Orient Overseas Posts Profit on Property Sale, Rebounding Container Rates

Orient Overseas (International) Ltd., Hong Kong’s biggest container line, returned to profit in the first half after a $1 billion gain from selling property and a rebound in shipping demand.

Net income of $1.28 billion compared with a restated loss of $231.8 million a year earlier, the company said in a statement today. Hanjin Shipping Co., South Korea’s largest liner, posted a 174.1 billion won ($149 million) profit in the second quarter as it charged more to move cargo.

Orient Overseas’s container-shipping sales rose 39 percent as it carried more clothes, toys and furniture to the U.S. and almost doubled rates on Asia-Europe routes. Shipping volumes are rising after a trade slump during the global recession caused industrywide losses of more than $15 billion last year.

“Profitability is improving with better rates,” said Geoffrey Cheng, an analyst at Daiwa Institute of Research in Hong Kong. “Export orders to the U.S. have been increasing, and this can help sustain demand for the rest of the year.”

In January, Orient Overseas agreed to sell its Chinese property assets to CapitaLand Ltd., Southeast Asia’s biggest developer, for $2.2 billion.

Orient Overseas posted an operating profit of $309.9 million rebounding from a year-earlier loss of $191.7 million. Sales jumped 32 percent to $2.7 billion. Hanjin’s operating profit was 169.7 billion won and sales at 2.37 trillion won.

Orient Overseas’s container-shipping revenue rose to $2.5 billion from $1.8 billion. Asia-Europe sales more than doubled to $603.6 million. Transpacific revenue increased 19 percent with average revenue per box rising 14 percent.

Special Dividends

Orient Overseas line proposed dividends of 51.5 cents a share, including the interim dividend and a special payout following the China property sale.

Shares of the company, controlled by the family of former Hong Kong Chief Executive Tung Chee-hwa, rose 1.5 percent to close at HK$63.65. The stock has risen 75 percent this year, compared with a 1.5 percent drop for the benchmark Hang Seng Index. Hanjin fell 1.2 percent to close at 33,500 won in Seoul.

Orient Overseas is giving preliminary consideration to a number of possible acquisitions, focusing on opportunities to “significantly grow” the container transportation business, Chief Finance Officer Ken Cambie told reporters in Hong Kong.

Further Opportunities

“Further opportunities may arise over the next six to 12 months,” Cambie said today. The company will expand the terminal and logistics businesses “organically,” he said.

Orient Overseas had avoided a container squeeze that plagued some companies in the first-half, and has adequate cargo-boxes to meet its requirement, Cambie said.

The shipping line carried 2.2 million twenty-foot containers in the first half, a 12 percent increase from a year earlier. Volumes on transpacific routes, the company’s biggest market, rose 4.4 percent, while Asia-Europe traffic increased 11 percent.

“High utilization rates are indicating strong near-term performance and seasonal demand,” Teddy Tsai and Quek Shuwei, analysts at DnB NOR ASA, wrote in an Aug. 2 note. “Most companies are expecting profitability and improving cash-flows going into the third-quarter.”

Hanjin moved 953,917 boxes in the second quarter, 24 percent more than a year earlier, the company said in a statement today. Operating profit from its container business reached 149.8 billion won, compared with a loss of 8.7 billion won in the previous three-month period.

“Container volume is expected to increase as we enter into the peak season but we are also concerned about the excess capacity expected with deliveries of new large vessels,” Hanjin said in an e-mailed statement today.

To contact the reporter on this story: Wing-Gar Cheng in Hong Kong at wgcheng@bloomberg.net

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