• Group Profit After Tax of US$239 million, a 32% increase from 1H 2014
• Earnings per share of US38.1 cents
• Interim Ordinary Dividend of US9.6 cents (HK$0.749) per share
Financial And Operational Highlights
• Group Operating Profit increased to US$271 million, a 28% increase from 1H 2014
- Container Transport & Logistics segment achieved 7.3% EBIT margin
- Property and Investment segment contributed US$61 million
• Net Debt to Equity ratio at 30%
• Newbuilding Development
- Took delivery of two ‘SX’ Class 8,888 TEU new vessels
- Two ‘SX’ Class 8,888 TEU new vessels to be received in 2H 2015
- Ordered six 20,000 TEU Class newbuilding vessels for delivery in 2017
Orient Overseas (International) Limited and its subsidiaries (the “Group”) today announced a profit attributable to equity holders, after tax and non-controlling interests, of US$238.6 million for the six-month period ended 30th June 2015, compared with US$181.3 million for the same period in 2014.
The profit after tax and non-controlling interests attributable to equity holders for the first six months of 2015 included investment income of US$27.2 million from Hui Xian and a net fair value gain of US$9.8 million on the revaluation of Wall Street Plaza (after capital expenditure net off).
Earnings per ordinary share for the first half of 2015 were US38.1 cents, whereas earnings per ordinary share for the first half of 2014 were US29.0 cents.
The Board of Directors is pleased to announce an interim dividend for 2015 of US9.6 cents (HK$0.749) per ordinary share. The dividend will be paid on 15th October 2015 to those ordinary shareholders whose names appear on the register on 11th September 2015.
The Chairman of OOIL, Mr. C C Tung, said, “The first half of 2015 was an eventful six months for the global economic environment. Greece’s ongoing challenges, and the US / Iranian nuclear negotiations acted as a backdrop to a slow but improving global economy. At this time, the Eurozone had reached a preliminary agreement with Greece, and the US and Iran had concluded their negotiations, subject to respective domestic legislative approval, paving the way for the gradual reintegration of Iran into the global economic system.”
“The industry experienced a volatile period during the first half. In the earlier months of 2015, the industry enjoyed a relative stable freight market. Through the combination of the normal seasonal cargo rush prior to Chinese New Year, capacity constraints arising from port congestion and disruptions in the US, and an improving cost structure created by lower oil prices, the industry made meaningful gains in margin performance. In the latter half of the reporting period, with idling ships reactivated and new build capacity delivering, freight rates moved rapidly downwards, forcing margins to narrow. It is likely that the industry as a whole will report mixed results for the half year”, added Mr. Tung.
“Oil prices have remained benign since the sharp drop in third quarter 2014. Despite some upward movements of oil price in the second quarter this year, the prospect of oil reverting to the highs of 2013 and 2014 seems increasingly unlikely”, commented Mr. Tung.
The average price of bunker recorded by OOCL in the first half of 2015 was US$352 per ton compared with US$595 per ton for the corresponding period in 2014, generating a decrease in fuel costs of 38%.
Compared to the first half in 2014, OOCL liner lifting dropped by 2%, load factor by 4%, and revenue by 6%. Average revenue levels in some trade lanes reached new post-Global Financial Crisis lows, with an average revenue per TEU drop of 4% in the first half.
In the first half of 2015, the Group took delivery of its fifth and sixth ‘SX’ Class 8,888 TEU vessels from Hudong-Zhonghua Shipbuilding in Shanghai, namely the ‘OOCL Taipei’ and ‘OOCL Utah’. Mr. Tung said, “There are two remaining vessels from this series, both of which are to be delivered in the second half of 2015.”
One 8,063 TEU SX class vessel, the 2004-built ‘OOCL Qingdao’, was sold in March 2015 and leased back to OOCL for 3 years.
