OOCL: Sale hones focus on liner division
Ocean carrier OOCL's parent company said the sale of its property division, announced earlier this week, was not necessitated by a need to pay debt, but rather was a strategic move to allow the company to focus on its core business and build cash reserves.
Hong Kong-based OOIL said Monday it has sold all but two properties in its property and development business for $2.2 billion to an Asia-based property developer. A statement from Stanley Shen, director of investors relations for OOIL (parent company of liner carrier OOCL), said, 'I don't want to speculate too soon what we'll do with the cash.”
It's the second major sale for OOIL in the last three-and-a-half years. The company sold its marine terminals division in late 2006 for $2.4 billion. The proceeds from that sale were evenly divided, with half going to dividend payouts and the other half put in the bank.
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Shen said the sale this week, along with that of the terminals division, has sharpened OOIL's focus on its core business, the OOCL liner carrier and logistics divisions.
OOCL is the world's 12th-largest carrier by fleet capacity, according to the maritime news service Alphaliner. Shen said the company is content focusing on profits rather than market share, and that OOIL's shareholders are well aligned with the company's management in terms of long-term strategy.
OOCL has been a consistent performer in terms of profitability over the years, and Shen said he expects that the line will have lost less money in 2009 than most other lines.
As for 2010, despite a moderate recovery in volume and rates the last few months, Shen said OOCL is anticipating the year will be 'very tough.'
'Demand has recovered somewhat, but we still have a big overhang of supply,' he said. 'We hope carriers won't introduce new capacity. That will force rates down and carriers will again be in a loss-making situation.
'The volume to the U.S. in the last few weeks is sustainable,' Shen continued. 'Load factors on the transpacific and Asia/Europe are at 97 percent in what is traditionally a weak period.'
He added that tightened supply is one reason for the higher load factor, but another is that shippers are restocking after the holidays.
'Orders in China are good through the first half of 2010,' Shen said.
He said OOCL's efforts to raise rates in the interim period before spring contract negotiations — part of a Transpacific Stabilization Agreement-wide endeavor to raise revenue until April — have largely been successful.
The TSA advised carriers to raise rates by $320 per 20-foot container and $400 per 40-foot container starting Jan. 15 to drive ocean freight rates on the transpacific closer to sustainable levels. The advised increased is only a recommendation and not binding, meaning carriers can charge whatever they wish to their customers.
'We've been very successful in getting shippers to agree to the emergency revenue surcharge,' he said. 'We've had almost 100 percent. Hopefully when it comes to contract negotiations, we'll be as successful.'
Shen didn't specify what interim increase OOCL sought. ' Eric Johnson