Orient Overseas (International) Ltd
Announces 2013 Interim Results
• Group Turnover decreased by 3% to US$3,025 million
• Loss Attributable to Equity Holders of US$15 million
• Loss per share of US2.4 cents
• No Interim Ordinary Dividend for 2013
• Take delivery of seven newbuildings, including five ‘Mega’ Class 13,200 TEU Vessels
Financial And Operational Highlights
Orient Overseas (International) Limited and its subsidiaries (the “Group”) today announced a loss attributable to equity holders, after tax and non-controlling interest, of US$15.3 million for the six-month period ended 30th June 2013 compared with a profit of US$116.5 million for the same period in 2012.
- Operating profit decreased to US$3 million
- OOCL liftings decreased 1.5% to 2.55 million TEUs
- OOCL Freight Revenue per TEU was down 2.2%
- Liquid Assets exceeded US$2.37 billion as at 30th June 2013
The loss after tax and non-controlling interests attributable to equity holders for the first six months of 2013 included investment income of US$9.1 million from Hui Xian and a net fair value loss of US$4.6 million on Wall Street Plaza revaluation after capital expenditure net off.
Loss per ordinary share for the first half of 2013 was US2.4 cents, whereas earnings per ordinary share for the first half of 2012 were US18.6 cents.
The Board of Directors has resolved not to pay an interim dividend for 2013. This decision for the interim reflects the lack of profitability for the first half of the year and is consistent with the Group’s efforts in preserving capital and minimising cash out flows during unprofitable periods.
The Chairman of OOIL, Mr. C C Tung, said, “The global economy continued to be uncertain during the first half of 2013, and the container transportation industry faced the challenges of weak cargo growth, capacity oversupply and high bunker costs. Market growth across major trades grew only by approximately 2.2% during the first half of 2013. While the markets expect a more robust second half on the demand side, the industry is still expecting a full year newbuilding supply increase of 10% in TEU terms or 270 new ships in 2013. These factors culminated in a disappointing first half for the Group.”
“The operating environment in the first half of 2013 was characterised by the deterioration of freight rates from the last quarter of 2012, especially on the Asia-Europe trade, and the extremely competitive freight rates recorded in both the Trans-Pacific trade and the Intra-Asia trade. A series of rate increases during the second quarter in the market on the East West trades generally could not be sustained”, added Mr. Tung.
OOCL’s total liftings for the first half of 2013 were down 1.5% compared to the corresponding period last year. Average freight revenue per TEU for the period was US$1,088, a decrease of 2.2% over the 2012 first-half average of US$1,112 per TEU. The slow growth in volume and the competitive freight rate environment resulted in reduced contribution for the Group.
During the first half of 2013, the Group took delivery of two 8,888 TEU ‘SX’ Class vessels and five 13,200 TEU ‘Mega’ vessels. Mr. Tung said, “As part of our retonnage program, we ordered ten 13,200 TEU mega newbuildings in 2011 and disposed of six mid 1990s built 5,400 TEU vessels in 2011 and 2012. Out of the ten newbuildings, four are chartered to our alliance partner on a short term basis. All ten vessels, the remaining five to be delivered in the second half of 2013 and 2014, are expected to improve our cost structure given their size and design. In addition, we will take delivery of our remaining four 8,888 TEU vessels in 2014 and 2015. These vessels, originally contracted for delivery this year, were delayed as part of our joint initiative with the shipyard to improve main engine efficiency. In total, we expect enhanced competitiveness in the trades where all these vessels are deployed.”
The Group’s investments include Wall Street Plaza, an office building in New York, and a minority investment in Hui Xian REIT through both direct holdings and a 7.9% holding of Hui Xian Holdings Ltd., a majority unit holder of Hui Xian REIT. The primary asset of Hui Xian REIT is Beijing Oriental Plaza, a mixed used development in Beijing.
Wall Street Plaza continues to perform in line with expectations. Rectification costs primarily relating to Hurricane Sandy were incurred in 2012 and first half of 2013. An independent valuation increase offsetting with capital expenditure resulted in a net fair value loss for the period of US$4.6 million.
The Group received from its investment in Hui Xian a total of US$9.1 million in the first half of 2013. As at 30th June 2013, the Group’s investment in Hui Xian was re-valued at US$145.9 million.
Mr. Tung commented on the outlook in the container shipping market, “There seems to be early indications that the global economic conditions are set to improve. We need to be mindful, however, that the slowdown of the Chinese economy, the ongoing economic restructuring in Europe, and the uncertainties around the sustainability and strength of the recoveries in the US and Japan continues to post challenges for the global economy. Against this backdrop, the industry still faces a 21% growth in capacity between today and 2015. We therefore expect margins to remain thin and volatile, and that the situation will not improve substantially until fundamental supply and demand reaches a better balance.”
Mr. Tung continued, “The Group continues to focus on enhancing contribution by a more disciplined approach to differentiation and segmentation, and ensuring better cost efficiency by continuous efforts to drive down costs without compromising service quality. Alliances remain an important element for carriers in terms of cost efficiency optimization and improved service coverage. These alliance platforms have become an integral part of the industry. We will continue to work with our partners to ensure that the alliance product stays competitive.”
Mr. Tung concluded that, “Notwithstanding the turbulent times, we continue to plan for the future and invest in tonnage, port facility in North America, IT infrastructure and logistics services. We believe these efforts will help us maintain our competitive edge in the industry going forward.”
As at 30th June 2013, the Group had total liquid assets amounting US$2,374.2 million and a total indebtedness of US$3,385.5 million. Net debt as at 30th June 2013 was therefore US$1,011.3 million compared with US$542.0 million as at the 2012 year-end.
Mr. Alan Tung, the Group’s Acting Chief Financial Officer, said, “The increase in net debt in the first half of 2013 was mainly a result of payments made for the newbuilding orders. 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, “We remain focused and deliberate in our efforts to maintain a strong and liquid Group balance sheet. This is especially important during challenging times as it allows the Group the ability to retain the widest degree of initiative and flexibility as a competitive edge.”
OOIL owns one of the world’s largest international integrated container transport businesses which trades under the name “OOCL”. With more than 290 offices in 60 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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