Net profit slumps 97% year-on-year as world's sixth-largest shipping company forecasts another loss

Recently, ONE announced its revenue for the last quarter, confirming that the container shipping company is facing losses.

ONE's net profit plummeted to $187 million in the second quarter ended Sept. 30, from $5.5 billion in the same period last year. In the first two quarters, ONE realized a net profit of $700 million, down 97% year-on-year, and expects a full-year after-tax profit of $851 million, compared to last year's $15 billion, ONE said, adding that "the freight market has suffered due to the deterioration of the economic conditions as a result of the decline in demand"

In fact, ONE expects another operating loss for the next two quarters and forecasts EBITDA of -191 million USD for the next six months.ONE said, "Despite the start of the peak season, freight volumes have not shown a strong recovery. On top of that, the short-term freight rate levels failed to sustain the upward trend due to a softening supply/demand balance as a result of the increase in newbuildings,"

ONE's total revenue for the quarter was only US$3.5 billion compared to US$9.4 billion in the same period a year ago, reflecting the collapse in short- and long-term rates.

Under strict capacity management, ONE's key trans-Pacific and Asia-Europe roundtrip routes achieved 95% and 92% utilization of load factors, respectively, yet rates continued to decline. While liftings actually increased by 7% over the previous year to 3,087,000 TEUs, average rates plummeted to US$1,150 per TEU compared to US$3,232 per TEU.

North American shipments showed some recovery in August, but lacked sustainability against a backdrop of weak overall consumption and other factors," ONE said. Although Europe showed a gradual recovery trend, but did not bring a full recovery in freight demand."

ONE also said, "The oversupply of tonnage caused by the delivery of a large number of newbuildings in the current fiscal year is expected to continue into the second half of the year." It added that the freight market is expected to "remain weak" for the current fiscal year.

Responding to the weak market fundamentals ONE will continue to pursue its blanket flight strategy, as well as "service restructuring in line with medium-term demand forecasts."

In fact, service suspensions had been proposed earlier, with alliance partners Hapag-Lloyd, ONE, Yang Ming Marine Transportation and Hyundai Merchant Marine announcing last week that they would suspend their Asia-Nordic and trans-Pacific Asia-Eastern U.S. services from mid-November.

ONE said it will focus on returning excess leased containers and improving container repositioning efficiency in an effort to reduce costs. Other initiatives include increased special cargo transportation and expanded service in growing markets from the east coast of Latin America to Northern Europe.

ONE is ranked sixth in the ocean carrier rankings with a 225-vessel fleet with capacity of 1.7 million TEUs and an order book of 515,000 TEUs, according to Alphaliner. The company has taken delivery of two 24,000 teu mega-vessels this year, two of the six vessels it has on long-term charter.