Orient Overseas (International) Limited (OOIL) said Monday it realized a $1.15 billion profit from the sale of the Long Beach Container Terminal (LBCT).
In April, OOIL sold the Port of Long Beach terminal to a consortium of investors led by Macquarie Infrastructure Partners for $1.78 billion. The U.S. government required OOIL to sell the California terminal after a Committee on Foreign Investment in the United States review of its acquisition by COSCO Shipping Holdings.
China’s COSCO Shipping acquired a majority stake in OOIL in July 2018.
“Recognizing the high quality of the terminal, a good sales price was achieved, resulting in a profit of [$1.153 billion],” OOIL said in its 2019 earnings release Monday. “The new buyer had thereby acquired a very attractive asset, and as part of the overall arrangements, OCCL will continue to have access to the terminal to service the requirements of our trans-Pacific trade.”
OOIL, headquartered in Hong Kong, is the parent company of Orient Overseas Container Line (OOCL). As part of the agreement with Macquarie, OOCL ships will continue to call at LBCT, one of the largest and most automated terminals in the United States, with a minimum volume commitment under a 20-year container stevedoring and terminal services agreement.
Including LBCT operations, OOIL Group earnings before interest, taxes, depreciation and amortization (EBITDA) in 2019 totaled $882 million, up from $717 million in 2018.
OOCL said its “IT strength and capability” have allowed it to service customers during the coronavirus crisis.
“We encourage all of our customers to utilize our effective online tools to expedite any queries and manage your shipment via MyOOCLCenter (MOC) and OOCL’s Mobile Solutions,” an advisory issued Sunday said. “Our customers should have full confidence that we are operating business as usual.”
OOIL said Monday as it looks forward in 2020, it sees “the market is becoming increasingly complex, with two conflicting signals. On the one hand, the signing of the first-phase trade agreement between China and the United States has removed some of the uncertainty in the escalation of trade frictions and the narrowing of the gap between demand and supply in the container shipping market has led to reasonably positive expectations for the industry at the start of 2020. On the other hand, the sudden outbreak of COVID-19 creates a tremendous amount of uncertainty.”
OOIL said its outlook has become more pessimistic as the coronavirus has spread around the world.
“If the epidemic is further escalated globally and lasts for a long time, the medium- and long-term impact will be more extensive and significant and the growth of the global economy and container shipping demand will decline,” it said.
On Monday OOIL said its 2019 profit attributable to equity holders grew to $1.34 billion from $108.2 million in 2018. The majority of that growth was from a $1.19 billion profit from discontinued operations.
Revenue increased to $6.87 billion in 2019 from $6.57 billion in 2018. Gross profit increased to $809 million from $712 million.
“This solid performance was achieved in context of an uncertain global economic and trade environment,” OOIL said. “Economic growth in most major economies continued to be relatively low and seemingly escalating trade frictions gave rise to uncertainty throughout the year.
“It is a tribute to the professionalism and the ‘we take it personally’ spirit of our staff that we managed to navigate these challenging times so smoothly,” OOIL continued, adding that becoming part of COSCO Shipping has combined “the strengths of both sides in one momentous step forward.”
“Our original synergy targets established during the acquisition process have already been exceeded and our teams continue to work hard to identify and exploit further areas where synergy benefits may be obtained. These highly tangible benefits, achieved through effective network planning, equipment management, joint procurement and cooperation in IT, will be a key success factor for our group in 2020 and beyond,” it said.
OOIL said its operating cash flow grew from $589.7 million in 2018 to $753.4 million in 2019. Group earnings before interest and taxes (EBIT) increased from $313.7 million in 2018 to $452.3 million in 2019.
OOIL said that in 2019, the global economy “had only 2.9% growth, which was the lowest level since 2008-09. The uncertainties of the ongoing U.S.-China trade discussions and Brexit further hampered economic growth.”
It said, however, that supply and demand were balanced.
“Effective supply growth was contained during the year because of few new vessels entering the market and the increase in the number of idled vessels, some of which were idled for the purpose of retrofitting scrubbers. Therefore, the market equilibrium of supply and demand was stable, which was favorable to freight rate stabilization,” OOIL said.
Container lines rushed vessels to shipyards to get scrubbers ahead of the International Maritime Organization low-sulfur fuel mandate that went into effect Jan. 1.
OOCL said it has ordered five 23,000-TEU (twenty-foot equivalent unit) vessels, the first newbuilds the group has purchased since 2015.
OOCL expects to begin taking delivery of the vessels, each carrying a price of $155.6 million, in 2023.
“Not only will these modern, efficient vessels improve our cost structure, fill the capacity gap caused by the future expiry of chartered-in capacity and further improve the group’s environmental protection and green operation level, but they will also serve as clear evidence of the entire group’s continuing commitment to our very successful dual brand strategy,” OOIL said Monday.
OOIL said its OOCL Logistics grew more slowly in 2019 than in previous years.
“However, it laid good foundations for 2020, with new customer contracts and an ongoing strong commercial effort. We will continue to grow this business at a steady pace, bringing diversification to our overall activities and thereby involving the group in all parts of the end-to-end supply chain, which is becoming of greater and greater strategic importance,” it said.