HMM makes billion-dollar turnaround from loss to record profit

The COVID-19 pandemic proved good for business for the world’s ocean carriers. 2020 was very good for South Korea’s HMM, which announced Tuesday a billion-dollar turnaround to record its highest operating profit ever.

Highest ever says a lot considering HMM, formerly known as Hyundai Merchant Marine, has been around for more than 40 years.

And then there’s the huge shift in profit. Operating profit in 2020 was $831.1 million — up more than $1 billion from the loss of $254 million in 2019. Net profit in 2020 came in at $105 million, up from a hole of negative $499.8 million in 2019.

HMM said year-over-year revenue moved up 16.3% to $5.43 billion in 2020 from $4.67 billion in 2019.

In its brief 2020 report, HMM said it “significantly improved earnings in 2020, primarily driven by efficient fleet operations, including 12 24,000-TEU container ships, increased freight rates and lower fuel prices.”

Results for the fourth quarter alone are impressive, with operating profit more than doubling from $230.7 million in the third quarter to $480.5 million. HMM said its operating margin grew from 16.1% in Q3 to 28.3% in Q4. The operating margin for full-year 2020 was 15.3%.

HMM only alluded to higher freight rates by pointing out that container volumes dropped by 9.2%, from 4.28 million twenty-foot equivalent units (TEUs) in 2019 to 3.89 million in 2020.

The Seoul-headquartered carrier also issued a short outlook for 2021, led with its expectation that container and vessel space shortages “will last through at least the first quarter of this year, with a likelihood that this situation continues until late spring.”

“Supply chain disruptions led mainly by a backlog of containers and terminal congestions at several main ports are on course to remain unabated over the short term,” HMM said.

It noted, however, that once COVID-19 vaccines have been widely distributed, “spending patterns may be shifted to services instead of products, acting as a sign of decline for freight rates.”

HMM added that it will acquire eight 16,000-TEU newbuilds in the first half of the year. The carrier said those container ships will enable it “to form an enhanced cost structure with lower fixed costs and secure greater operational efficiency.”

HMM has been bulking up its fleet in a steady wave. It signed a contract for 12 24,000-TEU container ships in September 2018. It announced in early October that all 12 were carrying cargo.

President and CEO Jae-hoon Bae said last fall that all 20 vessels will “feature the latest smart ship solutions.”

HMM is a member of the vessel-sharing pact THE Alliance with Hapag-Lloyd, Yang Ming and Ocean Network Express.

In the Americas, HMM calls Prince Rupert and Vancouver, British Columbia; Los Angeles, Long Beach and Oakland, California; Cartagena, Colombia; Wilmington, Delaware; Jacksonville, Florida; Savannah, Georgia; New York; Halifax, Nova Scotia; Balboa and Manzanillo, Panama; Charleston, South Carolina; Norfolk, Virginia; and Seattle and Tacoma, Washington.