These three shareholders have just released “revisions” to their earlier forecast for the first half and full year 2018 and they do not make comfortable reading. The estimates made for ONE when it started business in April 2018 were for it to make US$110m profit after tax in its first year. This has now been revised down to a loss of US$600m. The adjustments in the forecasts for revenue are less severe, with the initial forecast being US$12.25bn whilst the revised number is US$11bn.
The reasons for the problems have not been fully explained. MOL commented that whilst “for the first half of the fiscal year, synergistic effects of the business integration have emerged steadily …on the other hand, liftings and utilisation dropped due to the impact of teething problems immediately after the commencement of services in April of this year”.
ONE’s management was optimistic that it could deliver lower costs and a stronger sales operation by amortising fixed costs over greater container volumes of the combined business. However, what actually happened was problems with its internal information systems, especially the customer facing operations such as container booking, as the new company struggled to merge its various legacy systems from its constituent shipping lines.
The company’s management now asserts that these problems have been fixed and that the “synergistic effects for the initial year turned out to be higher than the initial outlook”. More details are to be revealed about problems on “specific factors and specific routes responsible for the downward revision when the “three parent companies” release their second quarter numbers. It is probably a reasonable assertion to suggest that until stronger explanations are given about ONE’s problems it is hard to be confident about its future prospects.
Source: Transport Intelligence, October 18th, 2018
Author: Thomas Cullen
