Liners have as much cash as the value of the vessels on their balance sheet, after the last 3 years of excess super normal earnings. As at the end of 2Q 2023, the 8 major liners that published their balance sheet data have $93bn cash against $106bn PP&E and RoU (Right-of-Use) assets owned and leased, which consists mainly of ships and containers. Cosco, Evergreen, HMM and Yang Ming has higher cash holdings than their PP&E and RoU asset values.
Taiwanese liners’ August revenue in NTD moved up 6% MoM, but revenue in USD moved up less at 4% MoM. In either currency, the rebound is better than CCFI on likely sequential volume growth. Since hitting the bottom in February, these liners’ monthly revenue has rebounded between 3%-27% with EMC leading due to its ongoing consolidation of the unlisted ship owning entities highlighted by the acquisition of the privately owned Evergreen Marine (Singapore) (EMS) for $780m on 19 June 2023, in a landm
Carriers reported a mixed 2nd quarter 2023 performance, with 3 carriers able to reverse their earnings decline despite the weak market conditions. OOCL and COSCO jumped to the top of the carriers earnings table with their outsized 2Q earnings despite weaker revenue and freight rates. OOCL and COSCO’s EBIT margins at 31.8% and 24.8% are more than 3 times higher than the average of the next 8 carriers which stands at just 6.7%. COSCO reported at the group level a $5.7 Bn improvement in its equ
COSCO reported full set of interim results in Asian evening of 29th Aug. Since bottom line has already been given in the alert published on 3rd July, the new news were in the top line and the costs, which give some clues as to how Cosco outperformed the industry in EBIT margin development in this down cycle: Cosco’s 2Q EBIT margin was 25% against the average of the next 8 carriers which stands at just 6.7%. Cosco’s 2Q revenue (-61% YoY) has dropped more than the average among the major liners.
OOIL’s 1H23 earnings fell 74% HoH. Earnings are still very good comparing to historical average. RoE was still stayed close to 20% despite of the large sum of idle assets (e.g. cash) on balance sheet. 74% sequential drop in earnings are a touch better than the industry average which is 83% HoH fall. OOIL’s unit costs fell 17% HoH relative to the industry’s average 11% HoH fall.
Wan Hai reduced EBIT losses by 37% QoQ in 2Q 2023. Like ZIM, Wan Hai also suffer from over-exposure on the weak Transpacific and Intra-Asia markets but it has been shielded from the rapid decline on the Oceania trades where Wan Hai do not have a presence. Wan Hai’s failure to invest in SOx scrubbers has also impacted its operating margins, with all of its ships using the more expensive LSFO.
Zim recorded its worst quarterly loss since its financial restructuring in 2014, with the 2Q 2023 net loss reaching $213m. ZIM’s EBIT loss expanded in 2Q by 11 times QoQ. Zim’s 2Q EBIT margin of -11.2% places it at the bottom of the earnings league table comprising of 10 of the top 12 carriers, with Zim the worst of the 3 carriers that dropped into loss making territory along with Wan Hai (net loss of $76m) and Yang Ming (net loss of $4m). Low operating efficiency and high charter expenses have
HMM’s liner EBIT fell 43%, which is broadly in line with the peers, as fall in freight rates off set increase in volume on the top line. HMM’s volume were up 12% QoQ, similar to CMA CGM and ONE, but is way ahead of Maersk and OOCL (+7% QoQ) and Hapag Lloyd (+4% QoQ).
Yang Ming 2Q earnings avoid sequential fall at the EBIT level as sequential fall in revenue was offset by the reduction in operating expense, which is an outliner. Yang Ming led the container liner peers in 13% QoQ reduction in OPEX excluding bunker, depreciation and SG&A, which consists of mainly port handlings and equity repositioning. Among the liners, e.g. Maersk and Hapag Lloyd, that have disclosed port handling expenses, unit costs for this item were down QoQ but the drop is mostly off
Hapag Lloyd reported before market open on 10 August. Hapag Lloyd’s 2Q results suffered second biggest a bigger QoQ fall in EBIT, following ONE’s 67% as Transatlantic head haul freight rates fell by 50% (Source: Xeneta) while CCFI fell only 7% during 2Q. However, Hapag Lloyd remain a leader in the EBIT margin among its container liner peers. What may have been overlooked however is that Hapag Lloyd has been leading its peers in delivering RoE (return on equity) on more efficient capital managem