South Korea’s leading container carrier HMM Co. returned to profit in the second quarter, its first quarterly profit in 21 quarters, thanks to improved efficiency with the deployment of the world’s largest container vessels and its new membership in one of the world’s largest shipping alliances.
HMM said in a regulatory filing on Wednesday that it posted an operating profit of 138.7 billion won ($117.2 million) in the second quarter ended June on a consolidated basis, reversing from a loss of 2.02 billion won in the previous quarter and 112.9 billion won in the previous year. It also raised a net profit of 28.14 billion won in the April-June period, improving from a net loss of 65.6 billion won in the previous quarter and 200.72 billion won in the previous year.
Sales reached 1.38 trillion won in the second quarter, up 4.7 percent from the previous quarter and down 1.6 percent from the same period last year.
HMM was trading 2.35 percent, or 150 won, higher at 6,530 won in the morning session on Wednesday.
The country’s sea flag carrier, formerly known Hyundai Merchant Marine, swung to profit for the first time in 21 quarters in the April-June period after joining The Alliance, one of the world’s largest shipping alliances, in April, which has broadened its coverage in Europe, and deploying a 24,000 twenty-foot equivalent unit (TEU) super-large container vessel to its route, which ramped up its cargo handling capacity significantly, the company said.
HMM’s both container and bulk businesses reported solid performance thanks to improved cost efficiency through route rationalization and lower container costs. Freight rates also increased in the period, helping to improve profitability.
Uncertainty lies ahead in the second half of the year amid escalating conflicts between the world’s two largest economies the United States and China and the protracted pandemic.
But the sea flag carrier plans to continue to improve its profitability by offering differentiated shipping services to cargo owners, putting out efforts to secure additional stable cargo, and improving IT system. HMM also plans to launch all 12 of its 24,000 TEU container carriers by the end of next month. With all the 12 super-large container carriers deployed, HMM’s active capacity would reach 800,000 TEU, the eighth largest in the global shipping market.
Its bulk business is also expected to improve in the later half as economic activities are projected to grow with ease of lockdown restriction, and demand for oil and petrochemical products should recover during winter. Demand for iron ore is also expected to recover on the revived steel industry.
The company’s turnaround raises hope for potential revival of Korea’s shipping industry that has relied on the Korean government’s support for rehabilitation.
HMM became the dominant player in the country’s shipping industry after bigger rival Hanjin Shipping declared bankrupt in 2017. HMM – which spun off from Hyundai Group – was nationalized and underwent massive reform led by state lender Korea Development Bank (KDB) under the government’s long-term initiative to rebuild Korea’s shipping industry.
Moon Seong-hyeok, minister of the Ministry of Ocean & Fisheries, said on Wednesday that HMM`s return to profit is a result of five years of government efforts to rebuild the country’s shipping industry.
Moon expected that HMM will post an annual net profit in 2022. The government plans to ramp up HMM cargo capacity from current 590,000 TEU to 1 million TEU in 2022 with an aim to expand its coverage routes in Asia and pioneer new sea routes in southeast United States, South America, and west Africa.
HMM will also aim to raise 51 trillion won in revenue by 2025.