Tung Chee-hwa gets $419m dividend, but will not be returning to family firm Rising steel prices will slow capital expenditure at Orient Overseas (International) Ltd this year despite the shipping firm's announcement yesterday of a second consecutive year of record earnings. While the company's former chief steward, Chief Executive Tung Chee-hwa, confirmed his retirement at Central Government Offices yesterday, OOIL executives in Wan Chai told of the firm's strong performance from the quarters of its flagship carrier, Orient Overseas Container Line. OOIL has also far exceeded analysts' forecasts by more than doubling net earnings for the year to US$670.44 million. Its revenues rose a comparative 27.7 per cent to US$4.14 billion for the year. 'Our container transport, logistics division enjoyed an unprecedented trading environment last year as volume kept pace with or indeed outpaced the rate at which new tonnage was deployed,' said Nick Sims, the group's chief financial officer. The average earnings forecast of analysts polled by the South China Morning Post was US$593.7 million. The OOIL board gave Mr Tung a farewell present in the form of a bonus one-for-10 share issue and a final dividend of 18 US cents per share, which provided him an extra $419.74 million based on yesterday's closing share price of $37.90. Company sources confirmed Mr Tung would not return to lead OOIL after stepping down as Chief Executive of Hong Kong. Despite unprecedented cash reserves of just over US$1 billion, Mr Sims said the group would scale back its capital expenditure this year - particularly for new containers which were priced at record levels and still rising. He said the group had expected its capex for the year to reach US$693 million - excluding new investment and property - with about US$200 million earmarked for new containers. But he said its expenditure on boxes would be reduced to less than half of the original target. The company will instead look for short-term lease positions. Huge increases in basic iron ore prices are seeing boxmakers pay an average of US$720 a tonne for the required steel products. They have passed this on to the carriers and leasing firms such as Cosco Pacific, driving container prices up 71 per cent in the past year to US$2,400 per unit, according to one manufacturer yesterday. However, Mr Sims did not rule out additional vessel purchases this year. 'If one looks at the rate of growth in global demand - it used to expand at about 8 per cent a year and that has recently accelerated to 13 per cent - in terms of maintaining market share, just to stand still you have to expand fleet capacity at 11 to 13 per cent a year,' he said. 'We have to expand further to meet our own growth plans.' The carrier's sales team is entering contract season with its biggest customers, the results of which will strongly influence this year's result. On the Pacific, for example, the Transpacific Stabilisation Agreement, a loose affiliation comprising most of the eastbound sector's leading carriers, is recommending freight rate increases of US$285 to US$430 per 40-foot box to US destinations. The group is also looking for an additional peak season surcharge of US$400. According to one carrier executive yesterday, early indications from the negotiations are promising. 'It looks positive, but we won't get the full amount - maybe just over half,' he said. OOCL generated 44.2 per cent of its revenue transporting Asian manufactured goods across the Pacific last year, or US$1.59 billion.