OOIL's net profit tumbles 84pc on shipping overcapacity
Shipping line's hopes for rebound, after 84pc plunge in profit for last year, are buoyed by expectations of narrowing demand-supply gap
Orient Overseas (International) Ltd is banking on a more positive outlook for container shipping to steer it out of choppy waters after its profits plunged 84 per cent to US$47 million last year.
Freight rates in most trade routes operated by OOIL have been down as the company increased container capacity at the expense of freight rates in the second half, especially in the intra-Asia sector. Global capacity grew 5.7 per cent last year while demand only rose 4.2 per cent.
The liner company moved 5.3 million teu (20-foot equivalent units) last year, 1.4 per cent more than the previous year, but revenue dropped 5 per cent to US$5.6 billion, which translates to a 6 per cent decline in revenue per teu.
The gap between demand and supply growth, however, will narrow this year, according to the views of 13 brokerage houses and consultancies cited by the company.
"It was not common for shipping lines in Asia to make profits last year, but OOIL could separate itself from the pack by cutting costs, like what Maersk Line did last year," said Jon Windham, an analyst at Barclays Capital.
The earnings at OOIL, one of the largest integrated container lines in the world, were better than the market consensus of US$35 million.
Its operating cost per teu dropped 2.8 per cent in the second half from the first and 2 per cent year on year.
