Orient Overseas (International) Ltd (OOIL) said on Monday that a sharp increase in profit from property investments, coupled with a reduction in financial costs, boosted its 2014 earnings while its core shipping business is heading into rougher seas.

The Hong Kong-based shipping conglomerate, controlled by the family interests of former chief executive Tung Chee-hwa, posted a net profit of $270.5 million for last year - up a whopping 474 percent from 2013.

But the company's shares closed 3.9 percent down at HK$47.85 apiece on Monday, underperforming Hong Kong's benchmark Hang Seng Index, which dropped 0.17 percent to close at 24,123.05.

In its annual report released on Monday, the company said its 2014 results included a $9.65 million "fair value gain" from an investment property. This investment showed a loss of more than $6.9 million in 2013.

The company also said Wall Street Plaza, an office building in New York owned by the company, contributed $119.4 million to operating income, up 88.8 percent from a year before.

Meanwhile, OOIL attributed the 10-percent reduction in total bunker cost to a decrease in bunker price and improved operation efficiency leading to reduced consumption.

Seaborne trade growth for the liner industry was better than expected amid mixed global economic environment in 2014, said OOIL. East-West trades recorded healthy volume growth while the Intra-Asia trades posted positive but inconsistent growth. In aggregate terms, global demand grew by 5.3 percent, an improvement from 4.0 percent in 2013.

"The industry as a whole performed better than that of 2013, though freight rate across trades were mixed," said OOIL Chairman Tung Chee-chen. The Asia-Europe trade saw better-than-expected performances, especially in the earlier part of the year, while those of the Trans-Pacific and Intra-Asia trades were more muted, he said in a statement.

In 2014, the lifting of OOIL increased by 5.5 percent while revenue improved by 3.5 percent compared with the previous year. Despite the increase in capacity and lifting, OOIL said it was successful in holding down the increase in operating costs to 1.7 percent to $5.88 billion in 2014.

Tung said he expects that trade growth in 2015 will outperform that of 2014, and bunker cost savings for the industry will become more apparent in 2015.

Looking ahead, Tung said:"Building a sustainable logistics business remains a key objective for the group."

He noted that operating under the brand name OOCL Logistics, the group's logistics business is an independent profit center active in international supply chain management, import and export services, domestic transportation and warehousing services. The business has grown to 130 offices in 30 countries. "We expect the logistics business will become a meaningful contributor to the group's bottom line over the long term," the company said in a stock exchange filing.

But it's not going to be smooth sailing all the way, the company conceded.

Carriers, it said, are facing multiple challenges, including port congestion in Asia and Europe, worsening labor and logistics bottlenecks in the US and the cascading effects in the Trans-Pacific and Intra-Asia trades.

Despite the uncertainties, OOIL said the company is expecting more new buildings delivered in 2015 followed by a lull in 2016. "In the first quarter of 2015, congestion in Asia and Europe has eased, and labor issues on the US West Coast seem to be in the process of being resolved," it said.

celia@chinadailyhk.com

Carriers are facing multiple challenges, including port congestion in Asia and Europe, worsening labor and logistics bottlenecks in the US and the cascading effects in the Trans-Pacific and Intra-Asia trades. Patrick T. Fallon / Bloomberg

(HK Edition 03/10/2015 page10)