Orient Overseas (International) Ltd., the parent of the container line OOCL, said Monday it had operating profits of $183.6 million in 2011, a huge decline from the $922.9 million the company made in 2010.
Revenue in 2011 was $6.01 billion, close to the $6.03 billion recorded in 2011.
OOIL said it had a profit of just $7 million in the second half of the year and said in a statement that “with the lack of profit in OOCL in the second half of 2011 and the difficult trading environment expected in 2012, the board of directors is not recommending payment of a final ordinary dividend for 2011.”
Profit attributable to shareholders in 2011 was $181.6 million, less than a tenth of the $1.87 billion it earned in 2010, when the sale of property in China boosted its profits by more than $1 billion.
OOCL is one of only three major container lines to announce profits in 2011, with most lines suffering steep operating losses last year. OOCL’s partner in the Grand Alliance, Hapag-Lloyd was another to be profitable in 2011, along with CMA CGM.
C.C. Tung, the chairman of OOIL, said “while we started 2011 believing that the extremes of 2009 and 2010 were behind us and that we had a period of steady growth ahead, trading conditions in the container transportation industry over the past year became increasingly difficult. While overall global demand levels grew, the slow rate of economic growth in the United States and in Europe saw only muted volume growth for container trade to those markets. Demand growth proved inadequate for the orderly absorption of new-build capacity that delivered during the year.”
OOCL said it lifted 5 million TEU in 2011, 5.6 percent more than in 2010.
“The peak cargo moving season was brief with only a moderate increase in volume in July and August. Average revenue per TEU was 7 percent lower overall for the year, mainly due to a 29 percent erosion in freight rate levels from Asia to Europe,” the company said.
“OOCL’s operating profitability was impacted by the downwards pressure on freight rates that intensified over the second half of the year. The traditional transpacific peak season in the third quarter was disappointing in terms of both volume and prevailing freight rates,” he said.
“While normal competitive pressure was felt across all trades as carriers sought to maintain market share while absorbing increased capacity, the Asia-Europe trade saw extraordinary freight rate declines. With the continued high price of bunker fuel also squeezing margins, the need for greater operational efficiency saw new alliances formed for Asia-Europe, including a group of six carriers to be called the ‘G6 Alliance’ of which OOCL is a founding member,” Tung noted.
“Despite 2011 representing a period of consistent deterioration in profitability for the industry, OOCL has made progress on many strategic fronts including the order of ten 13,200 TEU energy efficient ships and substantial progress on the development of IRIS4 as our next generation operating system,” he said.
“The ordering of the 13,200 TEU vessels confirmed OOCL’s ongoing role as a global network carrier, and its long-term commitment to the Asia-Europe trade in particular. These vessels, when delivered in 2013 and 2014, will further enhance OOCL’s competitive cost base as well as helping us to reduce emissions consistent with our focus on and promotion of environmental protection,” Tung continued.
OOCL said it has focused intensely on reducing fuel use because of the the rise in bunker costs.
“These programs included initiatives covering technology, optimal routeing, continuously optimized speeds, minimum ballast, optimal trim, and ensuring close communication between ship and shore colleagues regarding berthing arrangements and terminal productivity,” the company said.
Tung said “looking to 2012, we expect trading conditions to continue to be difficult. The major markets of North America and Europe are likely to see low levels of demand growth given the slow economic growth in those economies.
“Scheduled new-build capacity delivering in 2012 exceeds that of 2011, and is again dominated by the large vessels destined for deployment on the Asia-Europe trades. While there has been some freight rate improvement on both Asia-Europe and transpacific routes since the beginning of this year, freight rates for those trades do not yet fully cover costs especially given the increase in the cost of bunker fuel that has occurred,” Tung said. — Chris Dupin
OOCL parent sees sharp decline in profit
