Sales up, profit down at OOCL

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Hong Kong-based Orient Overseas Container Lines has posted its results for the year ending December 31, 2008 in which it reported a revenue of US$6.54 million, up from US$5.65 million in 2007.

Group turnover increased by 16 percent to US$6.45 billion and EBITDA from core operations was US$610 million, a drop of 29.8 percent over the 2007 EBITDA of US$869 million.

Despite the increased costs and falling freight rates in 2008, Orient Overseas (International) and its subsidiaries recorded a profit attributable to shareholders for the year of 2008 of US$272.3 million. As the prior year's result of US$2.54 billion included a one-time profit of US$1.99 billion from the sale of the terminal division, the appropriate comparison is of profit from continuing operations. The 2008 profit from continuing operations is US$275.5 million, which is a US$278.2 million (50 percecnt) reduction from the equivalent US$553.7 million reported for 2007.

"Going into last year our container transport and logistics business faced a challenging environment with increasing costs and weakening demand as global economic conditions deteriorated," said CC Tung, Chairman of Orient Overseas International. "The scheduled delivery of substantial new capacity into the industry also contributed to negative pressure on freight rates.

"The sub-prime issues that emerged in 2007 developed into a turmoil far exceeding most predictions and the financial landscape today looks vastly different from that of a year ago.  The impact of the financial crisis on the global economy has seen trade growth slow dramatically. This was most noticeable in the last quarter of 2008 which, while still profitable for us, saw sudden and severe reductions in demand across a number of trades," said Mr Tung.

"With a contraction in consumption in the United States, Europe and Japan all occurring at the same time, Asian economies have also been impacted more noticeably in 2009 given the importance of exports for China and the wider Asia-Pacific region. The acute deterioration in the global economy has come at a time when the industry faces an unprecedented supply of new capacity, particularly in the form of very large vessels. This combination of low demand growth and excessive new supply will almost certainly present the worst set of market dynamics that the container shipping industry has ever had to deal with."

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