Japanese-owned Ocean Network Express (ONE) has sharply lowered its earnings forecast after profits halved.
The world’s sixth-largest liner operator has dropped its annual profit forecasts by over $500m on the back of the fast-falling freight market.
It comes after the Singapore-managed company reported a drop of up to 50% in profit to $2.75bn for the three months ended 31 December 2022.
The profit is $2.75bn less than it earned in the previous quarter and 43% lower than the $4.8bn it logged in the same period in 2021.
ONE said the “significant deterioration” in its results was due to the rapid reduction in the short-term freight markets since the middle of last year.
Chief executive Jeremy Nixon highlighted a “particularly weak” fourth quarter of 2022 for US West Coast arrivals.
He added an expected surge in pre-Chinese New Year (CNY) orders did not materialise in December, partly due to the surge in Covid-19 cases.
Therefore February exports from China and Vietnam are expected to be “particularly light”.
“Market supply is being adjusted accordingly, resulting in a higher ratio of blank sailings during the extended post-CNY ‘rain shadow’ period,” he wrote.
Back to millions
ONE has lowered its profit after tax forecast by 4% to $14.72bn for the 2022 financial year.
That is $542m down from the projected figure of $15.2bn it had expected at the end of October.
The company is forecasting a profit of $940m in the three months ending on 31 March.
“Profitability is expected to deteriorate in the current quarter due to the softening of supply and demand,” the company said.
Revenues are expected to fall for the full financial year by $769m to $29.2bn.
That is based on the expectation it will take some time for the freight market to recover.
The number of blank sailings is expected to increase due to the impact of the CNY holidays.
ONE is a member of THE Alliance (THEA) alongside Germany's Hapag-Lloyd, South Korea's HMM and Taiwanese operator Yang Ming.
The Japanese company reported a drop in revenues to $6.2bn in the final quarter of 2022, down 25% compared with the previous year.
Those revenues are 33% or $3.1bn lower than in the same quarter in 2021.
Liftings for the Japanese carrier had fallen as a result of reduced cargo and more blanked sailings.
Cargo demand decreased especially in the East-West trades due to the increase in inventories in North America.
Demand had slumped following a decline in consumption in Europe due to rising inflation, the company said.
On the supply side, global port congestion improved, resulting in an increase in tonnage supply, it added.
