Orient Overseas (International) Limited (OOIL) announced a profit for 2011 of US$181.6 million, down 90 percent from $1.8 billion in 2010 that, however, included a $1 billion profit on the sale of the group’s former China property development business.
OOIL, which operates the largest container line in Hong Kong, sees difficult trading conditions in store for 2012 with the expected rise in new ship deliveries, higher prices of bunker fuel, and weak Europe and North America markets.
Revenue dropped 4 percent to $6 billion in 2011 compared to 2010. Profit after tax from continuing operations fell to $139 million last year from $870 million in 2010, the company said in a March 12 statement.
“While we started 2011 believing that the extremes of 2009 and 2010 were behind us and that we had a period of steady growth ahead, trading conditions in the container transportation industry over the past year became increasingly difficult,” said C C Tung, chairman of OOIL.
“While overall global demand levels grew, the slow rate of economic growth in the United States and in Europe saw only muted volume growth for container trade to those markets,” he added.
Its shipping line OOCL’s lifting increased 6 percent year-on-year. Average revenue per TEU was 7 percent lower overall for the year, mainly due to a 29 percent erosion in freight rate levels from Asia to Europe.
“OOCL’s operating profitability was impacted by the downwards pressure on freight rates that intensified over the second half of the year. The traditional trans-Pacific peak season in the third quarter was disappointing in terms of both volume and prevailing freight rates. The Asia-Europe trade saw extraordinary freight rate declines. With the continued high price of bunker fuel also squeezing margins, the need for greater operational efficiency saw new alliances formed for Asia-Europe, including a group of six carriers to be called the ‘G6 Alliance’ of which OOCL is a founding member,” noted Tung.
Looking at 2012, OOIL said it expects trading conditions to continue to be difficult. North America and Europe are likely to see low levels of demand growth given the slow economic growth in those economies. Scheduled new-build capacity delivering in 2012 will exceed that of 2011, and will again be dominated by large vessels for deployment on the Asia-Europe trades.
“While there has been some freight rate improvement on both Asia-Europe and trans-Pacific routes since the beginning of this year, freight rates for those trades do not yet fully cover costs especially given the increase in the cost of bunker fuel that has occurred,” Tung said.
