ORIENT OVERSEAS INTERNATIONAL
ANNOUNCES 2008 INTERIM RESULTS
• GROUP TURNOVER INCREASED BY 27.4% TO US$3,203.7 MILLION
• OOCL REVENUE INCREASED BY 24.8%, LIFTINGS BY 9.4%
• OPERATING PROFIT FOR CONTAINER TRANSPORTATION AND LOGISTICS INCREASED 1.7% TO US$208.9 MILLION
• EARNINGS FROM NON-CORE CONTINUING OPERATIONS WAS DOWN BY US$49 MILLION DUE TO LOWER EARNINGS IN RELATION TO LIQUID ASSETS
• TOTAL OPERATING PROFIT, EXCLUDING REVALUATION OF WALL STREET PLAZA, WAS US$45.8 MILLION LESS AT US$227.6 MILLION DUE TO LOWER NON-CORE EARNINGS
• WALL STREET PLAZA REVALUED DOWN US$10 MILLION TO US$190 MILLION (US$25 MILLION REVALUATION GAIN IN THE FIRST HALF OF 2007) REFLECTING WEAKER LEASING MARKET IN LOWER MANHATTAN
• PROFIT BEFORE TAX FROM CONTINUING OPERATIONS, INCLUDING THE IMPACT OF THE WSP REVALUATION, WAS US$175.6 MILLION
• PROFIT ATTRIBUTABLE TO SHAREHOLDERS OF US$158.3 MILLION
• EARNINGS PER SHARE FROM CONTINUING OPERATIONS OF US25.3 CENTS (LAST YEAR US36.7 CENTS)
• A DIVIDEND OF US6.5 CENTS (HK$0.51) PER SHARE
• DELIVERY TAKEN OF THREE 4,506 TEU NEW VESSELS; NO NEW ORDERS PLACED IN THE FIRST HALF OF 2008. 20 VESSELS STILL TO DELIVER BY THE END OF 2011
• FINANCING ARRANGED OR IN PROGRESS FOR TWELVE MORE VESSELS; SIXTEEN IN TOTAL
• PROPERTY DEVELOPMENT PROJECTS PROGRESSED AS FORECAST
• PROJECT TERM LOAN SYNDICATED AND OTHER BANK FACILITIES ARRANGED FOR PROPERTY DEVELOPMENT DIVISION
Orient Overseas (International) Limited (“OOIL”) Group today announced a profit attributable to shareholders of US$158.3 million for the first six months of 2008.
Profit before Tax from continuing activities for the period was US$175.6 million including a US$10 million negative revaluation of Wall Street Plaza.
The Container Transport and Logistics operations had an improved result year-on-year, with a 1.7% increase in operating profit to US$208.9 million for the first half of 2008 compared to the equivalent 2007 period.
Total Operating Profit, excluding the revaluation of Wall Street Plaza, of US$227.6 million was US$45.8 million down as compared to the first half of 2007. This reduction is principally a result of lower earnings in relation to the Group’s liquid assets.
The Directors have recommended the payment of an interim dividend of US6.5 cents (HK$0.51 at the exchange rate of US$1 : HK$7.8) which will be paid on 12th September 2008 to the ordinary shareholders of the Company whose names appear on the register of members of the Company on 1st September 2008.
The Chairman of OOIL, Mr C C Tung, said, “The first half of 2008 has been a further positive period for the Group, with our core business of Container Transportation and Logistics achieving an improved profit for the period compared to the first half of 2007.”
The improved result from our Container Transport and Logistics operations came from increased revenue that was in line with our expectations. We experienced only a small decline in load factor despite a significant increase in capacity, and we benefited from the improvement in freight rates seen over the course of 2007. However, higher costs due to the increase in the price of oil offset a substantial portion of the improved revenue result.
OOCL’s total liftings increased by 9.4%, and overall revenue per TEU increased 14.0% over the 2007 half-year period. In comparison, liftings increased by 18.8% for the first half of 2007 while overall revenue per TEU had fallen by 3.4%, compared with the first half of 2006.
OOCL had a 12.8% increase in capacity for the first half of 2008 as compared with the same period last year from the nine vessels added to the fleet in 2007 and the three 4,506 TEU vessels delivered from Samsung during the first half of 2008.
Group turnover for the six months ended 30th June 2008 was US$3,203.7 million, an increase of US$689.5 million or 27.4% as compared with the corresponding period of 2007. OOCL accounted for 99% of Group turnover, and had revenue of US$3,175.7 for the first six months of 2008 being a US$674.4 million or 27% increase over that in the 2007 half year.
