OOCL’s quarterly revenue surges by $730m even as cargo volume dips

Orient Overseas Container Line (OOCL) saw its revenue surge by more than $730m in the third quarter even as it suffered a decline in cargo liftings.

Hong Kong-listed parent Orient Overseas (International) Ltd said its liner operator subsidiary reeled in $5.04bn in revenue during the period, which marked a 16.9% improvement on the $4.31bn earned in the same period of 2021.

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While the company has yet to report OOCL’s bottom-line profits, the top-line figure suggests the Hong Kong container ship operator is continuing to enjoy strong freight income even as spot rates decline.

The biggest gains were made in its intra-Asia and Australasia services, where revenue jumped 29.6% to reach nearly $1.46bn in the latest quarter.

Asia-to-Europe services were the lone laggard, slipping 1.4% to bring in revenue of $1.6bn.

And OOCL delivered revenue growth despite declining cargo volumes.

The company lifted 1.75m teu during the third quarter, which represented a 3.4% slump on the same period of last year.

That was driven primarily by falling transpacific liftings, which dropped 14.4% to just over 419,000 teu.

The third-quarter revenue gains helped fuel a 43.4% surge for the first nine months of the year, when OOCL pocketed nearly $15.5bn.

Fearnley Securities said this was another strong quarter as earnings remain largely unaffected by rapidly falling rates.

The figures suggest “yet another solid quarterly profit” for the container line, the investment bank said.

“We expect a similar development for peers such as Zim and Maersk…as operator earnings are insulated in the short-term given much of their business is on term contracts that are renewed annually,” analysts Oystein Vaagen and Ulrik Mannhart added.

“However, the fourth quarter should show a substantial drop in earnings and 2023 earnings should be substantially down year-on-year as the effect of normalising rates fully kick in,” they said.

With volumes already starting to drop, lagging high rates are the main reason for continued strong earnings, Fearnley Securities believes.

The OOCL gains come as spot freight indicators have been sliding. Drewry’s World Container Index reached $3,689 per 40-foot equivalent unit (feu) container on Thursday, an 8% decline on the prior week and a 64% plunge compared to a year earlier.

But liner operators’ earnings are insulated, for now, because much of their business is on term contracts that renew annually.