Depressed freight rates and excess capacity on North American routes caused Orient Overseas (Holdings) Ltd., parent company of the colony's largest container shipping line, to slip back into the red for the first half of this year.
Orient Overseas (Holdings), parent of Orient Overseas Container Line Ltd., Monday reported a US$65.14 million profit for the period after including its extraordinary gain from selling off part of its terminal operating affiliate. That compares with a profit of US$12.41 million for the same period last year.Before the sale and other extraordinary items, however, the parent company posted a loss of US$3.48 million, compared with a profit of US$3.08 million a year earlier.
"The North American market continues to be plagued by excess capacity . . . and even though freight rates in trans-Pacific services are stabilized, North Atlantic trades continue to be intensely competitive," said C.H. Tung, chairman of the parent company, in announcing the first-half results. Mr. Tung called those results "in line with expectations."
Orient Overseas Container Line or OOCL, Hong Kong's largest container shipping company, operates separate liner services in the trans-Pacific,
trans-Atlantic and Europe-Asia markets, as well as within the Far East.
One executive of a competing line said he is "not optimistic" about the Pacific market. But he cautioned against reading too much into the Orient Overseas figures or the lower second-quarter earnings reported recently by American President Cos., parent company of American President Lines Ltd.
"OOCL has had some extenuating circumstances to suffer through with all their debt, so I am not surprised" at the financial results, said the executive, Edward Kelly, who is president of New York-based NLS (USA) Inc. Mr. Kelly's company is agent for Nippon Liner System Ltd., a shipping line based in Tokyo.
"The second quarter is traditionally one of the weaker ones anyway, so any problem they have I am sure they will overcome in the next two quarters," he added.
As for American President, Mr. Kelly said, "A lot of their earnings were tied to their domestic operations, their intermodal moves. American President and Sea-Land (Service Inc.) used to have a lock on that market, but now they have real competition from some world-class shipping companies. It's showed up on their bottom line."
American President Cos., based in Oakland, Calif., last month cited reduced freight rates in its international and domestic markets as the main reason for a 61 percent decline in its second-quarter net income, to $5.7 million compared with $14.7 million in the same quarter last year.
Mr. Kelly said Nippon Liner System expected to report a profit for both the second quarter and the third quarter.
Figures released recently by another shipping line indicate that freight rates fell significantly in both directions between the United States and Europe in the second quarter, while rates across the Pacific showed signs of stabilizing.
Sea-Land Service Inc., which like Orient Overseas serves both Atlantic and Pacific routes, said its average freight revenue dropped 9 percent for each container exported to Europe and 18 percent for each box imported from Europe during the second quarter, compared with the same period last year.
In the Pacific, Sea-Land's average revenue for each imported container fell 4 percent during the period. Average revenue for exported containers, however, climbed 31 percent from a year earlier, Sea-Land said.
Orient Overseas (Holdings) Ltd. reported operating profit before interest in the six months through June 30 was US$16.7 million, compared with US$42.4 million in the corresponding 1988 period.
After interest payments of US$28.7 million, losses of associated companies and tax, the holding company shows a loss of US$3.48 million. In the 1988 period, there was a profit of US$3.08 million.
Extraordinary gains this time, mainly a sale of part of its share of
Hongkong International Terminals Ltd., bring a bottom-line profit of US$65.14 million. That contrasts with a profit last time of US$12.41 million.
The main operating arm, Orient Overseas (International) Ltd., suffered a loss before extraordinary items of US$585,000, compared with a profit in the first six months of last year of US$15.5 million.
Orient Overseas Container Line Ltd. is the principal subsidiary.
By activity, the holding company's profit arose mainly from the integrated container operations (US$11.4 million), followed a long way back by property (US$3.8 million) and its bulk and liquefied petroleum gas carriers (US$2.7 million).
The container segment brought in US$38 million in the first half of last year.