Orient Overseas (International) Limited (“OOIL”) announced a profit attributable to equity holders of US$1,128.7 million for the six-month period ended 30th June 2023, compared to a profit of US$5,663.6 million for the same period in 2022.  

Earnings per ordinary share for the first half of 2023 was US$1.71, whereas earnings per ordinary share for the first half of 2022 was US$8.58.

The Board of Directors announced that the dividend for the first half of 2023 is approximately 50% of the profit attributable to equity holders at approximately US$568 million, with an interim dividend of US$0.69 per ordinary share and a special dividend of US$0.17 per ordinary share.

As was clearly to be expected, the extraordinary market conditions of the past two to three years came to an end. The long, steady decline in freight rates, which began around the middle of last year, continued during the first half of 2023. The fall from the great heights of 2020-2022 has certainly been spectacular in terms of both absolute dollar value and in terms of percentage, but this is simply a reflection of just how high the freight market had risen.  At the time of writing, freight rates are, broadly speaking, around, and in some cases above, the levels they were at pre-COVID-19, before global reactions to the pandemic created the exceptional container shipping market conditions of the past few years.

Those market conditions were a combination of better-than-expected demand and severe congestion around the network that placed massive downward pressure on the effective level of capacity available to shipping customers, notwithstanding the deployment of additional capacity by shipping companies.  Surprisingly resilient demand put together with reduced effective levels of supply drove freight rates up.

Starting from mid-year 2022, and continuing throughout the reporting period, very different market forces applied.  First, congestion at existing chokepoints was alleviated, releasing additional effective supply into the market, with very little material new disruption occurring.  Second, in a number of key importing economies, inventory levels had risen, not to historical highs, but certainly to levels higher than seen in the prior two to three years.  This caused importers in the US and Australia, for example, to take a more cautious approach in their ordering of new goods, thereby reducing the demand for container shipping.

As a result, compared to the same period in 2022, OOCL’s total liner liftings for the first half of 2023 reduced by 1%, total revenue decreased by 60%, resulting in a 60% decrease in revenue per TEU.  

The average price of bunker recorded by OOCL in the first half of 2023 was US$609 per ton, compared to US$729 per ton for the corresponding period in 2022.  The total bunker cost decreased by 17% in the first half of 2023 compared to the corresponding period in 2022, even though the consumption of bunker was nearly the same in both periods.

In the first half of 2023, the Group took delivery of the first two 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.  The first one delivered from NACKS is named the OOCL Spain; and the first one delivered from DACKS is named the OOCL Piraeus.  These 24,188 TEU vessels are currently the largest vessels being delivered to the Group.  The delivery of the remaining new buildings of same series will be delivered from 2023 third quarter to 2024 third quarter.

Despite increased consumer caution and slowing demand for products in the first half of 2023, OOCL Logistics has seen some successes.  The ocean freight business revenue has returned to normal level of previous years while increases were noted in handling volume in TEU.  Additionally, the domestic business unit has recorded satisfying growth.  To continue this positive trend, all logistics business units are actively developing new services, both in breadth and depth, by engaging with different stakeholders in customers’ organisations.  These services include traditional logistics activities as well as digital supply chain management processes.  

Certainly, the market is very far from being in disaster territory, and of course there are some indications that demand is improving and that shipping companies are behaving rationally in the face of fluctuating demand - all of this is reassuring.  However, undeniably, there are risks associated with the impact of inflation and higher interest rates on consumer spending, and from the unclear economic outlook.  There is also the uncertainty of not knowing exactly what the net fleet growth, in terms of effective capacity, will be in the coming months and years.  No-one can predict with accuracy the extent to which, in any given period, capacity from new deliveries will outpace the loss of capacity driven by scrapping and speed reductions, whether for CII / EEXI compliance or simply for cost reasons.

At the time of writing, ships are sailing full on the main long-haul tradelanes, and are forecast to continue to be fully loaded in the coming weeks. US West Coast rates have indeed risen, as one might expect at this time of year.  Similarly, Asia Europe rates are currently holding and in some tradelanes increasing.  Nonetheless, a cautious outlook is appropriate, given the challenges and uncertainties that abound.

As at 30th June 2023, the Group had total cash and bank balances of US$7,823.9 million compared with debt obligations of US$597.4 million repayable within one year.  The Group remained at net cash position with a net cash to equity ratio of 0.53 : 1 as at 30th June 2023.  The Group from time to time prepares and updates cashflow forecasts for asset acquisitions, to serve project development requirements, as well as working capital needs, from time to time with the objective of maintaining a proper balance between a conservative liquidity level and an effective investment of surplus funds.

OOIL owns one of the world’s largest international integrated container transport businesses which trades under the name “OOCL”.  With around 440 offices in approximately 90 countries/regions, the Group is one of Hong Kong’s most international businesses.  OOIL is listed on The Stock Exchange of Hong Kong Limited.

Source: OOCL

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