Orient Overseas (International) Limited (OOIL) said group net profit in the first half of 2014 ended June 30 amounted to US$181.3 million compared with a loss of $15.3 million for the same period in 2013.
The company said the profit included more than $50 million in net gains from its property investments.
Group turnover increased by 7 percent to $3.237 billion, while operating profit rose to $211 million from $3 million in the first half of 2013.
“The global economic environment seems to be positioning for a shift in the right direction despite the disappointing headline figures recorded in the first half of 2014,” said OOIL chairman C C Tung, who noted the negative GDP growth estimates for the U.S. and the negligible growth in the European Union in the first quarter.
“Despite these disappointing figures, however, there are underlying developments that support a degree of cautious optimism,” he added as he pointed to continued consumer spending recovery in the U.S. and efforts to cut lending rates in Europe to stimulate the economy.
“The industry saw a disappointing first half and a more encouraging second half in 2013. Moving into 2014, there has been cargo volume increase and a generally more positive sentiment than last year. In total, it is expected that the container transportation industry posted improved results for the first half of 2014. Such improvement, however, is likely to be capped given the large newbuilding orderbook and the anticipated next round of newbuildings that will likely materialize over the next twelve months,” commented Tung.
The group’s container shipping business, Orient Overseas Container Line (OOCL), saw liftings for the first half of the year increase 10.1 percent to 2.8 million TEUs and load factor rise by 5 points to generate an overall revenue increase of 4.3 percent to $2.89 billion from $2.77 billion in the same period last year.
While freight rates across various trade lanes had a mixed performance against the first half of last year, additional liftings made up for the revenue shortfall. The first six months of 2014 saw a robust growth in cargo demand in the major European and American markets, said the company.
During the first six months of 2014, OOCL took delivery of two newbuildings, both in the 13,208-TEU mega-class.
Tung said, “We expect to take delivery of another four 8,888-TEU SX Class vessels in 2015. These newbuildings represent the end of our last round of newbuilding orders.”
OOCL said it will continue to build its logistics business, focusing principally on achieving steady growth and providing multimodal logistics solutions and end-to-end services to customers.
On the outlook in the container shipping market, the industry will continue to face overcapacity in the coming years, predicts Tung.
“Despite the gradual recoveries of the developed economies, demand growth is not expected to return to the pre-global financial crisis level over the short to medium term,” he said. At the same time, gross static supply growth remains high with the orderbook-as-a-percentage-of-fleet ratio at 9.3 percent and 9.8 percent for 2014 and 2015, respectively.
“Unless bunker prices can decline to a more reasonable level, the drive for scale and fuel efficiency will translate into continued newbuilding projects. As a result, the challenge of overcapacity will likely persist over the short to medium term,” he continued.
He added that OOCL’s ongoing goals are to take “a more disciplined approach to differentiation and segmentation,” and improve cost efficiency “without compromising service quality.”
Tung concluded that, given the market conditions, the first half of 2014 was satisfactory for OOIL. “During the second half of the year, the group will redouble its efforts in its focus on cost efficiency and operating margin. As the global economy gradually recovers, there is expectation that the container transport industry will find itself in a more positive operating environment.”
