OOIL’s first half profits down 9%

OOIL’s first half profits down 9%    Hong Kong’s Orient Overseas (International) Ltd., parent company of ocean carrier OOCL, today reported a 9.2 percent drop in net profit to $280.5 million in the first half of the year, from $308.9 million after six months 2005.
   OOIL’s operating profit dropped 2.5 percent to $342.2 million, compared to $351 million a year ago. Revenue increased 6.2 percent to $2.39 billion from $2.25 billion in the same period last year.
   “The markets have remained robust in terms of container volume growth during the first half of 2006 but average freight rates have fallen over the same period, especially on the Asia to Europe routes,” said OOIL Chairman C.C. Tung. “This softness, when combined with steadily rising costs, both directly and indirectly as a result of higher oil prices, has led to a poorer overall performance.”
   OOCL’s average revenue per TEU in the first half went down 3.3 percent despite its container volume increasing 7.5 percent.
   OOIL said its container terminals division, presently being considered for sale, saw its operating profit jump 46.5 percent with combined throughput increase of 17 percent. OOIL’s terminal operations comprise TSI Terminal Systems, which operates the Deltaport and Vanterm terminal in the Canadian Port of Vancouver, New York Container Terminal on Staten Island and Global Terminal in New Jersey.
   Looking ahead to the remainder of the year, Tung admitted that 2006’s results would not match those of the last two years. “It is without doubt that the industry is at present having to weather a period of unusually high new vessel deployment at the same time as doubts abound as to the sustainability of the currently still strong container volume growth. Such sentiments clearly serve to soften freight rates. Nevertheless, the supply/demand balance eventually will have its effect and so it is the strength of volume growth during the coming peak period that will set the performance level for 2006 as a whole.
   “It is unlikely to compare with the group’s performance for the past two years, however, since much of the damage to freight rates has already been done during the first half and especially for the all important transpacific trades for which the annual rate setting process took place in April. Similarly for the Asia/Europe trades in which, although three monthly contracts are the norm, rates fall very quickly but rise very slowly.
   “In addition to the balance between supply and demand, rising costs are a major concern. The future cost of bunkers remains an unknown with many views as to where the price will go. The geopolitical issues make predictions much of a lottery. Whilst the bunker adjustment factor does allow us to recover some of any increase it is by no means a 100 percent recovery. Additionally, our third party transportation costs and terminal handling costs continue to rise, much of it the indirect result of higher fuel and energy costs,” Tung said.