Despite 2018 volume growth, OOCL has seen revenues sinking

Orient Overseas (International) Limited and its subsidiaries (the “Group”) today announced a profit attributable to equity holders for 2018 of US$108.2 million, compared to a profit of US$137.7 million in 2017.

Earnings per ordinary share in 2018 was US17.3 cents, whereas earnings per ordinary share in 2017 was US22.0 cents. The Board of Directors has recommended the payment of a final dividend of US7.7 cents per ordinary share for 2018.

Cosco Shipping Lines integration resulted in an important benefit

2018 was a landmark year in the development of OOIL.  In July, COSCO SHIPPING Holdings successfully acquired OOIL, with the new combined group stepping up in terms of total capacity and joining the top three in the industry.  As at the end of 2018, the combined group operated a fleet comprising 477 container vessels with total shipping capacity of 2.76 million TEUs, and had an order book of nearly 180,000 TEUs.

The acquisition effectively integrated the global network advantage of OOCL and COSCO SHIPPING Lines under COSCO SHIPPING Holdings, beneficial to fully achieving the synergies between the two sides, enriching the product selection for customers and allowing customers to enjoy a better service experience.

Second half 2018 results up thanks to synergy with Cosco Shipping

OOIL has an outstanding management team, a brand trusted by customers, and efficient management systems.  In order to develop these valuable intangible assets in the best possible way, COSCO SHIPPING Holdings formulated a “dual-brand” strategy, which will facilitate synergistic development of the “dual-brand” container shipping business.

OOCL and COSCO SHIPPING Lines cooperated closely with each other to explore and gradually to achieve synergies in a number of areas, including fleet and network planning, procurement, container management, IT, commercial co-ordination and marine operations.

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In the second half of 2018, both companies recorded good operating results.  The “dual-brand” strategy also provides a bigger and stronger platform for OOCL to further enhance its competitive advantages.

Growth momentum slowing down due to global economy issues

Looking back to 2018, the global economy continued to recover, but growth momentum slowed down.  Several negative economic factors, such as the concentration of vessel deliveries in the first half of the year, the significant rise of the oil price, and escalating trade frictions, resulted in a decrease in the overall financial performance of the container liner industry as compared to 2017, especially in the first half of the year.

Enjoying the benefit of being part of COSCO SHIPPING Group, we took a pragmatic and entrepreneurial approach to overcoming the effects of these adverse market factors and focused carefully on our targeted strategies in our various markets.

OOCL has taken delivery of six 21.413 TEU vessels in 2018

During the year, the Group took delivery of the sixth (and the last) of a total of six ‘Giga’ Class 21,413 TEU vessels from the Samsung Heavy Industries Shipyard in South Korea.  No order for new buildings were placed during the year.

As we approach the end of the second year of operation of the Ocean Alliance, we can clearly feel the benefits that alliance membership brings in terms of network planning, network scope, vessel utilisation and the management of business risk.  With plans for the third year of the alliance’s operation already well advanced, we look forward to further benefit.

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Some OOCL growth data show outpacing the average market figures

2018 saw a strong performance from our terminal in Long Beach, California.  The second phase of the terminal has now been operational for a year, and all those carefully planned designs using the latest technology and the most environmentally friendly techniques have been proven to bear fruit.

It is public knowledge that we are required to sell our interest in the Long Beach terminal, and we expect to be able to do this within the coming months.

Just as was the case in 2017, 2018 was a year of strong growth for OOCL, especially in the Asia-Europe and Trans-Pacific trades.  For the full year 2018, OOCL’s liftings were up 6.3% overall, but 8.9% on Trans-Pacific and 14.5% on Asia-Europe.  For the second year in a row, this growth outpaced the volume growth seen in the market as a whole.

New business opportunities in supply chain management

OOCL continues to have a strong focus on Intra-Asian trades as well as playing a leading role in other global trades such as the Trans-Pacific.  We continue to develop market opportunities in Intra-Asia, Intra-Europe and other regional trades, and are working closely with COSCO SHIPPING Lines to participate fully and effectively in the Belt and Road Initiative.

