Orient Overseas (International) : Announces 2018 Interim Results

Hong Kong, 6th August 2018

Orient Overseas (International) Ltd

Announces 2018 Interim Results

• Group Revenue of US$3,115 million
• 6% Liftings Growth to 3.3 million TEU
• Group Operating Profit of US$51 million
• Loss Attributable to Equity Holders of US$10 million
• Loss per Ordinary Share of US1.6 cents
• No Interim Ordinary Dividend

Financial And Operational Highlights

• Liftings growth of 6%
• Group EBITDA of US$322.6 million (including discontinued operation)
• Group EBIT of US$96.5 million (including discontinued operation)
• Net Debt to Equity ratio at 44%
• Remaining 21,413 TEU newbuilding vessel delivered in Q1 2018

Orient Overseas (International) Limited and its subsidiaries (the "Group") today announced a loss attributable to equity holders of US$10.3 million for the six-month period ended 30th June 2018, compared with a profit of US$53.6 million for the same period in 2017.

Results for the first six months of 2018 included investment income of US$23.2 million from Hui Xian and a net fair value gain of US$39.9 million on the revaluation of Wall Street Plaza.

Loss per ordinary share for the first half of 2018 was US1.6 cents, whereas earnings per ordinary share for the first half of 2017 was US8.6 cents.

The Board of Directors does not recommend an interim dividend.

The outgoing Chairman of OOIL, Mr. C C Tung, said, "Against the backdrop of a healthy global economy, the industry experienced good levels of cargo growth, and benefitted from moderate improvements in freight rates in many trade lanes. As such, the slow and steady recovery that began in late 2016 continued to provide encouragement to our sector."

"However, the financial results for the current reporting period reflect not only the positive growth story, but also some of the significant challenges that we have been facing", continued Mr. Tung.

"Supply side growth continued at a significant pace, with total capacity levels remaining a risk factor in the future, even if newbuilding deliveries look likely to reduce markedly in the coming two to three years. Increased costs have also hurt profitability: the higher price of oil has increased fuel costs, and equipment repositioning costs have been amplified by the increasing imbalance between (1) strong headhaul growth and (2) stable to weakening backhaul growth", commented Mr. Tung.

"The strong cargo volume growth seen in most East-West trade lanes, especially on Transpacific routes, is encouraging, not least because it is a trend that has now been sustained for over a year. While it is true that global economies still appear reasonably robust, not least the USA, the uncertainty caused by the threat of looming so-called trade wars justifies a degree of caution. It may well be that the impact on containerised transport will be less than some fear, on the grounds that goods transported in containers often tend to be higher volume but lower value. However, it would be naïve to be too confident in offering any predictions about how the currently imminent trade wars will impact the industry. Restrictions on trade are clearly not a positive factor: we will need to wait to gauge what their negative influence might be", added Mr. Tung.​

Compared to the first half of 2017, OOCL liner liftings increased by 6.0% while load factor reduced by 3.1%. Revenue levels per TEU increased by 3.5%.

The average price of bunker recorded by OOCL in the first half of 2018 was US$383 per ton compared with US$306 per ton for the corresponding period in 2017. As a result of the rise in fuel oil & diesel oil prices, bunker costs increased by 26% in the first half of 2018 when compared with the corresponding period of 2017.

During the first half of 2018, the Group took delivery of the sixth and the last of the 21,413 TEU series new-build vessel from Samsung Heavy Industries in South Korea, namely the 'OOCL Indonesia'. All six vessels of the 21,413 TEU series have been deployed in the Asia-Europe service and they mark an important milestone for the Group. As at 30th June 2018, no new-build vessels are pending for delivery; and no orders for new buildings were placed in the first half of 2018.

OOCL Logistics revenue and contribution for the first half of 2018 increased by 10.1% and 13.7% respectively compared with the same period last year. Profit increased by 113% compared with the same period last year. The contribution from International Supply Chain Management Service increased by 5.5% while contribution from Import/Export Services increased by 20.2% and is attributed to FCL, FFW, CHB, Depot and AFFW business growth. The growth of our warehouse business, including better utilisation improvements of existing warehouse facilities, as well as CCL warehousing, system sales and 4PL business were all key contributing activities contributing to the 28.7% growth in Domestic Logistics business.

The Group's property investments include its long-standing ownership of Wall Street Plaza located in New York. Based on an independent valuation, Wall Street Plaza has been re-valued upwards by US$40 million as at 30th June 2018 to reflect an assessed market value of US$310 million. After offsetting a total of US$0.1 million improvement to the building spent in the first six months of the year, the net fair value gain for the first half of 2018 was US$39.9 million.

