Release Date:
Release ID: 600

Orient Overseas International Announces 2006 Interim Results

Turnover increased by 6.2% to US$2,386.3 million.

EBITDA of US$358.3 million (US$439.7 million last year).

Profit attributable to shareholders of US$280.5 million, including a revaluation surplus of US$75.0 million for Wall Street Plaza (US$308.9 million last year).

Earnings per share of US44.8 cents (US49.4 cents last year).

Interim dividend of US11 cents (HK86 cents) per ordinary share.

OOCL liftings increased by 7.5%.

Press Release

Delivery taken of two 8,063 TEU new vessels and four 5,888 TEU Long-term Chartered vessels

Ordered another four 4,500 TEU new vessels in July.

Strong results from terminal operations.

Property development projects progressed as forecast.

Orient Overseas (International) Limited (“OOIL”) Group today announced a profit before taxation of US$311.2 million compared with US$329.4 million for the same period last year. After taxation and minority interests, the Group reported a profit of US$280.5 million, compared with US$308.9 million earned during the first half of 2005.

OOIL Chairman, Mr C C Tung, said “The markets have remained robust in terms of container volume growth during the first half of 2006 but average freight rates have fallen over the same period, especially on the Asia to Europe routes. This softness, when combined with steadily rising costs, both directly and indirectly as a result of higher oil prices, has led to a poorer overall performance for the first half of 2006 by comparison with the same period of 2005.”

“Compared with the corresponding period last year, OOCL’s total liftings increased by 7.5% and average rates per TEU decrease by 3.3%. The deployment during the first half of this year of number 9 in our total series of twelve 8,063 TEU “SX” Class newbuildings together with the first four of our series of eight 5,888 TEU “S” Class newbuildings, being operated under long-term charter structures, contributed towards an overall 9.9% increase in loadable capacity during the first half of the year. Despite this significant increase in fleet size, the strength in volume growth has been such that overall load factors suffered only a slight 1.8% drop as compared with the first half of 2005,” added Mr Tung.

“The continued pursuit of improved operational efficiency and tight control over costs together with the ongoing investment in IT capabilities have again resulted in benefits. Business and administration costs have continued to fall as a percentage of revenue as they have on a per TEU basis when compared with the same period last year. However, other fixed and variable costs have risen significantly during the first half of the year due mainly to the increased cost of bunkers,” said Mr Tung.

“In respect of our membership of the Grand Alliance, the P&O Nedlloyd membership and joint deployment of its vessels ceased in early 2006 following its acquisition by Maersk Sealand. OOCL, together with the other remaining members, Hapag-Lloyd, MISC and NYK, oversaw a very smooth transition and also the commencement of a slot sharing agreement with the New World Alliance, comprising American President Line, Hyundai Merchant Marine and Mitsui OSK Lines. Through these arrangements, OOCL continues to deliver the highest level of service to its customers,” commented by Mr Tung.

“For the first half of 2006, terminal operations returned encouragingly strong results as combined container throughput at our Terminals Division which comprised of TSI Terminal Systems Inc., New York Container Terminal, Inc. and Global Terminal & Container Services, Inc. increased by 17% over the same period a year ago, with total revenues and operating profit rising by 29.6% and 46.5% respectively. In Vancouver, the Group’s two terminals performed exceedingly well in the first half of 2006 with a 30.4% rise in TEU throughput volumes contributing to a 49.5% jump in revenue, aided in part by the continued strength of the Canadian dollar. Business conditions remain healthy at New York Container Terminal on Staten Island, where an increase of 6.7% in TEU throughput volume was accompanied by an 8.1% rise in revenue. Global Terminal in New Jersey was, however, directly and adversely impacted by the withdrawal of P&O Nedlloyd from the Grand Alliance and the transfer of its volumes elsewhere. It experienced a TEU throughput volume drop of 13% in the first half of 2006 but revenue remained essentially unchanged,” Mr Tung added.

“The Group’s property investment and development businesses continued to be profitable during the first half of 2006. However, as a result of the project timings we do not expect a significant contribution to Group performance for 2006 as a whole. Our portfolio of New York and Beijing investment properties continue to perform as budgeted. Our development projects in the Greater Shanghai area also continue as planned. The strength of the New York commercial property market and appreciation in land values have been such that the latest independent and professional valuation received for Wall Street Plaza has increased the value to US$175 million from the previous level of US$100 million,” said Mr Tung.

“Volume growth forecasts tend to be overly cautious whilst the disparity between the estimates of new tonnage to be deployed, in nominal capacity terms, and the actual effective capacity introduced into service remains significant. However, it is without doubt that the industry is at present having to weather a period of unusually high new vessel deployment at the same time as doubts abound as to the sustainability of the currently still strong container volume growth. Such sentiments clearly serve to soften freight rates. Nevertheless, the supply/demand balance eventually will have its effect and so it is the strength of volume growth during the coming peak period which will set the performance level for 2006 as a whole. It is unlikely to compare with the Group's performance for the past two years however, since much of the damage to freight rates has already been done during the first half and especially for the all important Trans-Pacific trades for which the annual rate setting process took place in April. Similarly for the Asia Europe trades in which, although three monthly contracts are the norm, rates fall very quickly but rise very slowly. In addition to the balance between supply and demand, rising costs are a major concern. The future cost of bunkers remains an unknown with many views as to where the price will go. The geopolitical issues make predictions much of a lottery. Whilst the bunker adjustment factor does allow us to recover some of any increase it is by no means a 100% recovery. Additionally, our third party transportation costs and terminal handling costs continue to rise, much of it the indirect result of higher fuel and energy costs,” commented Mr Tung.

During the first half of 2006, the Group took delivery of a further “SX” Class 8,063 TEU newbuilding, the OOCL Asia. Its sister ship, the OOCL Europe, was delivered on 26th July 2006. Also delivered were the OOCL Vancouver, the OOCL Kaohsiung, the OOCL Antwerp and the OOCL Dubai, the first four of the total series of eight “S” Class 5,888 TEU newbuildings all being or to be operated under long-term charter arrangements with Japanese owners. As at 30th June 2006, the Group is committed to the remaining two “SX” Class vessels of 8,063 TEU for delivery in 2007 and to the remaining four “S” Class 5,888 TEU vessels the delivery of which will take place during 2007. The Group also remains committed to a series of eight ca. 4,500 TEU Panamax sized vessels, six to be built by Samsung Heavy Industries Co Ltd in South Korea and two to be built by Hudong-Zhonghua Shipyard in China. Delivery of these vessels is scheduled to take place between the fourth quarter of this year and the second quarter of 2008.

On 20th July 2006, OOCL entered into shipbuilding contracts for another four ca. 4,500 TEU Panamax sized vessels also to be built by Samsung Heavy Industries Co Ltd in South Korea. Deliveries are scheduled to take place in mid 2010.

OOIL continues to maintain a prudent financial position, with a strategic goal of maintaining a net debt equity ratio of less than 1.0. Nicholas Sims, the Group Chief Financial Officer said that the Group’s net debt to equity ratio as at 30th June 2006 stood at 0.29 : 1, increased from 0.24 : 1 as at the end of 2005. He also said that as at 30th June 2006, the Group had cash and portfolio investment balances of US$1,108.3 million.

The Board of Directors has recommended an interim dividend of US11 cents (HK86 cents) per ordinary share to be paid on 15th September 2006 to those ordinary shareholders whose names appear on the register on 4th September 2006.


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