News / OOCL drives $139m OOIL H1 profit for Cosco, but falls below industry par

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Cosco-owned Orient Overseas International Ltd (OOIL) has posted a net profit of $139m for the first six months of the year, which compares with a loss of $10m for the same period last year.

Revenue from its operations, including ocean carrier OOCL, jumped 6%, to $3.3bn, earned from liner liftings of 3,374,412 teu, up 3.2% on the previous year, as freight rates improved generally.

However, compared with its carrier peers that have reported their H1 results so far, OOCL’s average rate of $978 per teu was slightly below the industry par.

The company said the interim result represented “a pattern of steady progress”, despite “an economic environment filled with uncertainties” and “seemingly slowing growth in terms of demand for container shipping services”.

OOIL said: “Market growth did indeed slow down in some tradelanes, but in many cases this was outpaced by an improvement in freight rates.”

On the headhaul Asia-US tradelane, OOCL benefited from a higher level of contract and spot rates, a legacy of the front-loading of containers in the last months of 2018 by shippers to beat the US government’s duty hikes on Chinese imports, a demand factor that produced a significant spike in rates.

After intra-Asia and Australasia, the transpacific is OOCL’s second-largest region and it saw revenue ahead 5.8%, to $1.19bn, on a 2% reduction in liftings to 943,691 teu as it tightened capacity.

Cosco’s completion of its $6.3bn acquisition of OOIL and OOCL last July saw the Chinese state-owned group leapfrog CMA CGM to become the world’s third-largest carrier.

OOIL claims its balance sheet is now “one of the most robust in the industry” and Cosco appears happy to continue with its Dual Brand strategy of OOIL publishing separate rather than consolidated results. Nevertheless, OOIL said there had been “significant synergy benefits” from the merging of network planning, equipment pooling, procurement and IT functions.

And OOIL said it had “continued to grow OOCL”, with new services to Latin America, the Caribbean and Africa.

As a final condition of Cosco’s takeover, the US Department of Homeland Security and Justice stipulated that OOCL’s Long Beach Container Terminal (LBCT) must be sold. In April, it was announced that the facility would be bought by a group of institutional investors led by Australia’s Macquarie Infrastructure Partners for $1.78bn. As part of the deal, OOCL entered into a 20-year services agreement with LBCT that will see the terminal continue to serve Ocean Alliance transpacific calls.

“At the time of writing, we edge closer to the conclusion of the sale of our container terminal in Long Beach, California,” said OOIL. “The transaction not only generates meaningful cash proceeds now, but also ensures that OOCL will continue to have access to a highly automated and efficient terminal that meets our needs,” it added.

The OOIL portfolio also includes OOCL Logistics and the Hong Kong-based company’s property investments, notably in its long-standing ownership of the Wall Street Plaza in New York, valued recently at $310m.