Hong Kong company reporting season

OOIL sails back to profit in the first half on industry recovery

The company’s improved performance is due to economic growth recovery and a consolidation of the sector that also saw the collapse of Hanjin Shipping

PUBLISHED : Monday, 07 August, 2017, 7:04pm
UPDATED : Monday, 07 August, 2017, 10:43pm

Orient Overseas (International) said it had returned to profit in the first half of the year as the industry recovers on improved global economic growth, posting a net profit of US$53.6 million, compared with a US$56.7 million loss for the same period in 2016.

The profit from operating activities reached US$25.3 million, compared with the loss of US$81.4 million for the corresponding period last year, the company said in its results announcement filing to the Hong Kong stock exchange on Monday.

The company’s improved earnings was also attributable to an increased revaluation of its investment in Wall Street Plaza in New York to US$27.7 million.

First-half revenue rose to US$2.9 billion, up from US$2.6 billion in the first half of 2016.

OOIL shares closed flat on Monday at HK$72.20.

“In the first half of 2017, we have begun to see a slow and steady recovery from the tough market conditions that characterised 2016,” said chairman Tung Chee-chen in the results announcement.

“Following a wave of M&A, corporate reorganisations, a corporate collapse…the industry continues to evolve. Over time, this may help to provide a more stable context for the industry…ultimately to benefit liner companies and their customers.”

Chief financial officer Tung Lieh-sing was quoted as saying in media reports on Monday that the shipping industry was recovering on the back of the global economic recovery, but unlikely to rebound to the high levels in 2000.

In the first half of 2017, we have begun to see a slow and steady recovery from the tough market conditions that characterised 2016
Tung Chee-chen, OOIL chairman

“Shipping rates [which measure profitability] have bottomed out last year, and are showing signs of improvement this year,” he reportedly said.

The Hong Kong-listed container shipping company was founded by the family of former Hong Kong chief executive Tung Chee-hwa in 1969. The family transferred its ownership to China’s Cosco Shipping Holdings last month, selling its 68.7 per cent stake for HK$49.23 billion.

Cosco set to become third largest shipping operator after deal to acquire Orient Overseas

Cosco will maintain OOIL’s listing status and global headquarter’s function and presence in Hong Kong, as well as retain its management team for at least two years after the completion of the deal.

“The offer from Cosco provides an opportunity for OOIL to continue to operate our brand”, said Chairman Tung Chee-chen in the results announcement.

“But as part of the China Cosco Shipping group, [we also can] bring together our operating model and our corporate culture with the competitive advantages of Cosco, including its size and scale, capital base, growing fleet and extensive port investments.”

Nonetheless, market watchers believe that the acquisition would bring the curtain down on a Hong Kong family dynasty. Tung Lieh-sing did not disclose any details when asked whether the Tung family would exit from the OOIL management team two years later, according to media reports.

OOIL may not be the last to be acquired by Chinese mainland companies. A UBS report said that more Hong Kong family firms would become targets of acquisitive mainland buyers this year as the intensified competition was tempting these family companies to sell their assets to big industry players.