Asia/Pacific News
OOIL Profits Down 33%
Hong Kong based integrated container transport business Orient Overseas (International) Limited (OOIL) [HKG:0316] has announced its six month interim results to June 30, 2012 saying its profit attributable to equity holders, after tax and non-controlling interest, fell US$58.2 million or 33% to $116.8 million from $175.0 million for the same period in 2011.
"The first half of 2012 has been challenging with very low market freight rates at the start of the year," commented OOIL Chairman Mr. C C Tung adding the firm also had to contend with "a spike up in bunker fuel prices in early January."
Operating profit decreased by 26% to $140 million from $188 million compared to the same period in 2011 despite revenues rising almost 7% to $3,122 million from $2,921 million in 2011.
Thin and Volatile
According to the report, there has been a marked improvement in freight rates in the period particularly on the Asia-Europe services, however trading conditions had been, and were likely to remain, difficult as a result of the current global economic conditions and the continuing surplus of capacity on the major trades.
Mr. Tung said pressure on the industry to absorb over 110 new container ships in the first half of the year will continue "for the next few years to come."
Subsidiary Orient Overseas Container Line (OOCL) "has been fortunate during this period of low demand growth in not having any new-build vessels delivering," noted Chief Financial Officer Mr. Kenneth Cambie.
The first of their new "mega" 13,200 twenty-foot equivalent unit (TEU) container vessels delivers at the start of next year, with "the next delivery of our 8,888 TEU vessels also not due until next year," he added.
The company did exercise a purchase option under a long-term charter of the 5,770 TEU vessel, OOCL Shanghai in January 2012 but no orders for new vessels were placed during the period.
Two 16-year-old 5,344 TEU vessels OOCL Hong Kong and OOCL China were sold at end of June 2012 and early July 2012 respectively, and leased back for 3 years on a time-charter basis.
Looking ahead, Mr. Tung said margins will remain "thin" and "volatile", and prospects of a traditionally strong third quarter have "dimmed" as the industry absorbs an estimated 2.4 million TEU of new-building capacity, which is about 15% of the current global capacity, over the next eighteen months.
He added that the need to meet higher operating costs, in particular high fuel costs, has seen freight rates improve and where the first half was adversely impacted by the unexpected increase in bunker fuel prices, the recent fall in the price of crude oil, "if it holds, should see an improvement in that margin to more appropriate levels."
