OOCL’s parent company profits down 2.9% in 2005
Hong Kong-based Orient Overseas (International) Ltd., parent company of Orient Overseas Container Line, today reported net profit of $651.3 million for 2005, down 2.9 percent from $670.6 million in 2004.
Group operating profit improved 2.2 percent to $744.9 million from $729 million in 2004. Group revenue, including revenue from logistics, terminals and property, increased 13.4 percent to $4.7 billion, compared to $4.1 billion in 2004.
“Last year I was able to report that 2004 had exceeded all expectations and that the group had achieved a record performance. I am immensely pleased therefore to report that 2005 has matched that performance,” said C.C. Tung, chairman and chief executive officer of OOIL.
“Our Container Transport, Logistics and Terminals division enjoyed another exceptional trading environment during 2005, as volume growth continued at above the long-term trend level and largely kept pace with the rate at which new tonnage was deployed,” Tung said.
The revenue of OOCL, the main operating arm of the group, increased 2.1 percent to $4.02 billion from $3.59 billion in 2004. OOCL handled 3.52 million TEUs, up 7.8 percent compared to the 3.26 million TEUs handled in the previous year. Overall average revenue per TEU for 2005 increased 3.9 percent.
OOIL said that the combined revenue of its container terminals in North America, two in the port of Vancouver and two in the port of New York and New Jersey increased 21.4 percent with a 12.4 percent rise in container box throughput volumes.
OOIL will pay a final dividend of 15 cents per ordinary share for 2005, down from the final dividend of 18 cents last year.
“The predictions at the beginning of 2005 were for a much softer market as container volume growth was forecast to slow against a known to be increasing rate of new tonnage deployment. As always, however, those forecasts for demand side container volume growth proved in the event to be underestimates. Conversely, supply side tonnage growth forecasts always prove to be an overestimate of the true increase in effective loadable capacity,” Tung said.
“Nevertheless, sentiment tends always to prevail and current sentiment suggests strongly that the deployment of new tonnage during 2006 will outpace the rate at which container volumes will grow, the extent of this imbalance being variously forecast at between 3 percent and 5 percent. As a result, the freight rate forecasts are for a softer market and, on some trade routes, we have seen this begin to happen. However, much remains uncertain, but consumer confidence and retail sales demand remain fairly buoyant throughout the major consumer economies and the forecasts for global GDP growth remain healthy.
“As we enter this period of supply side growth potentially outpacing the demand side, industrial load factors may or indeed will fall below the exceptional percentages, in the high nineties, experienced on the head haul legs during the past two years or so. But we do not believe that they will fall to the dire levels of five years ago.
“It is my view that carriers should accept and operate under these slightly lower load factors, temporary as they will be whilst we endure this bulge in the newbuilding delivery schedule, rather than lower rates in what in the event will turn out to be the vain attempt to regain the exceptional load factors of the recent past. The consolidation that has taken place within the industry should assist in producing this readier acceptance of load factor decline and therefore a greater resistance to freight rate erosion.
“Overall performance, of course, will remain dependent not only upon volumes and freight rates but also upon relative cost levels. Oil prices are critical not only due to their direct effect on bunker prices, but also due to their indirect effect of driving up terminal and third party transportation costs. Some of these cost increases are recoverable but many if not most are not,” Tung said.