· Group turnover decreased by 35% to US$2,067 million
· Total Operating Loss, excluding revaluation of Wall Street Plaza, was US$187 million
· Loss Before Tax, including the WSP revaluation, was US$223 million
· No interim dividend has been proposed
|OPERATING (LOSS) / PROFIT FROM CORE OPERATIONS||(187)||228|
|PROFIT / LOSS ATTRIBUTABLE TO SHAREHOLDERS||(232)||158|
|EARNINGS / (LOSS) PER ORDINARY SHARE (US$ CENTS)||(37.0)||25.3|
FINANCIAL AND OPERATIONAL HIGHLIGHTS
· OOCL freight revenue decreased by 37.2%, liftings by 17.2%
· Operating Loss for Container Transportation and Logistics of US$196.6 million
· Wall Street Plaza revalued down US$15 million to US$160 million reflecting weaker leasing market conditions in lower manhattan (US$10 million negative revaluation in 1H08)
· Loss attributable to shareholders of US$231.8 million
· Loss per share of US37.0 cents (last year earnings per share US25.3 cents)
· Delivery taken of one 4,578 TEU new-build vessel in 1H09
· Financing arranged for six new-build vessels in 1H09
Orient Overseas (International) Limited (“OOIL”) Group today announced an Operating Loss from Core Operations of US$186.6 Million for the first six months of 2009.
The Operating Loss from Core Operations for the half year, which excludes a US$15 million negative revaluation of Wall Street Plaza, was US$414.2 million down as compared to the first half of 2008. This loss arose from the difficult trading conditions faced by the Container Transport and Logistics business.
The Loss Attributable to Shareholders was US$231.8 million, while the Loss before Tax for the period was US$222.7 million.
The Container Transport and Logistics operations incurred an operating loss of US$196.6 million for the first half of 2009 compared to a profit of US$215.7 million for the equivalent 2008 period.
The Directors have not recommended the payment of an interim dividend.
(For complete financial tables, please visit the company website at http://www.ooilgroup.com)
The Chairman of OOIL, Mr C C Tung, said, “Market conditions in the first six months of 2009 have been extraordinarily difficult for the core business of Container Transportation and Logistics, resulting in a trading loss for the Group for the half year. With industry capacity continuing to increase, and continued weakness in the US and European economies, I expect trading conditions for the remainder of the year to remain difficult. While there are signs that the worst of the downturn may be behind us, a rebound in the global economy is expected to be subdued.”
The deterioration in the performance of the Container Transport and Logistics operations was a result of dramatically reduced revenue as business volumes suffered across all trade lines. With the United States and other OECD countries officially in recession during the period, freight rates and volumes continued the decline that started at the end of last year. The continued delivery of new-build capacity into the market aggravated the supply/demand imbalance in the industry despite many carriers suspending services and laying-up vessels.
With a dramatic fall in demand in January and ongoing weakness in consumer demand, particularly in OECD countries as economies moved to recessionary conditions, all trades have been affected. As a consequence, OOCL’s total liftings decreased by 17.2%, and overall revenue per TEU declined by 24.1%, versus the 2008 half-year period.
By 30th June, OOCL had been able to reduce capacity by approximately 14% compared to the end of December. Capacity reduction came from redelivery of chartered vessels at maturity in the first half of this year, and from operational adjustments.
Group turnover for the six months ended 30th June 2009 was US$2,066.8 million, a decrease of US$1,136.9 million or 35.5% as compared with the corresponding period of 2008. OOCL accounted for 99% of Group turnover, and had liner and logistics revenue of US$2,053.3 million for the first six months of 2009 being a US$1,122.4 million decrease over that in the 2008 half year. Both volume and rate declines contributed to the decline in revenue.
Bunker fuel prices have increased steadily from the US$240 per ton at the beginning of the year to US$400 per ton by the end of June. The majority of the freight contracts with longer term commitments remain subject to fuel price adjustments though recovery only partially covers actual cost.
Mr Tung remarked, “Cost pressures will continue with energy prices having crept up again over the course of the second quarter, and repositioning costs having increased with lower backhaul volumes.”
