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The mainland's biggest airfreight company, Sinotrans, said yesterday it will undergo a series of mergers and acquisitions (M&A) this year ahead of fiercer foreign competition.

"We will acquire smaller players in 2006," Chairman Zhao Huxiang told reporters in Hong Kong yesterday. "The M&As will largely take place in our core businesses - freight forwarding, express services and shipping agency work."

Small wharf operators and storage firms in the Yangtze and Pearl River Delta regions are top of Sinotrans' acquisition list.

Zhao also said the company's cash flow was healthy, meaning the coming deals will be financed through internal resources.

The move comes as competition in the mainland's logistics market is expected to heat up because it will open wider to overseas investors.

Controls on foreign firms are due to be scrapped later this year under the mainland's World Trade Organization commitments.

"Competition in the market is getting more intense," Zhao said.

Hong Kong-listed Sinotrans posted a 6.6 percent yearly increase in its net profit for 2005, reaching 857 million yuan (US$107 million).

The company's turnover surged to 28.8 billion yuan (US$3.6 billion), a jump of more than 30 percent year-on-year.

Its core businesses did well in 2005, with freight forwarding and express services recording a year-on-year surge in turnover of 31.9 percent and 36.7 percent respectively.

The volume of airfreight jumped 27.5 percent to 360,400 tons last year, compared with 282,600 tons in 2004.

The company's throughput in sea freight forwarding climbed to 4.66 million TEUs (20-foot equivalent units), a 31.6 percent increase from 3.5 million TEUs in the previous year.

Its Beijing-based, Shanghai-listed airfreight arm, Sinotrans Air Transportation Development, yesterday reported a net profit of 463.3 million yuan (US$57.2 million) for last year, a 16.2 percent increase year-on-year from 2004. Sinotrans holds a 70.4 percent stake in the company.

As for the rumour about merger plans between Sinotrans and the China Merchants Group, Zhao said it was groundless.

This comment echoes those made by Li Rongrong, director of the State-owned Assets Supervision and Administration Commission.

Both companies are under the supervision of the commission.

Earlier, Hong Kong media reported the two were expected to merge because of an overlap in their core businesses.

Admitting the two run similar operations, Zhao said Sinotrans would seek co-operation opportunities with China Merchants.

Sinotrans' shares were down 0.79 percent yesterday to close at HK$3.15 (40 US cents).

(China Daily March 30, 2006)