Better Margins and Cheaper Bunkers Improves OOCL Profits

The company said that it will be heavily focusing on improving margin performance.

Despite a rocky year so far in container shipping, Orient Overseas (International) Ltd (OOIL) reported a jump in net profit in the first half of the year thanks to cheaper bunkers and gains in margin performance, the company said in an earnings statement. 

Although revenues sliped to $3 billion in the first half from $3.2 billion in the first half of last year, net profit rose to $238.6 million from $181.2 million. 

Of those figures, the majority were attributed to Orient Overseas Container Line (OOCL) who heavily benefited in the first quarter of the year as fuel costs for the carrier fell by roughly 38 percent, the company said. 

"Through the combination of the normal seasonal cargo rush prior to Chinese New Year, capacity constraints arising from port congestion and disruptions in the US, and an improving cost structure created by lower oil prices, the industry made meaningful gains in margin performance," said C.C. Tung, chairman of OOIL. 

However, the second quarter was then hampered by new capacity being delivered, which helped cause some trade lanes, such as Asia-Europe, to reportedly reach "new post-Global Financial Crisis lows."

Tung added that the remainder of the year remains uncertain, especially as the industry faces a large orderbook that will add to the existing glut of capacity. 

"During the next six months, where revenue remains uncertain given the supply and demand imbalance, cost efficiency remains the critical factor for better margin performance," he said. 

Tung said he expects that a "sustainable recovery" will eventually be possible as the world economy improves and a better supply and demand balance is achieved in 2016. 

Earlier this year, it was reported that OOCL saw its earnings quadruple in 2014, which was partly driven by falling bunker costs.