ONE profits dropped by 50% in Q3 of FY22 compared the previous quarter

SINGAPORE : Ocean Network Express (ONE) profits dropped by 50% in Q3 of FY22 compared the record reported in the previous quarter as the sharp drop in container spot rates took its toll.

ONE reported a Q3 net profit of $2.77bn down 50% on a record $5.52bn profit reported in Q2 FY22, and down 43% on the same quarter in FY21.

The Japanese joint venture container line said that there had been a “significant deterioration” in results due to the rapid reduction in the short-term freight market.

According to Drewry’s World Container Index container spot freight rates were 78% lower for the week of 26 January 2023 compared to the same period a year earlier.

Container shipping has been hit by the twin forces of reduced demand and increased vessel supply in the market.

“Cargo demand decreased especially in East-West trades mainly due to the increase in inventories in North America which became clearer in July-August, and a decline in consumption in Europe due to progressive rising inflation,” ONE said.

In October and November 2022 ONE said cargo movements from Asia – North America fell by 19% year-on-year due to lower US imports, and by 26% year-on-year for the same two month period on the Asia – Europe trade as consumption declined as a result of high energy prices and inflation.

“On the supply side, global port congestion improved, resulting in an increase in tonnage supply,” the company said.

ONE is forecasting a further substantial fall in profitability for Q4 FY22 with the line expecting a profit of $940m after tax for the three-month period ended 31 March 2023.

“In the 4Q, the number of blank sailings is expected to increase due to the longer slack season around Chinese New Year and the time it takes for the cargo volume to recover after the holidays,” the company said. It added an assumption that it would take time for the freight market to recover.

Market observers also expect the sharp drop in spot rates to filter into long-term contract rates as these are negotiated for the coming 12 months, a process that was already seen as having started in the last three months of 2022.

For FY22 as whole ONE has shaved off 4% from its previous forecast with an expected profit of $14.73bn.