OOCL net profit falls 90pc to $181.6 million, revenue down 0.4pc
HONG KONG's Orient Overseas (International) Ltd, parent of Orient Overseas Container Line (OOCL), posted 90 per cent year-on-year decline in net profit in 2011 to $181.6 million as overall revenue fell 0.4 per cent to $6 billion and container shipping revenues slipped 1.5 per cent to $5.5 billion. Tuesday, 13.Mar.2012, 01:14 (GMT+3)
HONG KONG's Orient Overseas (International) Ltd, parent of Orient Overseas Container Line (OOCL), posted 90 per cent year-on-year decline in net profit in 2011 to $181.6 million as overall revenue fell 0.4 per cent to $6 billion and container shipping revenues slipped 1.5 per cent to $5.5 billion.
Industry-wide overcapacity, resulting in depressed freight rates, as well as higher fuel costs, were blamed for the disappointing performance. Bunker fuel prices increased 39.7 per cent to $650 per ton in the last year, Bloomberg noted.
Losses were acute in the second half, said OOIL. "Despite the poor performance in the second half, the group remains operationally robust and well placed for the future with its alliance memberships and financially strong, well capitalised, and has sufficient liquidity and access to funding to meet its future needs," said the statement accompanying the results.
Yet OOIL has a low expectations for the coming year because of more new ship deliveries and sluggish growth in Europe and America. "We expect trading conditions to continue to be difficult. The major markets of North America and Europe are likely to see low levels of demand growth," said the statement accompanying the results.
OOCL's average charge for moving a container fell 6.7 per cent last year while its throughput increased 5.6 per cent to five million TEU.
OOCL has joined the new G6 Alliance together with Singapore's APL and Hapag-Lloyd, to improve business on the Asia- Europe trade lane and press rate increases. One, of $450 per TEU, has been announced for April 1, following a $800 rate hike levied in March.
Global demand growth slowed down from 13 per cent in 2010 to seven per cent in 2011, with weak consumption growth in the United States and with the impact of austerity measures taken in Europe.
Capacity in the Asia-Europe trade increased by 16 per cent and in the transpacific trade by 10 per cent. With capacity growth in both trades being substantially greater than demand growth, freight rates deteriorated. The deterioration in freight rates and rising fuel costs combined to severely impact the economics of the major east-west trades.
Half of OOCL's volume is in intra-Asia trades. But short voyages and limited intermodal transport opportunities mean low margins, said the company. "But it has provided a cushion against the poor trading conditions on the east-west trades," said the company statement.
"We may, however, see a slowing in growth rates for intra-Asia container volumes in 2012 as Asian economies are not immune to the slow growth of the export markets of Europe and North America," said the company.