Balancing the books a test for carrier accountants
Wild swings in profitability have become de riguer for an industry lurching between good and bad times, but the bad times appear to be winning.
Last year was a good one for container carriers. Most of it, anyway. But that only makes this year’s plunge in profitability that much more spectacular.
Any carrier exposed to the trade lanes linking Asia to North America and Europe is limping towards the end of the year trailing a huge slick of red ink.
Taiwan’s biggest container carrier Evergreen Marine Corp posted an impressive 98 percent drop in net profit for the nine months since January. Its nine-month net was down from US$390 million in the same period in 2010 to just $9 million this year.
Over at the second largest box line in Taiwan, the Champagne was also kept tightly corked and stowed away in the “Special Occasions Only” closet.
It’s net profit for the three quarters was just 50 percent down on last year, but $167 million is still $167 million.
The third major Taiwan carrier Wan Hai Lines posted a drop of 88 percent in its net profit, even though it made a US$16 million profit in Q3.
Across the Taiwan Strait, the financial bloodletting continued. China Cosco Holdings lost $750 million in the three quarters compared with last year when it made a profit of $887 million. That is an incredible drop of more than $1.5 billion in a year.
China Shipping Container Lines almost came across looking good by losing just $250 million between January and September as operating revenue dropped 22 percent from $4.3 billion in 2010 to $3.4 billion.
Down in the maritime hub of Southeast Asia, the NOL Group was also playing hide the Champagne. The Singapore-based parent of APL posted a third-quarter loss of $91 million, compared with a profit of $282 million a year earlier. Like the rest, it expects to report a loss for the full year.
Other results will be coming in and they will all be equally dismal because of the trifecta from hell: Overcapacity, weak freight rates and high oil prices.
Just how long shipping lines can continue to survive in this feast or famine environment has been the discussion for as long as we can remember.
Cyclical the business may be, but the down cycles are becoming deeper and longer and the up cycles not long enough. With the good times cut back, the lines are not able to amass enough to carry them through the downturns, and you have to wonder how long a carrier can sustain billion dollar swings in profitability from year to year.