Ocean Network Express (ONE), a Japanese-owned alliance operating 216 containerships, reported a stellar financial performance for the first quarter of its fiscal year in a boom market that shows every sign of overheating.
ONE profit soared to $2.56bn in the first quarter of the year, from a mere $167m in the same period of its 2020 fiscal year.
The liner operator expects to have fared even better in the second quarter. According to an initial estimate disclosed in its earnings announcement on Thursday, the operator of 216 boxships predicts about $6bn in after-tax profit for the entire first half of the year.
However, ONE stopped short of providing guidance for full-year profitability, given how “extremely difficult” it is to make such estimates amid an unstable economic mood that swings in line with developments in the coronavirus pandemic.
“ONE’s forecasts for FY 2021 [fiscal year] are yet to be finalised,” the company said.
In May, ONE's three owners — NYK Line, Mitsui OSK Lines and K Line — warned shareholders that their liner earnings might fall in 2021, especially in the second half of the year.
‘Extreme strain’
The operator said the profit increase in the first quarter “was mainly due to the continuous strong market” amid the pandemic.
Global containership volumes rose by a fifth year on year, boosted by worldwide demand for consumer goods.
As a result, revenue more than doubled over this period to $5.78bn.
“Vessel utilisation was at full capacity due to strong cargo demand,” ONE said.
Higher cargo volume was more than enough to compensate for increased costs associated with higher vessel speeds to improve schedule reliability and deal with congestion.
The company warned that the frenetic pace at which the market moves has stretched the industry to its limit.
“There remains excessive strain on the entire global supply chain,” it said. “Severe shoreside and inland congestion was and is still ongoing.”
Cargo demand and labour shortages have resulted in longer port stays, port congestion, and heavy rail and truck traffic.
Truck and chassis shortages caused increased container dwell times. Travel restrictions also continue to make it difficult to change crews flexibly.
ONE has been trying to cope by speeding up vessels and increasingly adopting digital solutions to optimise operations. That includes flexible remote working in company offices around the world.
The Singapore-based outfit was formed in 2017 after K Line, Mitsui OSK Lines and NYK Line merged their liner operations. NYK Line is ONE's largest shareholder with a 38% stake.
