Orient Overseas announced its 2018 Interim Results, with outgoing Chairman of OOIL, Mr. C C Tung commenting on the upcoming merger with Cosco. Mr. C C Tung seemed optimistic about this development and noted that this transaction will offer many opportunities to both the companies.
Mr. C C Tung also presented his opinion on the current economy, saying that the shipping industry experienced good levels of cargo growth, and benefitted from moderate improvements in freight rates in many trade lanes. As a result, the slow and steady recovery that began in late 2016 continued to provide encouragement to the sector.
Nevertheless, increased costs have hurt profitability. Namely, high price of oil has increased fuel costs, and equipment repositioning costs have been amplified by the increasing imbalance between strong headhaul growth and stable to weakening backhaul growth.
As for OOCL, its average price of bunker in the first half of 2018 was US$383 per ton compared with US$306 per ton for the corresponding period in 2017. Thus, due to the increase in fuel oil & diesel oil prices, bunker costs increased by 26% in the first half of 2018 when compared with the same period of 2017. In addition, the company had total liquid assets amounting US$2.2 billion and total indebtedness of US$4.2 billion.
In addition, Mr. Tung spoke about the merger. As he said:
In a rapidly consolidating industry, I believe that this transaction offers tremendous opportunities both to OOIL and to the wider COSCO group. Together with greater scale and with increased financial resources, we will be able to combine the complementary strengths of our two liner businesses and COSCO’s terminal business, and thereby to create an industry leader.
He also mentioned, that the company will maintain the separate listing, branding, management and staff of the OOIL group. This transaction comes at a time when mergers and acquisitions in the container industry have gathered momentum in recent years. This transaction is a common choice for both sides to follow the development trend of container shipping industry and realize sustainable development, Mr. Tung believes.