The Group invests in Beijing Oriental Plaza directly through holdings in the Hui Xian REIT and indirectly through Hui Xian Holdings Limited. In the first half of 2018, Hui Xian Holdings Limited, the original developer company of Hui Xian REIT, declared a cash dividend and dividend in specie to its shareholders, of which the Group's shares amounted to US$22.6 million. In addition, the Group also received a distribution of US$0.6 million from its direct holding of Hui Xian REIT.

Mr. Tung commented on the recent development, "On the 13th July 2018, it was announced that the joint offer made by COSCO SHIPPING Holdings Co., Ltd. ("COSCO SHIPPING Holdings"; SHA: 601919; HKEx: 1919) and Shanghai International Port (Group) Co., Ltd ("SIPG"; SHA: 600018) to acquire all the shares of OOIL has achieved the necessary level of shareholder acceptance to become unconditional."

Mr. Tung continued, "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, providing the widest of networks and the best of service to our customers, using ambitious growth targets and meaningful synergy benefits to create value for our shareholders, enhancing our business through information technology, and offering challenging and exciting careers to our employees."

"We will achieve all these while maintaining the separate listing, branding, management and staff of the OOIL group. As I step down after 22 years as Chairman, I look forward with confidence to seeing the OOIL corporate culture of team work and our take it personally spirit play their part in the creation of a new industry champion, and offer every encouragement and wish every success to all those who will deliver this goal", concluded Mr. Tung.

With regard to the conclusion of the acquisition, incoming Chairman of OOIL, Captain Xu Lirong commented, "First of all, I would like to extend a warm welcome to OOIL for joining COSCO SHIPPING and express my heartfelt gratitude and great respect to Mr. Tung Chee Chen for his leadership and significant contributions to the impressive results achieved by OOIL over the past years. In the face of intensifying market competition, mergers and acquisitions in the global 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. I believe that after OOIL becomes a member of COSCO SHIPPING, we can effectively combine the respective strengths of OOIL and COSCO SHIPPING Lines and optimize our global network, thereby achieving greater economies of scale and synergies. This will not only enable both companies to enhance the overall profitability and promote the sustainable development, but will also allow us to offer customers more product choices. They can thus experience our better services."

Captain Xu further noted the value that OOIL will bring to the wider China COSCO SHIPPING Corporation group, and that every effort will be made to preserve and increase this "We have made "six undertakings to preserve the integrity of OOIL". It is an important decision which reflects our full confidence in the management of OOIL and the quality of its employees."

The incoming Chairman reiterated his views on the significance of Hong Kong as an ideal continuing headquarters for OOIL, "As a famous international financial center, trade center and shipping center, Hong Kong provides a superior trade environment coupled with supportive policies, sound legal system and robust offshore financial system, which facilitate the global expansion of outstanding enterprises. I am fully confident that Hong Kong will make further achievements in establishing itself as an international shipping center and creating new opportunities for enterprises in the shipping industry."

I​n conclusion, Captain Xu offered the following joint outlook for OOIL and China COSCO SHIPPING Corporation, "In the future, we will adhere to the "six undertakings" and dedicate to improve OOIL's brand value. OOIL will surely continue to maintain high operating standards, high standards of services and leading IT capability. The strengths of OOIL's international, professional and high-caliber talent team will be retained and further unleashed, so that the management and operating capability of the company will be strengthened in tandem with its fascinating growth. OOIL will thus become more competitive and effective, exert greater influence in the market, and provide customers with first-class products and services as before. At the same time, we and OOIL will adhere to the concept of "Trust Together", promptly combining our respective strengths to drive greater synergies between both companies. Our core competitiveness, operational efficiency and profitability will be further enhanced, which allows us to create greater values for shareholders."

As at 30th June 2018, the Group had total liquid assets amounting US$2.2 billion and total indebtedness of US$4.2 billion. Net debt as at 30th June 2018 was therefore US$2.0 billion.
OOIL owns one of the world's largest international integrated container transport businesses, which trades under the name "OOCL". With more than 360 offices in over 70 countries/regions, the Group is one of Hong Kong's most international businesses. OOIL is listed on The Stock Exchange of Hong Kong Limited.

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Issued by: Orient Overseas (International) Limited

For further information contact

Peter Budd Investor Relations (852) 2833 3301
Internet address: http://www.ooilgroup.com

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