Huge profit gains in ocean shipping have become commonplace this year. But Ocean Network Express’ year-over-year profit increase — 1,432% — is still attention-grabbing.
For its fiscal 2021 first quarter, ONE recorded profit of $2.559 billion, a $2.39 billion gain from the $167 million posted in the same period last year.
ONE’s fiscal year runs from April 1 to March 31.
ONE said in its earnings report Friday that “profit significantly increased” in large part because of the continuing strong market. The carrier included three bullet points:
- Global container trade volumes increased by about 20% year-over-year. Vessel utilization was at full capacity because of the strong cargo demand.
- Turmoil within the entire global supply chain continued during the quarter. “Severe shoreside and inland congestion was and is still ongoing.”
- Long-term freight increased and short-term freight was significantly higher than expected.
ONE’s first-quarter revenue jumped 111%, from $2.73 billion last year to $5.77 billion this year. Earnings before interest, taxes, depreciation and amortization leapt 499%, from $488 million last year to $2.92 billion this year.
ONE said its operational costs did increase due to faster vessel speeds to improve schedule reliability. “Cost-saving initiatives progressed, but additional costs increased due to shoreside and inland congestion.”
The Singapore-headquartered ocean carrier said strong cargo demand and labor shortages have resulted in longer port stays, port congestion, and heavy rail and truck traffic. Truck and chassis shortages were blamed for increased container dwell times.
ONE said a resurgence of COVID-19 outbreaks has made a full-year forecast difficult, although it did say it expects first-half profit of about $6 billion at the close of its second quarter on Sept. 30.
“The economic environment is now changing as the global situation of COVID-19 changes,” ONE said. “It is therefore extremely difficult to make a performance forecast and as such, ONE’s forecasts for FY2021 are yet to be finalized.”
ONE does not include commentary from CEO Jeremy Nixon in its earnings release, but in a separate presentation on first-quarter initiatives, he was quoted as saying, “There are still risks ahead due to the overall low vaccination levels in many countries, which can lead to sudden changes in labor availability and operational conditions. The industry overall has deployed every spare vessel and container and the order book for new tonnage this year has sharply picked up for 2023-24 delivery.
“Ultimately demand and supply will come back into balance, but we remain conservative in trying to predict when this may or may not happen,” Nixon said.
German carrier Hapag-Lloyd is not so conservative. On Friday it raised its full-year forecast and expects 2021 EBITDA in the range of $9.2 billion to $11.2 billion.
Full-year 2020 EBITDA was $3.08 billion, which Hapag-Lloyd CFO Mark Frese called a “stellar performance.”
Hapag-Lloyd expects first-half EBITDA of $4.2 billion, nearly $3 billion more than the same period in 2020 and nearly $1 billion more than last year’s total.
“Global demand for container transport remains at a high level. However, operational disruptions along the entire supply chain continue to cause significant delays and thereby contribute to the shortage of transport capacity,” Friday’s announcement said. “Hapag-Lloyd therefore expects earnings momentum to remain very strong in the second half of the financial year. Previously, a gradual normalization of the earnings trend had been expected for the second half” of 2021.