Patrick makes major move on domestic transport with FCL talks

Patrick Corp is negotiating to take control of the Gibbins family’s interstate container operator FCL, in a move that will have a further major impact on domestic rail freight transport. The stevedoring giant told the ASX late yesterday (Tuesday, March 8) that it has entered into an agreement with FCL’s owners to discuss the purchase of 100% of the business, with a final price yet to be agreed. It said that FCL has annual revenues of $170m. FCL’s major business is east-west interstate container transport and the company has consistently kept a market share of 30% since it began 30 years ago. It is viewed in the industry as Australia’s largest domestic container operator. Observers say that the move will now put Patrick into head-to-head competition with its rail operating partner Toll for interstate freight carryings. However, it will also make it more difficult to for Queensland Rail and ARG to find volume with which to expand their own interstate services. Linfox has also become an important user of FCL services in some areas, and along with SCT and K&#38S Freighters is also a rival operator on the east-west routes. FCL managing director Bill Gibbins said that he is "bowing to inevitable commercial pressure" to consolidate the transport and logistics industry to fewer players. He said that the deal "is not yet over the line", and that FCL has plans to continue if the takeover does not go ahead. But margins are "now wafer thin or non-existent", Mr Gibbins said. "Everybody who is enjoying the fruits of reduced supply chain costs has to recognise the result will be fewer supply chain players." Compliance costs in different states, despite attempts to harmonise them, create more overheads which turnover could not absorb, he said. Mr Gibbins predicted that if Patrick enters the domestic transport area, it can only expand and get bigger. "It turns Patrick from a passive investor in Pacific National into an active investor and user of Pacific National," he said. FCL also has two major railside hub facilities in central New South Wales. The Blayney hub is Australia’s largest inland export shipping hub with an estimated 85% of export rail volumes from the central west, now hauled by Patrick Rail after Pacific National pulled out of port-based services last year. The Parkes terminal is used for double-stacking domestic container trains to Perth, and is the focus of major hub plans. However, much of FCL’s other national rail business is handled at common-user rail terminals, operated by Pacific National or by other train operators. It seems likely that a move of this size will be referred to the Australian Competition and Consumer Commission. FCL under Mr Gibbins has developed a reputation for innovation with cargo handling and container equipment, as well as for its Parkes hub development. The company operates about 3,500 domestic containers in 20, 40, and 48 ft dimensions, many of them specialised. It now handles a mix of LCL as well as its original FCL namesake business. Patrick managing director Chris Corrigan said at the company’s AGM last month that Pacific National’s intermodal business would depend on terminal developments. He appears to have taken a major step towards getting the volumes to develop more terminals.

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