OOIL Ready for Potential Headwinds

OOILImage Courtesy: OOIL

COSCO-owned transport and logistics company Orient Overseas (International) Limited (OOIL) wrapped up 2019 with a significant earnings growth despite market uncertainties. 

The Hong Kong-based company reported a profit attributable to equity holders of USD 1.35 billion in 2019, against a profit of USD 108.2 million seen in 2018.

Revenues rose to USD 6.88 billion in 2019 from USD 6.57 billion recorded a year earlier.

In addition, earnings before interest and taxes stood at USD 452.3 million in 2019, compared to USD 313.7 million in 2018.

For 2019, OOIL’s container transport and logistics business OOCL — including Long Beach Container Terminal operation — reported EBIT of USD 370 million, representing an EBIT margin of approximately 5.3%.

What is more, liner liftings rose to USD 6.95 million TEU in 2019 from 6.7 million TEU in 2018.

“This solid performance was achieved in a context of an uncertain global economic and trade environment. Economic growth in most major economies continued to be relatively low, and seemingly escalating trade frictions gave rise to uncertainty throughout the year,” OOIL said, explaining that the results are a proof of the successful entry of OOIL into the wider China COSCO Shipping Group and the combination of the duo’s strengths.

In the container shipping industry, global demand growth in 2019 was only 2.6%, half of the growth in 2018. The global supply growth was 4%. However, effective supply growth was contained during the year because of few new vessels entering the market and the increase in the number of idled vessels, some of which were idled for the purpose of retrofitting scrubbers, the company explained.

Recently, OOCL ordered five 23,000 TEU boxships at COSCO Shipping yards in China. These are the first vessels ordered by the group since 2015.

“Not only will these modern, efficient vessels improve our cost structure, fill the capacity gap caused by the future expiry of chartered-in capacity, and further improve the group’s environmental protection and green operation level, but they will also serve as clear evidence of the entire group’s continuing commitment to our very successful dual brand strategy,” OOIL pointed out.

Outlook

Looking into 2020, OOIL said the market is becoming increasingly complex, with two conflicting signals.

On the one hand, the signing of the first-phase trade agreement between China and the United States has removed some of the uncertainty in the escalation of trade frictions, and the narrowing of the gap between demand and supply in container shipping market has led to reasonably positive expectations for the industry at the start of 2020.

On the other hand, the sudden outbreak of COVID-19 has created a tremendous amount of uncertainty, according to the company.

“If the epidemic is further escalated globally and lasts for a long time, the medium and long-term impact will be more extensive and significant, and the growth of the global economy and container shipping demand will decline,” OOIL further said.

“The current situation of our industry is very challenging. Nevertheless, we can say that OOIL is well prepared to resist any potential headwinds, and has a good track record of adapting quickly to changes in demand and in the operating environment,” the group concluded.

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