Wah Kwong’s CEO Tim Huxley

For Tim Huxley, the CEO and Executive Director of Wah Kwong Maritime Transport Holdings, a career in the ship business seemed an unlikely choice and Hong Kong a distant place on a map. Yet with a lifetime in shipping and a permanent home in Hong Kong, the unlikely came to pass. Tim Huxley, CEO and Executive Director of Wah Kwong Maritime Transport Holdings, a privately held ship owning company, is one of the best-known figures in Hong Kong’s close-knit ship owning community. Huxley, now in his early 50s, is distinctively tall and lean in appearance.

Aside from the glasses, Huxley looks like a runner from one of those old B/W films with the athletes in white shorts and knobby knees, which is appropriate, as he was an extra (albeit playing a Frenchman) in the classic film “Chariots of Fire” as a young man. Putting his career in celluloid on hold, Huxley struck out in another highly unlikely direction, the business of ships. Certainly it wasn’t a role to which he was born. “My father was a vicar,” he said with a laugh when asked how he chose a nautical livelihood. “I was actually thinking about writing…journalism,” Huxley remarked. He grew up in the northeast of England at Newcastle upon Tyne, not far from the famous Swan Hunter shipyards (now defunct for two decades and change.) A degree in literature & philosophy certainly isn’t the background that automatically begets a lifetime in the ship industry. Without a strong career goal in mind, Huxley applied for a job in the ship broking business. He didn’t have the obvious skill set beyond a willingness to travel but much to Huxley’s surprise he was hired. The explanation for his new avocation was explained as thus: “We can teach you the business, we need new people with fresh ideas.” Huxley joined Clarksons in 1982, and credits the shipbroking firm for developing his nascent industry skills and later, and more importantly, providing the impetus to move to Hong Kong. Huxley was with Clarksons for 24 years, 11 of those years he lived in Hong Kong. Wah Kwong Maritime Transport Holdings It was a new venture to transition from ship brokering to ship owning for Huxley when he came aboard with Wah Kwong. He was not alone as a transition was underway at Wah Kwong with a new generation, the third generation of the family was coming aboard. This wasn’t just another ship company but a charter member of Hong Kong’s ship owner establishment. The Group’s beginnings go back to 1952 when T.Y. Chao established the company in Hong Kong. Chao had moved to Hong Kong from Shanghai in 1948 and was part of a core of ship owners that moved to Hong Kong during the period immediately following the end of the civil conflict in China, which included Y.K Pao of World Wide Shipping, C.Y. Tung of OOCL (Orient Overseas Container Line), Koo Kou-ming of Valles Steamship (now Vancouver, BC based) and Frank Tsao of IMC (Industrial Maritime Carriers). Ships were a logical investment for these entrepreneurs as the “assets” were mobile and could be moved out of harm’s way. Like many other Hong Kong ship owners found “Japan Inc.”, the rapid post-War rise of Japan’s industrial power, provided both the means to build ships and their employment. Ships were pre-fixed prior to building on long term time charters primarily to Japanese charterers with financing secured on the back of the time charters (a system sometimes referred to as Shikumisen). The system allowed the Hong Kong ship owners to move from simply deploying second hand ships to newbuilds. In Wah Kwong’s case, in the mid-1960s they ordered their first newbuilding, a 16,000-bulk carrier appropriately named New Venture. Considering the vessel’s success the moniker “venture” became a permanent fixture in the names of their vessels. Another aspect of the rise in Hong Kong ship owners was listing on the Hong Kong stock exchange. In the early 1980s, the build/charter formula was sorely tested by recession. Five charterers that deployed a significant portion of the Wah Kwong on long-term charters hit financial difficulties and defaulted. In 1986, this forced Wah Kwong into a restructure with the company’s lending banks. The company sold off non shipping assets to help stem the tide. In the subsequent years, the Group sold their older vessels and began a replacement program. The average age of a vessel dropped from 13-years in 1994 to just 2-years in 1998. A strategic element Wah Kwong has maintained. In 1999 CMB (a business partner of Wah Kwong through Bocimar Far East) became a substantial shareholder. Bocimar and George Chao made a joint voluntary offer to acquire all the outstanding shares of Wah Kwong. After the process was completed, Wah Kwong was delisted from the stock exchange. By 2001 Bocimar sold their shares to the Chao family and with that Wah Kwong had gone full circle and was again a family entity. Currently, Wah Kwong has a fleet of around 27-vessels including dry bulkers, tankers and LPG carriers. Rollers Being a family owned and