By Mike Wackett
OOCL parent Orient Overseas International Ltd (OOIL) has announced a $239 million net profit for the first six months of 2015, compared to $181 million in the same period of the previous year, cementing its reputation as one of the most well-managed container lines.
Although the bottom line benefited from a $61 million contribution from property investments, it ought to be pleased with the performance from its container line in what was, especially in the second quarter, a tough market environment. OOIL chairman CC Tung commented: “In the earlier months of 2015, the industry enjoyed a relatively stable freight market. Through the combination of the normal seasonal cargo rush prior to the Chinese New Year, capacity constraints arising from port congestion and disruptions in the U.S., and an improving cost structure created by lower oil prices, the industry made meaningful gains in margin performance.” He added however that the latter half of the reporting period had been more difficult as the reactivation of laid-up ships and a surge in newbuild deliveries drove freight rates down “forcing margins to narrow”. “It is likely that the industry as a whole will report mixed results for the half year,” said Mr Tung.
Volumes declined by 2.3 per cent in the first half of the year compared to the same period of 2014, to 2.7 million TEUs, with its transatlantic trade suffering the worst fall – a 7.5 per cent drop to 180,175 TEUs. Cargo from Asia to Europe fell by 3.4 per cent in the period to 464,335 TEUs, while its biggest trade – intra-Asia and Australasia – was static at 1.48 million TEUs.
Due to the rate war between Asia and Europe, revenue from that sector was down by 15.6 per cent to $496 million (in the second quarter plunging by 28 per cent), and overall, OOCL’s revenue was 6.4 per cent lower than the first half of 2014, at $2.7 billion.
Nevertheless, a 38 per cent drop in bunker prices, with an average price per tonne of $352, compared to the average $595 paid per tonne in the first half of 2014, contributed significantly to the improved balance sheet.
“The first half of 2015 was satisfactory for OOIL,” said Mr Tung but said the group’s outlook “remains mindful and cautious” because of the serious overcapacity situation.
He said: “The supply overhang is likely to exert pressure on freight rates in the second half of the year. During the next six months, where revenue remains uncertain, given the supply and demand imbalance, cost efficiency remains critical for better margin performance.” “Positive trade growth, especially in the transpacific and transatlantic trades, and to a degree in the intra-Asian trade, will provide support to the underlying market,” said Mr Tung.
During the period, OOCL boosted its balance sheet by around $54 million with the sale and lease back of the 8,063 TEU OOCL Qingdao to non-operating containership owner Global Ship Lease. This was the second of such deals made by OOCL with GSL involving a three-year time charter, while later this year it will take delivery of two 8,888 TEU “SX” class newbuildings. OOCL announced in April that it was placing an order for six 20,000 TEU class ships from Samsung Heavy Industries in South Korea for delivery in 2017.
As at 30 June 2015 OOIL had total liquid assets of $2.8 billion and a total debt of $4.2 billion, and is “comfortably within its target of keeping net debt to equity ratio below1:1” giving it one of the strongest balance sheets in liner shipping.
Reprinted courtesy of The Loadstar (www.loadstar.co.uk)