- Liftings increased by 7.8% to 3,523,218TEU
- Group turnover up to US$4.7 billion, a growth of 13.4%
- Operating Profits matched record performance of 2004 for the Group and also individually for both Orient Overseas Container Line and the Container Terminals Division
- Profit before tax of US$690.1 million, last year US$696.3 million
- Profit attributable to shareholders US$650.9 million, last year US$670.4 million
- Earnings per share US104.0 cents
- 31.8% Return on average equity for 2005
- Final dividend of US15 cents (HK$1.17) per share
Orient Overseas (International) Ltd (“OOIL”) today announced a profit attributable to shareholders of US$650.9 million for the year ended 31st December 2005, a decrease of 2.9% from the attributable profit of US$670.4 million recorded in 2004. The Directors are recommending a final dividend of US15 cents (HK$1.17) per share.
“Last year I was able to report that 2004 had exceeded all expectations and that the Group had achieved a record performance. I am immensely pleased therefore to report that 2005 has matched that performance. Indeed, at the operating level, the Group has achieved another record profit and this accomplishment has been emulated individually by both our International Container Transport and Terminals businesses,” said Chairman, Mr C C Tung.
“Our Container Transport, Logistics and Terminals division enjoyed another exceptional trading environment during 2005 as volume growth continued at above the long-term trend level and largely kept pace with the rate at which new tonnage was deployed. Business confidence continued to remain buoyant throughout the year and, as a result, total liftings increased by a further 7.8%. This increase compares with the unprecedented 21.6% by which total liftings increased in 2004. Total liftings in 2005 were, to a degree however, restrained by just an 8.8% increase in loadable capacity compared with an 18.2% increase during 2004. The overall load factor for 2005 remained unchanged from 2004,” said Mr Tung.
Our container terminals in North America, two in the Port of Vancouver and two in the Port of New York and New Jersey, made substantial improvement in 2005. Combined revenue grew by 21.4% on a 12.4% rise in container box throughput volumes and pre-tax earnings topped 2004 results by 52.0%. In addition to an ongoing program of upgrading and replacing existing equipment, the terminal division has embarked upon plans and undertaken studies related to an increase in berth and throughput capacity at several of its facilities before the end of the decade.
As in prior years, OOIL has continued to put resources into strengthening the technology infrastructure of the Group with an ultimate aim to provide reliable and efficient services to customers. In 2005, our focus on information technology developments was placed in three different directions. For carriers, further enhancements have been made to IRIS-2, OOCL's central carrier information system; to improve its functionality as a pioneer carrier system. For Logistics Services Providers, we have developed tailor-made logistics solutions relating to inventory management and reefer cargo handling. Lastly, for importers/exporters and carriers, we have introduced greater functionality to our award winning Internet portal, CargoSmart, to further enhance its capacity as a multiple-carrier portal for customers.
OOCL Logistics, for the full year of 2005, was in operation under its new organisation structure. We have been pleased with the progress of each of the three newly created business units, namely, International Logistics, China Logistics and E-business. Also, by adopting a decentralised and empowered management philosophy, we have witnessed a wealth of regional initiatives in providing a wide range and variety of services to customers, such as local warehousing, trucking and customs brokerage businesses.
Our Property Development and Investment Division was successful in the acquisition of new projects during 2005. The Property Development business produced satisfactory results in 2005. However, due to the timing of previous land acquisitions and our considered views of the market, property development income will slow dramatically during the coming two years of 2006 and 2007. Our Property Investment business produced a result for 2005 in line with expectations. We continue to hold an 8% interest in Beijing Oriental Plaza. As at 31st December 2005, Wall Street Plaza was valued at US$100 million. The property enjoyed an occupancy rate of 99% for the better part of the year.
“The predictions at the beginning of 2005 were for a much softer market as container volume growth was forecast to slow against a known to be increasing rate of new tonnage deployment. As always, however, those forecasts for demand side container volume growth proved in the event to be under-estimates. Conversely, supply side tonnage growth forecasts always prove to be an over-estimate of the true increase in effective loadable capacity. Nevertheless, sentiment tends always to prevail and current sentiment suggests strongly that the deployment of new tonnage during 2006 will outpace the rate at which container volumes will grow, the extent of this imbalance being variously forecast at between 3% and 5%. As a result, the freight rate forecasts are for a softer market and, on some trade routes, we have seen this begin to happen. However, much remains uncertain but consumer confidence and retail sales demand remain fairly buoyant throughout the major consumer economies and the forecasts for global GDP growth remain healthy.
As we enter this period of supply side growth potentially outpacing the demand side, industrial load factors may or indeed will fall below the exceptional percentages, in the high nineties, experienced on the head haul legs during the past two years or so, but we do not believe that they will fall to the dire levels of five years ago. It is my view that carriers should accept and operate under these slightly lower load factors, temporary as they will be whilst we endure this bulge in the newbuilding delivery schedule, rather than lower rates in what in the event will turn out to be the vain attempt to regain the exceptional load factors of the recent past. The consolidation which has taken place within the industry should assist in producing this readier acceptance of load factor decline and therefore a greater resistance to freight rate erosion.
Overall performance, of course, will remain dependent not only upon volumes and freight rates but also upon relative cost levels. Oil prices are critical not only due to their direct effect on bunker prices but also due to their indirect effect of driving up terminal and third party transportation costs. Some of these cost increases are recoverable but many if not most are not,” concluded Mr Tung.
Mr Nicholas Sims, the Group Chief Financial Officer, said that the Group’s net debt to equity ratio as at 31st December 2005 was 0.2:1, compared with 0.3:1 at end of 2004, and it remains one of the Group’s strategic goals to maintain this ratio at a level below 1:1. He also confirmed that sufficient resources had been set aside to ensure that no undue burden is placed upon the Group’s financial position as new vessels are delivered over the next few years. "Indeed, the Group's balance sheet and financial position get ever stronger and place the Group advantageously for the future," he commented. He also said that the Group, even off the higher equity base of 2004, had achieved another commendable return on average equity at 31.8% and pointed out that the total dividends for the year represent a yield of 6.7% based upon the average share price during 2005.
OOIL owns one of the world’s largest international integrated containerised transportation businesses and trades under the name OOCL. Its investments are principally in international containerised transportation, logistics, container terminal operations, commercial property in New York, business interests in the People’s Republic of China and portfolio investment securities. With more than 160 offices in 50 countries the Group is one of Hong Kong’s most international of businesses. OOIL is listed on The Stock Exchange of Hong Kong Limited.
