HMM: Operating profits decline before privatization, five potential buyers

HMM Privatization Deal Collapses as Harim Group Withdraws

In a challenging quarter marked by persistently low freight rates, South Korean shipping company HMM recorded operating profits of just USD 100 million in the second quarter of the year, the lowest since the onset of the pandemic in Q2 2020. The decline was primarily attributed to a staggering 70% year-on-year drop in freight rates, despite maintaining steady shipping volumes compared to the previous year.

HMM’s average container rates stood at USD 1,020 per twenty-foot equivalent unit (teu) for the January-June period, a stark contrast to the USD 3,549 per teu reported in the first half of 2022. Particularly affected were the rates on headhaul services ex Asia, which plummeted by a significant 76% during the same period. However, despite the decline in profits, shipping revenue experienced a slight uptick in Q2 compared to Q1.

While container earnings still constituted the majority of company revenue at 84% for Q2, this marked a notable drop from the 94% reported in 2022. HMM acknowledged that a swift recovery in container market rates was unlikely in the short term due to supply and demand dynamics. Nonetheless, there were signs of a price recovery attributed to carriers exercising supply control.

In response to the challenging market conditions, HMM has outlined plans for route rationalization and a strategic focus on higher-profit shipments, including reefer and inland cargoes. The company has also committed substantial investments of KRW 15 trillion into ship acquisition, terminal development, logistics facilities, and containers through 2026. Of this, KRW 3.7 trillion will be allocated to eco-friendly vessel initiatives. The turnaround comes after nine years of losses prior to the onset of the COVID-19 pandemic.

In a separate development, HMM’s privatization has attracted the attention of five potential bidders as the company approaches the final stages of the shortlisting process. Among the interested parties are IMM Private Equity, which owns Hyundai LNG Shipping, and Korean fashion giant Global Sae-A. Speculation has arisen that HMM could potentially integrate into Global Sae-A’s distribution logistics chain.

Additional bidders include SM Group, the owner of SM Line; LX Group, a subsidiary of electronics conglomerate LG; Dongwon Group, a specialist in logistics and fisheries; and Harim Group, a South Korean agri-food business that already owns PanOcean.

The sale of a majority stake in HMM is being overseen by state sellers Korea Development Bank (KDB) and Korea Ocean Business Corp (KOBC), with a deadline of August 21 for interested parties to submit their bids. Once this phase concludes, a preferred bidder will be selected to steer the future course of the South Korean shipping company.

Source: Alphaliner

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