- Group turnover US$4.14 billion, a growth of 28%
- Profit before tax US$700.7 million, up 98%
- Net profit increased by 104% to US$670 million from US$329 million
- Earnings per share US119.3 cents (last year US59.3 cents)
- Return on average equity for 2004 at 46%
- Final dividend of US18 cents (HK$1.4) per share
- Bonus share issue of one for ten
- Container terminals in North America were all profitable
- Property developments continue to produce profits
- Took delivery of four SX class vessels
- Six new 4,500 TEU vessels ordered for delivery between 2006 and 2008
Orient Overseas (International) Ltd (“OOIL”) today announced a profit after taxation and minority interests of US$670.4 million for the year ended 31st December 2004, a 104% increase over the attributable profit of US$329 million recorded in 2003. The Directors are recommending a final dividend of US18 cents (HK$1.4) per share.
The Directors are also recommending a bonus issue of shares on the basis of one (1) bonus share for every ten (10) existing issued ordinary shares.
“2004 has exceeded all expectations and we have outperformed 2003, achieving record levels of total liftings, total revenues and margins.” said Chairman, Mr. C C Tung.
“Our Container Transport, Logistics and Terminals division enjoyed an unprecedented trading environment during 2004 as volume growth kept pace with or indeed, outpaced the rate at which new tonnage was deployed. Business confidence continued to remain buoyant throughout the year and, as a result, total liftings were increased by 21.6% compared with 2003 in which year they had increased by 18.7%. Importantly also, the average load factor for 2004 showed a 2.4% improvement over 2003.”
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 progress in 2004. Combined revenue grew by 15.2% on a 10.4% rise in container box throughput volumes and pre-tax earnings eclipsed 2003 results by 47% as margins expanded. We continue to explore expansion opportunities at our North American terminals and remain alert to opportunities that may arise from time to time to invest in other terminal projects, particularly in Asia. In line with this policy, Letters of Intent have been signed with the Port Authorities of both Tianjin and Ningbo related to investment in the expansion of container terminal capacity in both of these ports. As a result, we shall continue to benefit from the ongoing growth of Chinese trade.
During 2004 OOIL has continued to invest in its technology infrastructure to improve internal processes and customer service. These information technology developments were focused on four key areas: enhancements to IRIS-2, OOCL's central carrier information system; the launch of a sailing schedule application, SchedulingSmart; the launch of an equipment management system, OperationSmart; and enhancements to its award winning multiple-carrier Internet portal and integration services provider, CargoSmart.
2004 was another milestone year for OOCL Logistics after 25 years in operation. To enhance its ability to create value for customers, it underwent a major corporate reorganisation during the year but its business model remains as being an independent 3rd Party Logistics Provider whilst, at the same time, providing support for the OOCL business as a whole. In the interests of customer focus, the company established three new business units: International Logistics, China Logistics and E-Business. The International Logistics group focuses on serving customers with global sourcing and supply-chain-management needs. The China Logistics group develops sophisticated transportation, warehousing and distribution services in the PRC and the E-Business group provides next-generation applications and e-solutions to reduce bottlenecks and to increase efficiency and responsiveness of the supply chain taking advantage of the OOCL Group's industry-leading technology platforms.
Our Property Development and Investment division experienced a solid performance during 2004. Performance was satisfactory and ahead of expectations. In addition, we were successful in the acquisition of new projects during the year. In particular, we have assembled land parcels for further projects in Kunshan, Jiangsu Province and central Shanghai. These acquisitions bring our pipeline in total to over 900,000 sq m of gross floor area. Our property investment business produced a result in line with expectations. We continue to hold an 8% interest in Beijing Oriental Plaza and we expect the project to continue to yield a positive result at the project level in the near term. As at 31st December 2004, Wall Street Plaza was valued at US$100 million, no change from the prior year.
“The outlook for our core container transport, logistics and terminals business remains positive. During the course of 2004 the supply and demand balance remained firmly in our favour and at the present time it is hard to find any data to suggest that this favourable situation will alter in the near term. On the horizon however, are some predictions that during 2006 volume growth will slow at a time that a peak in newbuilding deliveries is expected to occur. Until now estimates by independent commentator and analysts have been for a supply side increase in tonnage during 2006 of up to 15% of the existing global container fleet. Evidence shows that tonnage increase estimates are more often than not over-estimates since they relate to static slots only and take no account of, for example, changing trade patterns or indeed of the effects of congestion. This latter problem with which the industry is presently having to contend is due to the lack of investment over the recent past in the land based infrastructure necessary to cope with the higher volume growth levels experienced over the past few years. As a result, on both the west coast of North America and, to some extent, in northern Europe significant delays have been experienced especially during the peak shipping season as the terminals, the road systems and the railways reach saturation levels. Today's estimates for demand side volume growth in 2006 put the increase as low as 9.7% compared with close to 13% for the preceding three years. These estimates tend to be based upon global GDP growth estimates and, as a result, take no account, for example, of the continuing effects of the outsourcing of production and assembly processes to the Far East or for the opening up of the markets of the former Eastern Europe to Far East produced consumer goods. More importantly perhaps, they cannot account for the potential further erosion in the unit cost of consumer goods which leads to volume growth at significantly higher levels than value growth. Therefore, even were a supply surplus to arise it is likely to be less severe than some are predicting and therefore, is likely to have only a marginal effect upon freight rates. Indeed, some of these same independent commentators and analysts are now starting to come around to this point of view once they account for the congestion factor and its potential impact upon effective tonnage supply, especially on the Trans-Pacific trade lanes.” 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 2004 was improved to 0.2, compared with that of 2003, and it remains one of the Group’s strategic goals to maintain this ratio at a level below 1.0. Sufficient resources have 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.
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.
