Due to Logistics Shortage, HMM's Operating Profit Expected at 7 Trillion Last Year... Korea Ranks 4th

"This Year Also Strong Performance... Operating Profit Expected to Reach 10 Trillion"

[Asia Economy Reporter Moon Chaeseok] HMM, the largest container shipping company in South Korea, is expected to record an operating profit of approximately 7.2 trillion won last year. This ranks as the fourth highest among domestic companies.

According to the shipping industry on the 13th, HMM is scheduled to announce its performance for last year on the 14th or 15th. Based on the earnings forecasts compiled by the securities industry over the past three months, HMM's revenue and operating profit for last year are projected to be 13.6802 trillion won and 7.2077 trillion won, respectively. If this forecast is accurate, HMM will achieve its highest annual performance since its founding, including the Hyundai Merchant Marine era, with an operating profit margin of 53%. It will earn the fourth highest operating profit, following Samsung Electronics, SK Hynix, and POSCO. It will surpass Hyundai Motor Company, which recorded an operating profit of 6.6789 trillion won last year.

The fourth quarter revenue and operating profit forecasts are also estimated at 4.3291 trillion won and 2.5287 trillion won, respectively, marking the largest quarterly figures ever. Generally, the fourth quarter sees a decline in cargo volume compared to the peak third quarter, resulting in lower revenue and operating profit. However, last year, thanks to ocean freight rates more than doubling compared to the previous year and port congestion, results are expected to exceed those of the third quarter.

HMM, which struggled with losses for the past decade and was managed by its largest shareholders, the Korea Development Bank and the Korea Ocean Business Corporation, achieved a turnaround in performance last year. From the fourth quarter of 2020 through the third quarter of last year, it set new records for four consecutive quarters by surpassing the previous quarter's performance. The industry views HMM's strong performance as a signal of its revival.

Strong performance is expected to continue this year as well. The Shanghai Containerized Freight Index (SCFI), which indicates the level of freight rates on maritime shipping routes, recorded 4,980.93 on the 11th, falling below the 5,000 mark. However, the securities industry forecasts HMM's operating profit this year to range between 7.6 trillion and 10.2 trillion won. Due to HMM's characteristic of having a high proportion of long-term contracts, there is a time lag before the decline in ocean freight rates is reflected.

Researcher Bae Gi-yeon of Meritz Securities said, "Operating profit is expected to grow about 34% this year, reaching 10 trillion won," adding, "This is due to the effect of proactively securing freight rates for contracted volumes to be transported this year, given the high proportion of long-term contracts. Regardless of whether the SCFI declines, further growth in performance is possible."

This content was produced with the assistance of AI translation services.