Q1 Earnings Consensus
Revenue 2.3673 trillion KRW
Operating Profit 911.8 billion KRW
Record Largest Turnaround to Profit
[Asia Economy Reporter Dongwoo Lee] HMM, the national deep-sea shipping company that had been struggling in the red for years, is raising expectations that it will open the era of 1 trillion KRW operating profit in the first quarter of this year. A quarterly operating profit of 1 trillion KRW is the first since HMM was founded in 1976. This is the result of harsh structural improvements along with the continuous rise in maritime freight rates.
According to the financial investment industry on the 22nd, the consensus for HMM's first-quarter performance this year is sales of 2.3673 trillion KRW and operating profit of 911.8 billion KRW. This represents an 80.2% surge in sales compared to the same period last year, and operating profit has turned from a 2 billion KRW loss to the largest profit ever recorded. In particular, the estimated operating profit for the first quarter is the largest quarterly performance in the company's 45-year history and is comparable to last year's total operating profit (980.8 billion KRW).
Industry experts also predict that HMM's first-quarter operating profit will exceed market expectations and reach the 1 trillion KRW mark. Due to the impact of COVID-19, unprecedented global online retail purchases have continued on routes including the Americas and Europe, causing freight rates, which directly affect profits, to rise sharply since the second half of last year. The Shanghai Containerized Freight Index (SCFI), which aggregates freight rates for 15 container shipping routes, recorded 2833.42 as of the 16th, up 181.30 points from the previous week. This is a 210.7% increase compared to the same period last year (March 13, 2020, 911.85).
The industry analyzed that global shipping companies' strategy of adjusting vessel supply in response to COVID-19, combined with rising cargo volumes, has led to freight rate increases for more than half a year. The recent rise in freight rates is expected to have a positive impact not only on short-term performance but also on the one-year fixed contracts newly applied from next month.
Securing competitiveness through economies of scale was also a major factor driving performance. Last year, HMM received delivery of twelve 24,000 TEU-class container ships and immediately deployed them on European and American routes, securing large cargo volumes from domestic exporters and Asia. In particular, by completing the delivery of eight 16,000 TEU-class container ships by the first half of this year, HMM plans to increase cargo volumes to the U.S. East Coast via the Panama Canal.
Becoming a full member of the shipping alliance "THE Alliance" since April last year also proved effective. THE Alliance, composed of HMM, German shipping company Hapag-Lloyd, Taiwan's Yang Ming Marine Transport, and Japan's Ocean Network Express (ONE), is one of the world's top three shipping alliances and calls at over 80 ports worldwide including Asia, Europe, the Mediterranean, North America, Central America, and the Middle East. Through this, HMM has been able to regain trust in the global shipping market and significantly improve its cost structure.
An HMM official said, "The company's operating profit for the first quarter is expected to meet the industry consensus, ranging from 900 billion KRW to 1 trillion KRW," adding, "We will continue to improve performance through continuous vessel deployment."
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