It was announced on 1 April 2015 that the Group had placed orders for six vessels of the 20,000 TEU class with Samsung Heavy Industries Co., Ltd. of South Korea. Delivery is planned to occur in 2017.
“Our small but growing Logistics business continues to be profitable. Logistics revenue for the first half year decreased 1.2% over the same period last year. Revenue from Import/Export Services continued to grow while Domestic Logistics Services in China and Japan dropped due to fierce competition. Revenue growth from Supply Chain Management Services was relatively flat although improvements were made in higher value added services. We will continue to develop new logistics products and enhance our logistics capability, quality and productivity in our primary business segments as well as building our service network and coverage in ASEAN and India Sub Continent countries”, continued Mr. Tung.
The Group’s property investments include its long-standing ownership of Wall Street Plaza located in New York. Wall Street Plaza continues to record steady results and based on an independent valuation, has been re-valued upwards by US$10 million as at 30th June 2015 to reflect an assessed market value of US$190 million. After offsetting a total of US$0.2 million improvement to the building spent in the first six months of the year, the net fair value gain for the first half of 2015 was US$9.8 million.
The Group continues its investment in Beijing Oriental Plaza directly through holdings in the Hui Xian REIT and indirectly through Hui Xian Holdings Ltd., which holds units in the Hui Xian REIT. In the first half of 2015, Hui Xian Holdings declared a cash dividend and dividend in specie to its shareholders, of which the Group’s shares amounted to US$24.7 million. In addition, the Group also received a distribution of US$2.5 million from its direct holding of Hui Xian REIT.
Mr. Tung commented on the outlook in the container shipping market, “The industry faces a large orderbook in the year 2015. Until sustainable demand growth is achieved, freight rates will continue to be under pressure. This could hardly be more evident than it was in the second quarter of this year, when demand growth was less than satisfactory in certain trade lanes, especially that of Asia Europe. Looking into the second half and into next year, the industry takes comfort that scheduled new deliveries are relatively limited in 2016, and is hopeful that cargo growth, especially in Asia Europe and Intra Asia, will recover a more favourable trajectory.”
Mr. Tung continued, “The first half of 2015 was satisfactory for OOIL. The Group remains mindful and cautious, however, of the over capacity that is especially serious in 2015. The supply overhang is likely to exert pressure on freight rates in the second half of the year. During the next six months, where revenue remains uncertain given the supply and demand imbalance, cost efficiency remains the critical factor for better margin performance. The industry is hopeful that positive trade growth, especially in the Trans-Pacific and Trans-Atlantic trades, and to a degree in the Intra-Asia trade, will provide support to the underlying market.”
Mr. Tung concluded that, “The world economy is on a more positive trajectory now. With more sustainable recovery worldwide, a more favourable supply and demand balance in 2016, and better alliance cooperation dynamics, the container transport industry should find itself in a more positive operating environment looking into next year. My colleagues and I remain focused in ensuring that the Group is well positioned for the future and continues to be one of the highest performing container shipping companies in the industry.”
As at 30th June 2015, the Group had total liquid assets amounting US$2.8 billion and a total indebtedness of US$4.2 billion. Net debt as at 30th June 2015 was therefore US$1.4 billion compared with US$1.3 billion as at the 2014 year end.
Mr. Alan Tung, the Group’s Acting Chief Financial Officer, said, “The Group continues to have sufficient borrowing capacity and remains comfortably within its target of keeping a net debt to equity ratio below 1:1.” Mr. Alan Tung added that, “The Group is deliberate in its efforts to balance the need for a strong and liquid balance sheet, necessary in a capital intensive business, with an industry-competitive shareholder return.”
OOIL owns one of the world’s largest international integrated container transport businesses, which trades under the name “OOCL”. With more than 320 offices in 70 countries, the Group is one of Hong Kong’s most international businesses. OOIL is listed on The Stock Exchange of Hong Kong Limited.
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Issued by: Orient Overseas (International) Limited
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