas of competence that enable us to compete and differentiate."

This rationalisation process has been geared in part towards insulating the business against the shocks and cycles to which the PNG economy remains exposed. The country depends to a large extent on its resources, both agricultural (palm oil, coffee and cocoa) and mineral (oil and gas, copper and gold). Low commodity prices, such as have been experienced over the last year, therefore have a large impact on other sectors, and growth generally. Meanwhile, economic activity is also intertwined with the progress of development projects within those resource sectors.

"To put things in context, when the Exxon Mobil PNG LNG (Liquefied Natural Gas) project was being built, from 2009-2012, that was a US$20 billion project, more than the annual GDP of PNG today", says Langslow. "So there's a real exposure to whether or not there are large-scale projects underway. When it goes ahead, the next LNG project, a Total SA-led project, will be on a similar scale."

Growth of 9% in 2015 fell significantly short of the government's anticipated 15%, and the forecast for the current year has been revised down to just over 4%. Adding to the country's woes in 2015 was a strong El Niño; the resulting drought caused significant hardship through crop failures, as well as a drop in river levels. This meant that the Ok Tedi copper and gold mine, which is located 500 miles from the coast, had to close for several months and as a logistics provider, Steamships' riverine shipping activity suffered as a consequence.

Despite these challenges, Langslow remains upbeat about PNG's medium-term prospects. "We feel very optimistic about the opportunities in this place," he says. "We've ridden the waves and cycles, the ups and downs, over past decades. We’re familiar with that cyclical nature of things. But the underlying opportunities and promise continue to be huge. The resources are here, but there’s also great demographic potential in terms of opportunities for the country to modernise and grow. To give one example, at the moment less than 20% of households have electricity. The government's target is to get that to 70% by 2030. If you think about the potential that offers to our Gala Ice Cream brand alone, well, ice-cream doesn’t go very well without electricity!"

      

Packing Papua New Guinea’s iconic Gala Ice Cream at Laga Industries' new plant in Lae.

"Our overall approach is to try and focus on the quality of what we do, and that's something that's very much consistent with Swire values. It's about investing in the quality of our assets and operations and also focusing on our people, so that we have the competencies and attributes in our businesses to allow us to continue to prosper in the next up-cycle."

Swire Shipping’s MV Shuntien (left) and Consort Express Lines' MV Bamu berthed at Motukea Wharf outside Port Moresby.

In 2015, Steamships consolidated its two shipping divisions – Steamships Coastal Shipping and Consort Express Lines – in order to reduce structural costs and enhance competitiveness. That follows significant investment in newer marine tonnage to create more reliable scheduling. Also merged last year were the company's two land logistics divisions, which now comprise a combined Transport and Port Services business that provides customers with end-to-end services across ten locations. In Steamships' Commercial division, meanwhile, Laga Industries – a manufacturer and distributor of various consumer goods, including vegetable oils, beverages and the aforementioned Gala Ice Cream – recently upgraded the latter's production plant and freezer capacity. "It's really a worldclass facility now," says Langslow.

Activity on the Property and Hotels side of things has been even more significant in recent years. "We've invested a lot in this division. With the hotels, it is a case of adding new food and beverage outlets, upgrading rooms and enhancing our service standards. We are building and will operate a new hotel in Kiunga for the Ok Tedi Development Fund, and will be expanding and developing our hotels in Lae and Mt Hagen. With regard to property, the focus in the last few years has been on projects of quality and scale, and we have found that the upper end of the market has remained relatively stable, even while certain sectors of the market have been challenging."


One significant, even visionary, project, has been a new office development on the grounds of what was formerly the Steamships wharf in Port Moresby. Comprising two office towers and a large, harbour-facing terrace given over entirely to food and beverage outlets, the Harbourside development was commissioned in June 2015 and is now fully leased, with Steamships itself occupying the fifth floor of the west tower. Built in anticipation of the port's imminent relocation across Fairfax Harbour to Motukea, it is the first step towards a transformation of Port Moresby's waterfront and Central Business District. "It's a very exciting and positive development," says Langslow. "We have first-mover advantage in this area, which we intend to build on."


Harbourside, the newly completed development in Port Moresby’s CBD, accommodates office space, as well as a range of food and beverage outlets.

Steamships investment in PNG is about more than just prestige projects and bricks and mortar, though. Some 97% of the company's employees are PNG nationals and it places great emphasis on developing their skills and talents, not to mention organising regular social and sporting events – including annual rugby sevens tournaments – for staff. Beyond that, there is also a realisation that as a business that has grown in tandem with the country as a whole, Steamships has a role to play in helping the wider community.

Buk Belong Pikini
Steamships is the leading corporate donor to Buk Bilong Pikinini (roughly translating as “books for children”), a charity that promotes literacy in PNG; the company has sponsored three libraries in Port Moresby, Lae and Goroka.

"PNG has some fairly obvious social needs in the areas of health and education and social welfare," says Langslow. "The traditional system of collective welfare here is called the ‘wantok' system, a pidgin term which basically translates as ‘one-talk' and means supporting your kinsfolk. As a business, we can play a part in that and we support a number of initiatives to that end, including Buk Bilong Pikinini, which provides books for communities to improve literacy, and the Youth With a Mission medical ship, which calls in on villages and ports around the country."

Swire gained majority shareholder control in 1996, but its involvement in Steamships dates back over 60 years to China Navigation's resumption of services to the country after World War II. In keeping with the ethos and vision of its parent group, Steamships clearly prides itself on being a reputable and responsible business, with a long-term commitment to fostering economic growth and contributing to the local community.

"Steamships depends entirely on this beautiful and diverse country and its people for its future and we're wholly committed to its success," says Langslow. "I think there is a mutual affection there from Papua New Guineans and I'm confident it will continue to be a great place to do business."

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