Orient Overseas slumps to first-half loss
Low freight rates and oversupply of ships contribute to company's US$15.3m loss
Slowing demand, oversupply of ships and low freight rates drove Orient Overseas (International) Ltd to an attributable loss of US$15.26 million during the first half of the year.
Chairman Tung Chee-chen said in a filing with the Hong Kong stock exchange yesterday that he expected margins to remain thin and volatile in the next two years, as the industry still faces growth of 21 per cent in capacity between now and 2015.
The global container trade's average annual growth will rise just 5.5 per cent in the five years to 2017, the International Monetary Fund forecast in January.
But Alan Tung Lieh-sing, the group's acting chief financial officer, said OOIL will face overcapacity of only 7.2 per cent next year, against forecast demand growth of between 4 per cent and 7 per cent over the same period. He said oversupply will decrease further to 3.5 per cent in 2015.
"We will maintain our competitiveness by providing the right tonnage and services," he told reporters. "For our vessels, that is achieved by controlling both size and efficiency. If that can be achieved by obtaining new builds, we will not be held hostage by financing."
That said, the firm has no plans to expand its fleet despite low prices for ships. It postponed receipt of six vessels due for delivery this year so that the shipyard could improve engine efficiency.
The company's net debt has nearly doubled since December, boosted by payments on the 10 ships due to arrive by the end of this year. It has liquid assets exceeding US$2.37 billion.
Container throughput fell 1.5 per cent to 2.55 million 20-foot equivalent units in the first six months. Traffic on transatlantic routes fell sharply amid weak demand from Europe. Average rates fell 2.2 per cent.
OOIL offered no interim dividend. It closed 1.46 per cent higher at HK$45.25 yesterday.
