Ocean Network Express almost hits target in Q2

Japanese carrier Ocean Network Express (ONE) almost hit its target for profitability in the second quarter of its fiscal year, which ended 30 September, posting a positive result of $121m.

Thus, after six months, ONE is in the black to the tune of $126m, earned on revenue of $5.98bn.

It said cost reductions and the fall in bunker prices had mitigated the impact of a drop in liftings due to “US-China trade issues and a deterioration in the supply-demand balance in the European trade”.

In terms of liftings, ONE’s biggest tradelane, headhaul Asia-North America, saw a utilization level of 94% in Q2 and an overall 90% load factor for H1 at 1.44m teu.

The carrier’s second largest tradelane, westbound from Asia to Europe, recorded a utilization level of 95% in Q2, for a cumulative 91% for H1 at 947,000 teu.

Less optimism about H2

However, the outlook is rougher weather for the carrier.

ONE said it now expected to report a loss of $66m on its trading in the second half of the year and, as a consequence, had downgraded its full-year profit forecast by $30m, to $60m.

It said this was a reflection of an expected deterioration in spot rates and concerns over a further slowdown in the global economy.

The forecast also assumes that the additional costs for compliance with IMO 2020 will be recovered in full by its OBS (One Bunker Surcharge) mechanism, adding that its “customers’ awareness” of the regulatory compliance was increasing.

It also said that the installation of exhaust gas cleaning scrubber systems on its vessels was “under study” for some of its larger ships.

Reporting ONE’s results within its group earnings, 40% equity holder NYK said freight rates “did not rise during the summer peak and were sluggish during the quarter”.

It added however: “Synergistic effects of the business integration were further accumulated and improvement measures, such as optimising the cargo portfolio, continued to be executed.”

And 30% stakeholder MOL said: “ONE is revising its short-term freight rate assumptions in light of the concern over a global economic slowdown.” And fellow 30% shareholder K Line said it noted the “profit improvement”.

ONE’s “par” Q2 result supports the upgrade in Maersk’s results guidance and the robust operational results from OOCL for its Q3, but the further outlook expressed by the Japanese carrier is of concern.