OOIL tumbles after 93pc drop in earnings
Growth in demand fails to offset rising fuel costs
Shares of Orient Overseas (International) Ltd, a shipping company controlled by the family of former Hong Kong chief executive Tung Chee-hwa, fell 11.17 per cent to close at HK$34.20 yesterday after announcing a 93 per cent decline in its first-half net income.
Profit decreased to US$158.3 million for the six months to June from US$2.22 billion a year earlier due to an exceptional gain of US$1.98 billion from the sale of its North American ports during the first half of last year.
Operating profit fell 27 per cent to US$217.6 million from US$298.4 million as rising demand from Asia failed to offset higher fuel costs.
Sales rose 27.4 per cent to US$3.2 billion from US$2.51 billion, boosted by strong demand for its Asia to Europe, intra-Asia and Australasian operations. Gross profit margin fell to 13.4 per cent from 16 per cent.
The average bunker fuel price in the first half rose 64 per cent to US$502 per tonne. Bunker fuel now represents 79 per cent of voyage costs versus 70 per cent a year ago.
'While China exports remain robust, there are signs of slower growth for imports,' said Ken Cambie, OOIL director and chief financial officer. 'This may reflect the slowdown in exports from China to the United States and Europe, causing a reduction of raw material and semi-finished goods movement.'
The company expected tough competition from other carriers in the second half because of increased industry capacity, slowing demand growth and high energy prices pressuring its bottom line.
Mr Cambie also said the firm decided not to put in a bid for Hapag-Lloyd due to worsening market conditions. 'This is a very good operation,' he said. 'However, given the current market situation ... the decision was taken that this is not the appropriate time to enter the process.'
German travel and shipping group TUI last week said it received at least four offers for its Hapag-Lloyd container shipping business, including from a German consortium and Singapore's Neptune Orient Lines.
The world's fifth-largest shipping firm could fetch more than US$6.4 billion, market experts estimated.
OOIL, Hong Kong's second-largest shipping company, said its container volume surged 9.4 per cent to 2.42 million cargo boxes in the first half, while its average revenue per cargo box increased 13.6 per cent to US$1,207. It expected overall rates for this year to remain above last year's levels.
The company received three new 4,506 teu (20-foot equivalent unit) vessels without placing new orders during the first half.
Macquarie analyst Jon Windham said OOIL's first-half result was worse than expected but all other industry players were suffering from the worsening environment.
'The container industry is facing decelerating demand growth, accelerating supply growth and rising cost pressures,' said Mr Windham, who rated the shares a 'neutral' with a target price of HK$35.
The company proposed an interim dividend of 6.5 US cents, compared with 9.5 US cents a year earlier.