Hong Kong-listed Orient Overseas (International) Ltd (OOIL) carved out a profit for 2015 of US$283.9 million, up from $270.4 million in 2014, even as it described operating conditions in the year past for its shipping line as challenging, and the second half as tough.
The group achieved a revenue of $6 billion, down from $6.5 billion in 2014, and posted a group operating profit of $353 million, higher than 2014’s operating profit of $329 million.
The firm’s container transport and logistics business reported EBIT of $294 million, representing an operating margin of approximately 5%.
While the company said it is seeing continued progress in its logistic business build-out, terminal investment in Long Beach, California, and IT development, its container shipping unit continues to struggle.
OOIL chairman C C Tung said that in early 2015, container shipping companies enjoyed positive conditions marked by lower fuel costs and gains in the U.S. economy. However, the situation became increasingly complicated as the year progressed as oil prices continued to plunge, leading to a reduction in energy-related capital expenditure.
Moreover, trade growth was limited, and the U.S. Federal Reserve started the process of normalizing interest rates. The second half of the year saw retail sales stagnating further, thereby reducing imports from Asia, noted Tung further.
“By the end of the year, the worsening imbalance in supply and demand, driven by large amounts of new tonnage being introduced at a time of lacklustre volume growth in many trades and even shrinkage in others was having a dramatic effect,” said Tung.
“Capacity had started to be taken out of the market in response to slower demand growth, and having witnessed a substantial fall in rates, lines were forced to surrender all of (or more than) the benefit of lower fuel prices to their customers.”
On the company’s container shipping business, Orient Overseas Container Line or OOCL, he said: “For the full year 2015, OOCL’s liftings were essentially flat, with a drop in revenue, and of revenue per TEU of 10%. This reflects the challenging environment, particularly as the very tough second half took hold.”
OOCL’s liner liftings last year were at 5.6 million TEUs with the load factor dropping to 72% from 76% in the previous year.
During 2015, the group took delivery of four new 8,888-TEU vessels from China, the last four of the series. On March 31, 2015, the company placed orders for six 20,000-TEU vessels with Samsung Heavy Industries Co., Ltd. of South Korea, which are set for delivery in year 2017.
On the company’s outlook for 2016, Tung said it will be a year of continued challenges and uncertainty, what with the reduction in the IMF forecast for global economic growth, the solid but not spectacular U.S. economic recovery, and low Japanese and European growth levels. Chinese growth has also continued to slow down, presenting challenges to emerging market and commodity economies.
“Even if at a lower rate than in 2015, new shipping capacity continues to be introduced,” noted Tung.
Tung said they will rely on economies of scale to drive sustainability in the industry by replacing smaller vessels with bigger ones on certain routes, and by putting into service the 20,000-TEU ships by 2017.
Additionally, they will look at strengthening alliances even more. “OOCL continuously seeks to identify opportunities for additional efficiencies and savings through these arrangements,” he stated.
