HMM, Korea’s largest container shipper, suffered a steep decline in sales and profits in the first quarter as freight rates had been lowered to pre-pandemic levels, following its peak last year.
Its net profit dropped by 91 percent on year to 285.3 billion won ($213.2 million) in the first three months, according to the earnings result announced Monday.
The net fell short of market expectations of 660.1 billion won, according to market tracker WiseReport.
HMM’s operating profit also plummeted by 90 percent to 306.9 billion won, missing market expectations of 658 billion won.
Similarly, the company’s revenue witnessed a 58 percent decrease, amounting to 2.08 trillion won, below the market consensus of 2.38 trillion won.
“The decline in performance is due to the normalization of global freight rates, which have returned to pre-Covid levels after the effects linked with the pandemic during 2020 through 2022 subsided,” HMM explained Monday.
The Shanghai Containerized Freight Index further supports this trend, showing a drop from an average of 4,851 points in the first quarter of 2022 to 969 points in the first quarter of this year.
The operating profit margin stood at 14.7 percent, a margin that the company says is higher than during the pandemic.
However, ocean freight rates are expected to remain weak in the near future.
“Weak consumer spending due to the ongoing war between Russia and Ukraine and the burden of high energy prices is not expected to recover soon, and global demand is expected to remain sluggish due to factors such as interest rate hikes,” HMM said.
To tackle these challenges, HMM said it plans to enhance operational efficiency and refine cost-cutting measures such as unit transportation costs.
The anticipated sale of HMM may face obstacles amidst the company’s declining performance.
State-run Korea Development Bank (KDB) and the Korea Ocean Business Corporation are the two largest shareholders of HMM, holding 20.69 percent and 19.96 percent of its shares respectively.
KDB selected Samsung Securities as the advisor for the sale of HMM. However, potential buyers have raised concerns about unresolved issues, including the management of perpetual bonds.
Source: Hellenic Shipping News