The improved revenue was, however, largely matched by increased costs arising from high oil prices. High energy prices were felt both directly through higher bunker fuel costs and indirectly through higher terminal and third-party transportation costs (e.g. trucking and especially North American railroad charges).
The average bunker price paid for the first half of 2008 was US$502 per ton, which was 64% higher than the US$306 per ton recorded in the same period of 2007. While savings in consumption have continued to be achieved through revision of sailing and operational programs such as slow-steaming, bunker now represents 79% of voyage costs versus 70% during the first half of 2007.
Mr Tung noted that “while higher bunker fuel costs are increasingly mitigated through separate bunker surcharges and operational adjustments, base freight rates need to adjust to cover the less transparent increase in other operating costs. The introduction of a separate floating bunker charge into a majority of contracts for Trans-Pacific services during the 2008 contract negotiations is a positive development in achieving improved bunker cost recovery.”
During the first half of 2008 the Group took delivery of a further three “P” Class 4,506 TEU Panamax size vessels from Samsung Heavy Industries Co Ltd in South Korea – being the OOCL Busan, the OOCL Texas and the OOCL Panama. “With no further newbuild capacity delivering this year, redelivery options on existing chartered-in vessels coupled with our new-building deliveries in 2009 will afford us flexibility to adjust our capacity according to the market environment”, said Mr Tung.
Mr Kenneth Cambie, the Group Chief Financial Officer, noted that “with financing already in place, or likely to be concluded within the next quarter, for sixteen of the twenty vessels still to deliver, our exposure to any further tightening of credit capacity in the financial system is contained. Adequate resources will continue to be reserved to ensure that the delivery of the vessels on order, and any further orders, 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. Our property development activities are focused in the Greater Shanghai and Greater Bohai (Beijing/Tianjin) areas of China. For property investment, we currently have two investments in properties, namely Wall Street Plaza in New York and Beijing Oriental Plaza in Beijing.
Wall Street Plaza, the Group’s 100% owned investment property in the city of New York, continued to perform solidly despite deterioration in the Manhattan commercial property rental market. Wall Street Plaza commenced the year fully leased but currently has a vacancy rate of 9.9% after an early termination of a lease for which an early-termination payment was received. Wall Street Plaza’s operating profit for the half year is ahead of last year and is still expected to produce an improved year-on-year operating profit for 2008. As at 30th June 2008, Wall Street Plaza was valued at US$190 million, a US$10 million reduction on the valuation as at 31st December 2007. The revaluation reflects the higher overall vacancy rate in downtown Manhattan as the financial sector scales back its space requirements in light of massive losses in recent quarters.
“Despite the tightening measures experienced in China, our property development projects in the Greater Shanghai and Greater Bohai areas have continued as planned,” said Mr Tung.
“The Group has been able to maintain momentum on all its developments through the strength of our internal resources, with the ongoing support of our banks, and from our in-depth local knowledge as well as the good working relationship we have with our partners, suppliers and authorities.”
Mr Tung noted, “while we expect the tight regulatory and credit conditions in China to remain through to the end of 2009, we remain confident that progress on our projects can be maintained given the Group’s liquidity position and strong capital structure.”
Mr Cambie remarked, “we continue to enjoy good support from our banks with successful syndication and arrangement of a term loan and other RMB facilities respectively during the first half of this year, giving us confidence in regard to financing of our other projects.”
“The second half of 2008 is expected to be considerably more challenging than the first half has been, with increased industry capacity, the impact on demand growth rates of slowing US and global economies, and ongoing cost pressures from high energy prices,” Mr Tung said.
“A clearer outlook for global economic growth in 2009 will develop over the remainder of the year, especially as to whether economic conditions in the United States will stabilise next year or an even lower rate of growth is experienced than is forecast for this year. In the face of this uncertainty, we do remain exposed to the risk of deterioration in freight rates as these are market driven and vulnerable to adverse swings in sentiment.”
As at 30th June 2008, the Group had cash, bond and portfolio investment balances of US$1,972.9 million and a total indebtedness of US$2,245.3 million. The Group has therefore moved from a zero net debt position as at the 2007 year-end to having net debt of US$272.4 million as at 30th June 2008.
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 230 offices in 58 countries the Group is one of Hong Kong’s most international businesses. OOIL is listed on The Stock Exchange of Hong Kong Limited.
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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/