operated enterprise is important. The shareholders (i.e. family) have more patience than shareholders might in the public sector. “Each day [we ask] are we still a good place to work,” Huxley explains of the corporate atmosphere. “I work for a great company. We are fortunate that we are family owned and benefit from a modern well run organization, I’m not sure if it was listed it would work as well.” Wah Kwong did make another run at an IPO in 2008 but as the shipping industry tanked so did the IPO. In retrospect it might have been a blessing. Huxley’s reticence is understandable in the context of the last seven years. Most lifelong shipowners live and die by the BDI (Baltic Dry Index). When the BDI rises and falls like rollers in the deep blue, as has happened in recent times (2,330-730 range), there is almost a palpable panic that spreads among ship owners like flu, a contagion starting in Athens, soon to London, inescapably taking root in New York, finding its way to Hong Kong before returning to Athens. Huxley is blessed with the ability to view downturns as opportunities. Huxley has the anti-cyclical broker philosophy of “buy low, sell high.” An important, and often overlooked feature of shipowning, is adding and deleting (scrapping or selling) ships from the roster. Wah Kwong from the experience of the 1980s tries to keep a very young fleet which requires a willingness to take advantage of what the market offers. As Huxley explained, “During the last recession it would have been criminal not to take advantage [of the lower shipbuilding prices].” As Huxley elaborated, the obsolescence of newly built ships is a consequence of the rapid change in the industry. Because of the recent changes in technology, largely driven by environmental and efficiency concerns, the real value of the ships and by consequence their owners has in some cases plummeted. The ships are nothing short of unsellable. Staying on top of the evolving technology and regulatory regimes is critical to positioning in the marketplace. Right now Wah Kwong is in the midst of a rebuild designed to create a fleet of around 40 ships by 2016. As in the past the charterers are big names in the industry but with a better mix of actual cargo interests (commodity houses) with ship providers. Purple Chips in a Sea of Blue Huxley is one of the real Hong Kong expats, a lifer who relishes the special nature of a most unusual place. One of the qualities that makes Hong Kong so unique is the shipowning community. Since the recession of the 1980s and especially since the 1997 Hong Kong return to China, the shipping interests have become more involved with the PRC and a part of the industrial revival, much as they had been involved with Japan Inc. While globally many shipowners have been labeled “Blue Chip” companies, Hong Kong’s special relationship with China has led some to call the regional ship owners “Purple Chip” companies. It’s an interesting analogy as many of these ship owners began their careers in Hong Kong after fleeing China, following the communist victory in the civil war. But the unique position of the territory, with its autonomy under Basic Law, regulatory transparency and access to global capital, make it unquestionably one of the world’s great shipowning regions. Can the “City” compete with other Asian cities like Shanghai or Singapore? Huxley is a great believer in Hong Kong. Along with the other components, the talent level exists there but he does caution investment in developing not only the maritime sector but the entire financial structure as this is key to remaining competitive. Generations Huxley is fast to admit that he is a caretaker as the third generation of Chaos takes over the business. Last year, Sabrina Chao became chairwoman of Wah Kwong’s board of directors. She succeeds her father George, uncle Frank and grandfather Chao Tsong-Yeah (T.C. Chao) at the helm of the Group. She is the daughter of Hong Kong film star Lily Chao and during the run up to the IPO in 2008 worked closely with Huxley in trying to make the business of ships accessible to financial specialists. She had already worked for two years at Jardine Fleming on equity derivatives and two more years at PricewaterhouseCoopers working on audits, so her financial acumen was already established before joining the family business. It perhaps was really rejoining the family business as Chao had been around the business all her life. Her ascendancy to the chair now puts the third generation at the helm. Chao, like Huxley, shares the belief in the anticyclical strategy to staying ahead of the curve. It is an approach that can be grating on the nerves and takes courage, as selling when the market is low and buying when it is low often runs diametrically opposite of the supply and demand of tonnage. For Huxley running the day to day at Wah Kwong is a continuing part of the great adventure and now himself in the position of looking for people with fresh ideas, for you can always teach the business.