Through OOCL Logistics, the Group continues to expand its reach into the full breadth of the supply chain.  This growing part of the OOIL group provides new business opportunities and diversification, as well as consistent profitability through excellence in customer service, as well as reliability and advanced technological solutions.

OOCL participates in open digital platform GSBN based on blockchain technology

In November 2018, COSCO SHIPPING Lines, OOCL and several other world leading ocean carriers and terminal operators signed a letter of intent for the establishment of the Global Shipping Business Network (GSBN), an open digital platform in the shipping industry based on blockchain technology, with the aim to jointly promote the establishment and information sharing of digital standards and improve the operational efficiency and the quality of customer service of the industry.  The software solutions of the shipping blockchain consortium which is the core technology application will be developed and provided by CargoSmart, a subsidiary of OOIL.

Looking forward to 2019, we are cautiously optimistic about the global economy and the shipping environment as both challenges and opportunities are lying ahead.

Challenges include :

1) a slowdown in the global economy, as reflected by the adjustment of the global economic growth forecast for 2019 from 3.7% downwards to 3.5% by the International Monetary Fund (IMF) in January;
2) the many uncertainties that may negatively affect shipping, including trade frictions, high oil price, and etc.;
3) the industry’s supply-demand imbalance, especially the overcapacity in some markets.

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Further integration with COSCO will lead to further added values

The favourable conditions and positive factors include 1) the growth drivers of China economy remain stable and strong; 2) a more open China provides new driving forces for the development of the global free trade; 3) the Belt and Road Initiative creates significant opportunities for the development of the world economy, and with the construction of the Belt and Road being further deepened worldwide, emerging markets represented by Southeast Asia, Middle East, Central and South America and West Africa could be further developed, thereby driving the global economic growth; and 4) the capacity growth of  container shipping tends to slow down, thus may help alleviate the pressure on supply side.

On the implementation of the dual-brand strategy, OOCL aim for achieving further synergy benefits and improving service quality.  In order to bring greater synergistic benefit for the combined group, we will focus on accelerating the integration of equipment management, procurement, IT systems and network planning.

OOCL future focus is on integrated logistics solutions

On the implementation of the digitalisation strategy, the Company will use digital technology not only to meet but also guide and create customer demand, bring new experience to customers and create value for customers.  The Company will actively establish digital operation support systems and innovate business model and service products through a combined application of new technologies such as big data, AI, E-commerce platform and blockchain, so as to constantly improve the operational efficiency and service quality of supply chain.

On the implementation of the end-to-end strategy, the Company will design and launch more end-to-end services and products, accelerate the development of extended services and endeavour to enhance the capacity in the one-stop transportation services.  In respect of railway transportation, the Company will include more countries in Central and Eastern Europe into the service scope of the China-European Sea-rail Express, focus on integrated logistics solutions, develop more end-to-end customers and complement the advantages of OOCL Logistics, accomplish the design, construction and management of end-to-end service channels and solve the “last mile” problem.

Today OOCL operates 370 offices in 80 regions.

“All rivers eventually flow into the sea in despite of different sources.”  In the new year, OOIL as an integral part of the container shipping business of China COSCO SHIPPING Group, will, together with parties from various fields, continue to work proactively and diligently, constantly improving development quality, offering customers ever-improving services, and creating greater value for our shareholders.

As at 31st December 2018, the Group had total liquid assets of US$2,246.8 million compared with debt obligations of US$501.9 million repayable in 2019.  The net debt to equity ratio remained low at 0.41 : 1 at the end of 2018.  The Group from time to time prepares and updates cashflow forecasts for asset acquisitions, to serve project development requirements, as well as working capital needs, from time to time with the objective of maintaining a proper balance between a conservative liquidity level and an effective investment of surplus funds.

OOIL owns one of the world’s largest international integrated container transport businesses which trades under the name “OOCL”.  With more than 370 offices in over 80 countries/regions, the Group is one of Hong Kong’s most international businesses.  OOIL is listed on The Stock Exchange of Hong Kong Limited.

Issued by: Orient Overseas (International) Limited