Evergreen Marine Corp, the world's third-largest shipping line, posted strong quarterly earnings on Tuesday thanks to robust exports and freight rates, which it expects to remain high.
It swung to a profit in the second quarter from a loss a year earlier, when the outbreak of Severe Acute Respiratory Syndrome (SARS) hurt regional demand, and boosted earnings 36 percent from the first quarter.
Soaring exports from China and a shortage of cargo vessels have driven freight rates up over the last two years, though some analysts warned about additional cargo capacity coming into play next year.
"Mainland China is a very important market with a lot of export cargo.
That is the reason why demand has been much higher than supply.
That's why ocean freight prices have risen," said Evergreen spokesman Nieh Kuo-wei.
Around 60 percent of Evergreen's container traffic is trade between China and the rest of the world, with the remainder taken up by intra-Asian business, said Nieh.
Evergreen, which operates more than 100 vessels, earned T$2.66 billion in the April-June quarter, according to Reuters calculations based on its first-half results statement.
That compared with a T$41 million loss a year earlier and a T$1.96 billion profit in the first quarter.
Evergreen's main domestic rival, Yang Ming Marine Transport Corp, last week posted a second-quarter profit of T$2.44 billion, up 47 percent over the same period last year.
"According to our forecasts, next year there won't be so many new vessels built and the market will stay strong," said Nieh, adding that rates would stay firm in 2005.
Evergreen has forecast 2004 earnings would more than double from last year to T$7.46 billion on the boom in container demand due to the global economic recovery.
Most shippers raised freight rates on both intra-Asian and trans-Pacific routes this year.
But Evergreen's shares have slumped 23 percent since a peak in March, because the re-election of Taiwan President Chen Shui-bian was a negative for the opening of direct transport links between Taiwan and China, analysts said.
Merrill Lynch downgraded its investment ratings on Evergreen and Yang Ming in July, saying margins were unsustainable due to an expected fall in long-haul freight rates and growth in vessel supply.
Evergreen is expanding its fleet by an additional 10 vessels, each with a capacity of 6,700 TEUs (20 foot-equivalent units), with delivery to begin next year. The ships will be used on routes between Asia and Europe.
The results came after Evergreen's shares closed down 0.96 percent at T$30.90 on Tuesday, 9.2 times its forecast earnings for 2004, according to Reuters Estimates. The broader market fell 0.40 percent.
Comments
Comments are closed.