Group Turnover increased by 7% to US$3,122 million
• Profit Attributable to Equity Holders of US$117 million
• Earnings per share of US18.6 cents
• Interim Ordinary Dividend of US4.66 cents (HK36.3 cents) per share
Financial And Operational Highlights
• Operating profit decreased by 26% to US$140 million
• OOCL liftings increased 6.1% to 2.6 million TEUs
• OOCL Freight Revenue per TEU was down 1.0%
• Liquid Assets exceeded US$2.5 billion as at 30th June 2012
Orient Overseas (International) Limited and its subsidiaries (the “Group”) today announced a profit attributable to equity holders, after tax and non-controlling interest, of US$116.8 million for the six-month period ended 30th June 2012 compared with US$175.0 million for the same period in 2011. The 2012 interim result represents a US$58.2 million or 33% decrease in earnings from comparable activities.
The profit after tax and non-controlling interests attributable to equity holders for the first six months of 2012 included dividends from Hui Xian Holdings Ltd amounting to US$42.6 million and a US$5.0 million upward revaluation of Wall Street Plaza.
Earnings per ordinary share for the first half of 2012 was US18.6 cents, whereas earnings per ordinary share for the first half of 2011 was US28.0 cents
The Board of Directors is pleased to announce an interim dividend for 2012 of US4.66 cents (HK36.3 cents) per ordinary share. The dividend will be paid on 15th October 2012 to those ordinary shareholders whose names appear on the register on 6th September 2012.
The Chairman of OOIL, Mr. C C Tung, said, “The first half of 2012 has been challenging with very low market freight rates at the start of the year, low demand growth on the east-west trades, and a spike up in bunker fuel prices in early January. Fortunately there has been a marked improvement in freight rates, particularly on the Asia-Europe services, to offset the low growth in demand on the East-West trades. Despite this recovery in rates, trading conditions have been, and are likely to remain, difficult and volatile given prevailing economic conditions and the continuing surplus of capacity on the major trades.”
“While facing low demand growth, mirroring sluggish economic activity in key consumer markets, the industry has had to absorb over 110 new container ships in the first half of the year. The pressure from the delivery of new-build capacity will continue, and the industry’s ability to absorb and judiciously deploy capacity will be key to stability for both the rest of this year and for the next few years to come”, said Mr. Tung.
OOCL’s total lifting for the first half year increased by 6.1% and total revenue increased by 5.0% compared with corresponding period in 2011. The decline in average revenue seen in 2011 has stopped and average revenue started to recover in March, notably for Asia to Europe business.
During the first half of 2012 no new-build vessel was delivered and no orders for new vessels were placed. The Group exercised a purchase option under a long-term charter of the 5,770 TEU vessel ‘OOCL Shanghai’ in January 2012. A 16-year-old 5,344 TEU vessel ‘OOCL Hong Kong’ was sold at end of June 2012 and leased back from the new owner for 3 years on a time-charter basis. Another 16-year-old 5,344 TEU vessel ‘OOCL China’ was sold in early July and was also leased back from the new owner for 3 years on a time-charter basis.
Mr. Kenneth Cambie, the Group’s Chief Financial Officer, noted that “OOCL has been fortunate during this period of low demand growth in not having any new-build vessels delivering. The first of our new mega 13,200 TEU container vessels, which are expected to deliver significant operating cost efficiencies, delivers at the start of next year. With the next delivery of our 8,888 TEU vessels also not due until next year, any capacity growth for us in the second half of the year will come from the charter market.”
Wall Street Plaza continues to perform in line with expectations, and based on an independent valuation, it has been re-valued upwards by US$5 million as at 30th June 2012 to reflect an assessed market value of US$165 million.
Following the successful floating of Beijing Oriental Plaza via a Real Estate Investment Trust (“REIT”) last year, the value of our 7.9% investment in the project is now largely dependent on the market value of the REIT units ultimately owned by Hui Xian Holdings Ltd. In the first half of 2012, Hui Xian Holdings Ltd declared dividends, in forms of both cash and Hui Xian REIT units, to its shareholders, of which the Group’s share amounted to cash of US$7.9 million and Hui Xian REIT units valued at US$34.7 million. As at 30th June 2012, the Group’s investment in Hui Xian Holdings Ltd was valued at US$99.0 million, a drop of US$29.3 million from 31st December 2011, mainly a result of distributing the REIT units to its shareholders.
Mr. Tung commented on the outlook in the container shipping market, “Prospects of a strong third quarter, the traditional peak season for container shipping, have dimmed a little of late as a result of the poor economic data from the major consumer markets. A large number of mega-ships have still to deliver in the second half of the year and deployed capacity will need to adjust quickly to meet demand levels if freight rates are to be maintained in the seasonally weaker fourth quarter.”
“Despite limited ordering of new vessels over the last twelve to eighteen months, the industry needs to absorb an estimated 2.4 million TEU of new-building capacity, which is about 15% of the current global capacity, over the next eighteen months. Given the substantial new-build capacity still to deliver, and with ongoing weak demand growth, volatile fuel prices, and fragile freight rates, continued discipline in capacity deployment and cost control will be needed for the industry to rebuild stability toward profitability. Nevertheless, the need to meet higher operating costs, and in particular high fuel costs, has seen freight rates improve this year, and it is hoped that they will now remain at these more reasonable levels”, said Mr. Tung.
Mr. Tung concluded, “Putting aside the non-recurring items at the OOIL level, the performance of the liner and logistics business has been credible in the face of the difficult trading conditions experienced. OOCL’s positive operating margin for the first half was adversely impacted by the unexpected increase in bunker fuel, but the recent fall in the price of crude oil, if it holds, should see an improvement in that margin to more appropriate levels. But, fundamentally, margins will remain volatile, and likely thin, until supply and demand rebalance.”
As at 30th June 2012, the Group had total liquid assets amounting US$2,527.5 million and a total indebtedness of US$2,812.1 million. Net debt as at 30th June 2012 was therefore US$284.6 million compared with US$259.1 million as at the 2011 year-end.
Mr. Cambie noted that, “The increase in net debt in the first half of 2012 was mainly a result of stage payments made for newbuilding orders. The Group continues to have sufficient borrowing capacity and remains comfortably within its target of keeping its net debt to equity ratio below 1:1.”
OOIL owns one of the world’s largest international integrated container transport businesses which trades under the name “OOCL”. With more than 270 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.