Orient Overseas (International) Limited announces H1, 2024 interim results

Orient Overseas (International) Limited (“OOIL”) announced that the Group's revenue for the six-month period ended 30th June 2024 reached US$4,646 million, EBIT – US$841 million, EBITDA – US$1,277 million, operating Cash Flow was US$959 million

Profit attributable to equity holders – US$833 million. Dividend for the first half of 2024 is approximately 50% of the profit attributable to equity holders – at approximately US$416 million, with interim dividend of US$0.63 per ordinary share.

Container Transport and Logistics business reported EBIT of US$878 million, representing an EBIT margin of approximately 18.9%. Liner liftings grew to 3.7 million TEU. Earnings per ordinary share for the first half of 2024 was US$1.26, whereas earnings per ordinary share for the first half of 2023 was US$1.71.

Towards the end of 2023, the sudden incident around the Red Sea ended the hovering low market levels, and the market rebounded sharply as we entered the traditional peak season. There was a short quiet season just right after 2024 Chinese New Year, where we saw delivery of many new ships and the oversupply resulted in downward pressure.  Eventually, concerns over supply chain disruption and continuously strong demand again resulted in rebound for most routes, and repeatedly breaking new Shanghai Containerised Freight Index records since 2023.

The recent supply chain disruptions were primarily due to the ongoing situation in the Red Sea.  In order to maintain schedule reliability, the additional distance to circumnavigate through the Cape of Good Hope instead of going through the Red Sea meant that liners had to deploy additional capacity.  Other factors such as poor weather, backlog of cargo, arrival of delayed vessels together and surge in the transshipment volume, resulted in different level of congestions at some ports, which have made more capacity stuck there.  All these in some ways provide an explanation for why effective supply remains low despite the rapid increase in nominal capacity.  New supply chain risk management requirements and geopolitical factors have reshaped existing trade patterns, that brings the need to further optimise our network to cater emerging markets such as India, Vietnam, and Latin America, which in turn brings new challenges on supply chain management.
 
On the demand side, the US economy showed resilience and the European economy has also been recovering.  Unlike the first half of 2023 where consumption was primarily on services, we saw consumers were more willing to buy goods in 2024, the positive sentiment resulted in importers raising their import expectations.  At the same time, retailers are still concerned about delivery delays caused by supply chain disruption, so they have refined their inventory management strategy to adopt a more Just-In-Case approach instead of Just-In-Time approach to ensure the goods arrive in-time for peak season sales.  This resulted in a surge of shipments during the second quarter.

OOCL’s total liftings for the first half of 2024 increased by 2% and total revenues increased by 2% year on year.  

The average price of bunker recorded by OOCL in the first half of 2024 was US$589 per ton, compared to US$609 per ton for the corresponding period in 2023.  Although the bunker price fell slightly by 3%, the total bunker cost increased by 13% as fuel oil and diesel consumption increased by 17% in the first half of 2024 compared to the corresponding period in 2023.  The increase in bunker consumption is attributed to the vessels sailing in the Asia-Europe trade being re-routed to the Cape of Good Hope due to the situation in the Red Sea which began towards the end of 2023.

The dual-brand strategy continues to play a pivotal role, not only in dealing the Red Sea disruption and port congestions where we realised cost minimisation and efficiency gain through synergies, but also in emerging market and niche market, in the form of the dual-brand and Ocean Alliance, allowing us to rapidly extend our network and to better serve our customers.  We believe that the Company will continue to achieve greater results under this strategy.

In the first half of 2024, the Group took delivery of the seventh to eleventh 24,188 TEU new-build vessels from Nantong COSCO KHI Ship Engineering Co., Ltd. (NACKS) and Dalian COSCO KHI Ship Engineering Co., Ltd. (DACKS) respectively.  Two vessels delivered from NACKS are named OOCL Valencia and OOCL Sweden; and three vessels delivered from DACKS are named OOCL Abu Dhabi, OOCL Finland and OOCL Denmark.  The remaining one new building of same series will be delivered in the third quarter of 2024.

For the first half of 2024, OOCL Logistics revenue and contribution witnessed steady increment as compared with the same period last year.  The revenue of the International Business Units presented healthy growth due to the growing demand and exploring new market of international logistics services.  While freight forwarding and domestic logistics continued to face fierce competition, the business units still managed to maintain stable revenue.