One-eye retina downsizing as weak demand dampens profits

Photo: Nihon Shipbuilding Corporation

The sea carrier’s declining profitability rate is accelerating as east-west trade lines continue to suffer from weak demand, driving freight rates into stubbornly low rates.

Japanese ocean carrier ONE saw its net profit more than halve to $513 million between April and June (Q1), compared to the first three months of the year.

“East-West Routes suffered a decline in demand due to stagnant retail consumption in Europe and the United States as a result of high interest rates and inflation,” said ONE.

It is now likely that signs of a strong recovery in orders and inventory rebalancing will not be evident until later this year, CEO Jeremy Nixon said.

“This will require some early adjustments to downsize the network to better manage usage levels and schedule performance over the next six months,” he added.

ONE’s result for the quarter was a sharp contrast to the previous year’s $5.5 billion in earnings, which was fueled by the post-pandemic boom. Top line revenue was $3.77 billion, which was down 58% year over year, and down 19% sequentially.

Lifts for the period were 2,825,000 TEU, at an average rate of $1,332 per TEU, compared to the prior quarter’s $1,788 per TEU and the inflated average of $3,069 in the same quarter last year. 2022. However, carrier utilization rates remained at a healthy 94% in the capital Asia-Europe, although load factors were boosted by strong demand on the Asia-Mediterranean route.

Meanwhile, headland services in Asia and North America saw utilization decline, to 82%, in line with lower demand, with ONE’s Asia to North America volumes down 18% year-on-year, amid a significant improvement in ship turnover in the US West Coast. Previously busy ports.

Clearly ONE won’t bring in anywhere near the $15 billion in profits it generated for its NYK, MOL and K Line shareholders in the previous year, it has declined to provide a full-year forecast, stating that it expects “further market shifts … creating Uncertain look.

ONE’s response to financial headwinds is more slow sailing, more empty sailing, deploying larger vessels to reduce unit costs – such as the six 24,000 TEU long-charter vessels delivered this year to Asia and Northern Europe – and optimizing utilization. of its container fleet by returning surplus rental boxes and repositioning equipment more efficiently.

According to data from Alphaliner. ONE is the sixth-ranked ocean carrier, in terms of capacity, with a fleet of 218 ships with a total TEU of 1,686,930 TEU, and has an order book of 35 ships, with a capacity of 454,268 TEU.

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