Orient Overseas International announces results for 2009

Orient Overseas (International) Ltd. (OOIL today announced a loss of US$400.6 million for the year ended December 31st, 2009, compared to profit of US$275.5 million recorded in 2008.

2009 presented the worst market conditions ever experienced in the container shipping industry. The year opened with a collapse in container freight rates as excess shipping capacity chased a dearth of demand volume.

An improvement in freight rates occurred in various trade lanes over the second half of the year as capacity in excess of demand was removed and the first tentative signs of a pick-up in global economic activity were seen. Unfortunately, the second half of the year also saw increases in energy prices, commented Mr. C C Tung, the Chairman of OOIL, when announcing the Group 2009 financial results.

The container transport and logistics arm of the Group, OOCL, suffered a double-digit decline in lifting in the first three quarters, and stabilized to a 4% drop in the last quarter. Overall, 2009 volume was 14% lower than that in 2008 and revenue was 33% lower.

The recovery in the global economy and the pick-up in OECD consumer demand are likely to be sluggish, noted Mr. Tung. In the supply side, there continues to be an excess of capacity in the form of outstanding new-build orders and laid-up vessels that will need to be absorbed over the next three to four years.

An imprudent re-introduction of capacity currently idling or laid-up, if mismatched to demand, could see fresh rounds of rate cutting. The industry challenge between short-term cash flow and longer-term stability will test the market capacity discipline over the next couple of years until trade growth eventually absorbs the surplus capacity, Mr. Tung continued.

On January 18th, 2010, OOIL announced the sale of Orient Overseas Developments Ltd (OODL to CapitaLand China (RE) Holdings Co. Ltd. for US$2.2 billion. The sale was of the PRC property development business conducted under OODL and excluded the investments in Wall Street Plaza and Beijing Oriental Plaza. With the sale having occurred after year-end, the disposal and associated profit will appear in the 2010 accounts.

Our exit from the property development sector in China allows the Group to redeploy capital and to strategically reposition and focus the Group as a well-capitalized container transportation and logistics business, said Mr Tung.

Even with the extremely difficult operating environment in 2009, we held to the Group Core Values. We maintained our commitment to deliver superior customer service, working with our customers to sustain and enhance their supply chains in a rapidly changing environment.

Our commitments to deliver superior customer service to our customers have served us well and our staff rose to the challenge of getting us through the storm in solid financial and operational condition and in good shape to prosper as the industry recovers over the next two to three years.

While 2010 will be another challenging year, our remaining core business of container transportation and logistics remains well placed to endure and emerge stronger from this period of adverse demand and supply dynamics, concluded Mr. Tung. <Korea Shipping Gazette>