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BUNKER INDEX :: Price Index, News and Directory Information for the Marine Fuel Industry
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OOIL swings into profit ahead of Cosco takeover despite 64.5% jump in bunker costs

07 Aug 2017 11:50 GMT

Chairman voices support for Cosco $6.3 billion deal.



Orient Overseas (International) Ltd (OOIL) - the parent company of Orient Overseas Container Line (OOCL) - reports that it managed to achieve a H1 swing into profit despite a year-on-year increase in bunker costs.

For the first six months of 2017, the average bunker price paid by OOCL rose by $120, or 64.5 percent, to $306 per tonne, up from $186 per tonne during the corresponding period last year.

"Both the fuel oil and the diesel oil price have rebounded from their lowest levels, leading to the increase in bunker costs by 64% in the first half of 2017 compared with the corresponding period of 2016," OOIL explained.

Despite the increase, OOIL posted a H1 net profit of $53.6 million - a positive swing of $111 million compared to last year's $56.7 million loss.

Revenue during the period rose by $337 million, or 13.2 percent, to $2,898 million.

Chairman of OOIL, C.C. Tung, said: "This steady improvement in the supply demand balance is not a sign of a booming market - we are far from that. However, it does mean that for the first time since the onset of the global financial crisis, the supply demand balance is not worsening year on year. This is a significant shift, and if it holds, then the industry will at least have the chance to start to absorb some of the excess capacity that exists."

Takeover

Commenting on the $6.3 billion takeover offer made last month by Cosco Shipping Holdings Co., Ltd and Shanghai International Port Group Co., Ltd (SIPG) to acquire OOIL in a deal that would make Cosco the world's third biggest shipping company with more than 400 vessels, Tung said: "The controlling shareholder, who currently holds 68.7% of OOIL has irrevocably undertaken to accept the offer. On completion, Cosco Shipping Holdings will hold 90.1%, while SIPG will hold 9.9% of the total amount of OOIL shares tendered."

"As the industry consolidates at speed, with the largest players now having millions of TEU in carrying capacity, the capital base necessary to operate successfully, and to establish a place among the leading industry participants, is becoming increasingly sizeable," Tung explained.

Voicing his support for the takeover offer, Tung observed: "My view is that the offer provides an opportunity for OOIL to continue to operate the OOCL brand, but as part of the China COSCO Shipping Group, and to bring together our operating model and our corporate culture with the competitive advantages of COSCO, including its size and scale, capital base, growing fleet and extensive port investments, to name but a few. This would create a combined group that would have a very strong chance of maintaining and building a status as one of the very best performers in an industry now entering a new phase."

As at June 30, OOIL had total liquid assets amounting $2.3 billion and a total indebtedness of $4.2 billion. Net debt as at June 30 was therefore $1.9 billion, which remains at the same level as in 2016 year-end.






Related Links:

OOIL posts $219m loss, highlights higher H2 bunker prices
OOIL denies takeover bid
OOIL posts loss as low bunker prices 'provide some element of cushion'

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