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| Hyundai Merchant Marine (HMM) CEO Bae Jae-hoon speaks during a press conference at the company's office in Seoul, Tuesday. Courtesy of HMM |
By Nam Hyun-woo
Hyundai Merchant Marine (HMM) said Tuesday the company would turn a profit sometime within the third quarter of this year at the earliest, after ending an 18-quarter losing streak.
The rather upbeat outlook came amid growing pressure on the company for a quick turnaround after receiving 1 trillion won in financial support from the state-run Korea Development Bank (KDB) in 2018. KDB announced Bae Jae-hoon as the new HMM chief in March and he pledged a swing to profit.
"The third quarter has been the high season for shippers in various aspects and we expect some additional effects by introducing mega container vessels this year," Bae said during a press conference at its headquarters, downtown Seoul. "We cautiously expect a turnaround in terms of profit in the third quarter."
Since the second quarter of 2015, HMM has been reporting losses. During the first nine months of last year, the company reported combined losses of 265.2 billion won, though it saw a 10 percent rise in sales during the given period.
On the faltering bottom line, HMM signed a self-rescue deal with the KDB in July 2016 and then received additional aid back in October 2018, but has thus far been far from showing any visible rebound. This was followed by KDB's criticism that HMM is in moral hazard and the lender has been strengthening its monitoring of the shipper since then.
"Thanks to the assistance from the KDB and other stakeholders, we could lay the groundwork for our recovery last year, and we applied every possible measure to make it sustainable, which can endure any kind of headwinds," Bae told reporters.
As one of the grounds for his outlook, