Business interest rate returns to 10%! Does ocean freight rely on bulk carriers to capsize?
On May 13th, Pan Ocean of South Korea released its first quarter performance report, which showed that the company achieved operating revenue of 975.5 billion Korean won (approximately 713 million US dollars), a year-on-year decrease of 2.1%; Realized operating profit of 98.2 billion Korean won (approximately 72 million US dollars), a year-on-year decrease of 12.8%. However, despite this, the company's operating profit margin has dropped significantly to single digits for two consecutive quarters and returned to 10% in the first quarter of this year.
South Korean industry insiders have stated that due to the global economic downturn leading to a decline in the shipping market, especially in dry bulk and container transportation, the revenue of Pan Ocean Shipping has significantly declined since 2023. Last year, Pan Ocean Shipping achieved a revenue of 4.361 trillion Korean won (approximately 3.29 billion US dollars), a year-on-year decrease of 32.1%; Realized an operating profit of 385.8 billion Korean won (approximately 299.1 million US dollars), a year-on-year decrease of 51.1%; Realized a net profit of 245 billion Korean won (approximately 185 million US dollars) for the current period, a significant year-on-year decrease of 63.8%. From the full year of 2023, the operating profit margin of Pan Ocean Shipping was 8.8%, a decrease of 3.5 percentage points from 12.3% in 2022. Especially in the third quarter of last year, the company's container transportation business also experienced its first loss in 10 years.
In the fiscal years 2021-2022, the operating profit margin of Pan Ocean Shipping reached around 12%. In the first half of 2023, the operating profit margins of Pan Ocean Shipping in the first and second quarters remained above 10%, at 11.3% and 10.2%, respectively. But in the second half of the year, as the growth momentum of operating profits weakened, the revenue of Pan Ocean Shipping also declined. After the operating profit margin dropped to 7.1% in the third quarter of last year, it continued to drop to 6.7% in the fourth quarter.
However, in the first quarter of this year, Pan Ocean Shipping achieved a 42.9% increase in operating profit compared to the fourth quarter of last year through efforts to improve profitability in the dry bulk transportation sector and reduce losses in the container transportation sector. The operating profit margin rebounded to 10% and returned to double digits.
Specifically, from the perspective of various business areas, the dry bulk transportation business of Pan Ocean Shipping is based on the traditional off-season of the first quarter, focusing on profit oriented ship leasing business. Therefore, although the transportation volume has decreased, the operating profit has increased by 20% compared to the previous quarter, reaching 53.3 billion Korean won (approximately 39 million US dollars).
In the field of container transportation, ocean freight has reduced its losses by reducing costs while maintaining a low freight tone.
The oil and LNG transportation businesses of Pan Ocean Shipping have achieved a significant increase in operating profit compared to the previous quarter, as the MR tanker transportation market continues to rise and LNG carrier transportation revenue grows.
A person related to Pan Ocean Shipping stated, "After entering the second quarter, as the global economic recovery trend becomes more active, the demand for cargo transportation is expected to increase. Therefore, the company looks forward to a positive improvement in the market situation. In the future, the company will strive to strengthen its market response ability and maintain continuous investment in the conversion and construction of environmentally friendly and efficient fleets by expanding its business investment portfolio and other measures, striving to enhance profitability. At the same time, through ESG (Environmental, Social and Corporate Governance) practices, the company will establish its position as a 'sustainable enterprise'."