During the first half of 2009 the Group took delivery of one more “P” Class 4,578 TEU Panamax size vessel, the OOCL Norfolk, from Samsung Heavy Industries Co. Ltd. in South Korea.
Mr Kenneth Cambie, the Group Chief Financial Officer, noted that “OOCL has a further nine “P” Class and four “SX” Class 8,063 TEU vessels to be delivered from Samsung through the remainder of 2009 and 2010. Additionally the Group has six 8,600 TEU newbuild vessels from Hudong – Zhonghua Shipyard (Group) Co. Ltd. scheduled for delivery from late 2010 on. Adequate resources will continue to be reserved to ensure that the delivery of the vessels on order does not impose any undue financial burden upon the Group as a whole.”
The Group’s property development and investment activities are conducted under OODL. Property development activities are focused in the Greater Shanghai and Greater Bohai (Beijing/Tianjin) areas of China. For property investment, there are currently three investments in properties, namely Wall Street Plaza in New York, Beijing Oriental Plaza in Beijing, and Kunshan Huaqiao Double-Tree by Hilton in Jiangsu Province, China.
Wall Street Plaza, 100% owned investment property in the city of New York, has continued to perform solidly despite deterioration in the Manhattan commercial property rental market. The overall Manhattan vacancy rate is now 10.5%, while for downtown Manhattan, where the building is located, the vacancy rate has increased from 7.4% a year ago to around 8.0%. Wall Street Plaza occupancy has increased from 90% at the start of the year to 94.1% currently. As at 30th June 2009, Wall Street Plaza was valued at US$160 million, a US$15 million reduction on the valuation as at 31st December 2008.
“The Hilton Double-Tree Hotel in Kunshan opened in January this year. While initial occupancy levels have been disappointing, better operating performance is expected as the economic recovery gathers momentum and business conditions for the surrounding community improve,” said Mr Tung.
“The Group’s near term focus of our property development activities in China continues to be on execution of existing projects. While presales of selected residential products in Kunshan and Shanghai will be ready to launch by early 2010, the Group do not expect resumption of material earnings until 2011 onwards.”
Mr Tung noted, “With the Shanghai residential market having firmed in the first half of the year, the residential development projects are the Group’s primary focus. Despite China experiencing lower economic growth in 2009, the longer term outlook for office, retail and hotel sectors remains satisfactory and it is believed that it will strengthen with the economy. Planning and approval work on all projects continues with expected completion dates realigned to the view of future market conditions.”
Commenting on current conditions in the container shipping market, Mr Tung noted, “the recently completed annual service contract negotiations for Trans-Pacific have been at rates that reflect current market pricing. While contracted volumes are down on last year, this gives us greater exposure to any upside movement in spot rates. Despite competitive conditions remaining intense, OOCL is seeking an improvement in freight revenues with recently announced rate restorations.”
“While the result for the first half of the year has been disappointing and the outlook for the remainder of the year and into 2010 remains challenging, the eventual pick-up in demand as the global economy recovers will improve industry dynamics. Positive sentiment should see freight rates rise, and global trade volume growth will redress the current supply/demand imbalance. I am therefore confident that the global container shipping industry will return to health as the global economy begins to recover in earnest,” Mr Tung said.
As at 30th June 2009, the Group had cash, bond and portfolio investment balances of US$1,666.5 million and a total indebtedness of US$2,390.6 million. Net debt position has moved from US$295.1 million as at the 2008 year-end to US$724.1 million as at 30th June 2009.
OOIL owns one of the world’s largest international integrated container transport businesses which trades under the name “OOCL”. Its investments are principally in international container transport, container terminal operations, property interests in the People’s Republic of China and New York, and portfolio investment securities. With more than 280 offices in 55 countries the Group is one of Hong Kong’s most international businesses. OOIL is listed on The Stock Exchange of Hong Kong Limited.
Issued by: Orient Overseas (International) Limited
For further information contact
Kenneth G Cambie Chief Financial Officer (852) 2833 3518
Stanley Shen Investor Relations Manager (852) 2833 3167
Internet address : http://www.ooilgroup.com