Evergreen Q3 net dives y/y on supply,investments
Taiwan's Evergreen Marine Corp, the world's third-largest container shipper, on Tuesday posted a sharp decline in profit for the third quarter from a year ago due to oversupply, lower freight rates and investment losses. But the figure represented a return to profit from a loss the previous quarter, when soaring fuel costs hit hard."Increasing capacity, higher fuel costs and also increases in U.S. intermodal transport costs have had an impact," said an Evergreen executive, declining to be named."To just break even this year would be good enough." Analysts, however, predict a sharp decline in full-year earnings on slowing demand resulting from lower U.S. economic growth and a large expansion in the amount of container vessels Evergreen posted a net profit of T$40.5 million (US$1.2 million) in the July-September period, according to Reuters' calculations based on a company statement.That compared with a T$3.5 billion profit during the same period a year earlier and a net loss of T$631 million in the previous three months.Evergreen, along with other container shippers, had reported robust profits in the past two years as brisk demand from China pushed up freight rates.But supply of new capacity is expected to outpace container volume growth by 3 percentage points this year and another 2 points in 2007, while orders for new ships amount to 52 percent of the world's existing container capacity, shipbrokers say.Asia-to-Europe freight rates have already fallen about 15 percent in the first half of this year, with investors fearing the decline may spill into trans-Pacific routes.Contributing to weaker profits was Evergreen's investment in Taiwan's second-largest airline, EVA Airways Corp."We own about one-third of EVA Air, which has just reported a loss, so we have to shoulder that," the executive said.EVA Air posted a net loss of T$2.32 billion in the first nine-months earlier in the day.A survey of seven analysts by Reuters Estimates yielded a mean forecast of T$5.76 billion for Evergreen's net earnings in 2006, less than half the T$12.2 billion it made last year.Evergreen earns 60 percent of its revenue from shipping goods between Asia and the United States, with the rest split evenly between intra-Asia and Asia-Europe routes.The firm's shares slid 10.7 percent in the July-to-September period, lagging a 2.7 percent gain on the broader market .They closed up 0.53 percent on Tuesday at T$19.10 against a 0.37 percent rise on the main board. (US$1 = T$33.3)in the market.