Orient Overseas (International) announces 2014 Interim Results
Orient Overseas (International) Limited and its subsidiaries today announced a profit attributable to equity holders, after tax and non-controlling interest, of US$181.3 million for the six-month period ended 30th June 2014 compared with a loss of US$15.3 million for the same period in 2013, the company said in its press release.
The profit after tax and non-controlling interests attributable to equity holders for the first six months of 2014 included investment income of US$41.4 million from Hui Xian and a net fair value gain of US$9.7 million on Wall Street Plaza revaluation after capital expenditure net off.
Earnings per ordinary share for the first half of 2014 was US29.0 cents, whereas loss per ordinary share for the first half of 2013 were US2.4 cents.
The Board of Directors announces an interim dividend for 2014 of US7.5 cents (HK58.5 cents) per ordinary share. The dividend will be paid on 16th October 2014 to those ordinary shareholders whose names appear on the register on 12th September 2014.
The Chairman of OOIL, Mr. C C Tung, said, “The global economic environment seems to be positioning for a shift in the right direction despite the disappointing headline figures recorded in the first half of 2014. In particular, the Bureau of Economic Analysis of the U.S. Department of Commerce announced in its third estimate of the first quarter real GDP growth to have been in the negative. At the same time, the European Union announced that the 18 countries sharing the Euro had a growth of 0.2% for the first quarter.”
“Despite these disappointing figures, however, there are underlying developments that support a degree of cautious optimism. Consumer spending in the U.S. continued to recover during the first quarter, and the economy is expected to have performed better during the second quarter. The Federal Reserve has become more confident in a sustained recovery as the windup of the bond purchase program proceeds as planned, and unemployment has dropped to its lowest level since 2008. In Europe, despite the weak GDP figures, the European Central Bank is responding in a proactive manner by cutting lending rates to 0.15%, lowering deposit rates to the negative, and preparing to embark on its own stimulus program”, added Mr. Tung.
“The industry saw a disappointing first half and a more encouraging second half in 2013. Moving into 2014, there has been cargo volume increase and a generally more positive sentiment than last year. In total, it is expected that the container transportation industry posted improved results for the first half of 2014. Such improvement, however, is likely to be capped given the large newbuilding orderbook and the anticipated next round of newbuildings that will likely materialise over the next twelve months”, commented Mr. Tung.
OOCL’s lifting for the first half year increased 10% and load factor increased by 5 points thereby generating an overall revenue increase of 4% over the same period last year. While freight rates across various trade lanes had a mixed performance against first half last year, additional liftings made up the revenue shortfall. The first six months of 2014 saw a robust growth in cargo demand in the major European and American markets.
OOCL achieved 8% reduction in bunker cost against a 3% increase in capacity and 10% increase in lifting.
During the first six months of 2014, OOCL took delivery of two newbuildings, both of which are 13,208 TEU Mega Class vessels. Mr. Tung said, “We expect to take delivery of another four 8,888 TEU SX Class vessels in 2015. These newbuildings represent the end of our last round of newbuilding orders.”
“OOCL continues its efforts in building out its Logistics business. The principal focus will be ensuring that the business will achieve steady growth, and that the organisation is equipped to provide quality multi-modal logistics solutions and end-to-end services to our customers. In China, the business has leveraged upon our in-country experience and extended to provide domestic services to our customers. We remain committed in growing our logistics business going forward”, 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 perform in line with expectations and based on an independent valuation, it has been re-valued upwards by US$10 million as at 30th June 2014 to reflect an assessed market value of US$180 million. After offsetting a total of US$0.3 million improvement to the building spent in the first six months of the year, the net fair value gain for the first half of 2014 was US$9.7 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. During the first half of 2014, Hui Xian Holdings Ltd. paid a dividend in specie of 59.25 million units of the Hui Xian REIT to the Group, resulting in a US$32.3 million income to the Group for the first half of 2014. Together with the cash dividends from Hui Xian Holdings Ltd. and the cash distributions from Hui Xian REIT, the Group posted a profit of US$41.4 million in relation to our investment in Hui Xian in the first half of 2014.
Mr. Tung commented on the outlook in the container shipping market, “The industry will continue to face overcapacity in the coming years. Despite the gradual recoveries of the developed economies, demand growth is not expected to return to the pre Global Financial Crisis level over the short to medium term. At the same time, gross static supply growth remains high with the orderbook-as-a-percentage-of-fleet ratio at 9.3% and 9.8% for 2014 and 2015 respectively. Unless bunker prices can decline to a more reasonable level, the drive for scale and fuel efficiency will translate into continued newbuilding projects. As a result, the challenge of overcapacity will likely persist over the short to medium term.”
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. Our investments in a new port facility in North America and IT capabilities will ensure our competitive edge in the industry going forward. The Group is building its logistics business and expect meaningful contribution to the Group over the medium to long term.”
Mr. Tung concluded that, “Given the market conditions, the first half of 2014 was satisfactory for OOIL. During the second half of the year, the Group will redouble its efforts in its focus on cost efficiency and operating margin. As the global economy gradually recovers, there is expectation that the container transport industry will find itself in a more positive operating environment.”
As at 30th June 2014, the Group had total liquid assets amounting US$2,455.1 million and a total indebtedness of US$3,565.0 million. Net debt as at 30th June 2014 was therefore US$1,109.9 million compared with US$1,122.8 million as at the 2013 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, “We remain deliberate in our efforts to balance the need for a strong and liquid Group balance sheet against a competitive shareholder return. This is especially important as the Group considers further capacity growth and enhancement of its competitive edge over the medium and long term.”
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 65 countries, the Group is one of Hong Kong’s most international businesses. OOIL is listed on The Stock Exchange of Hong Kong Limited.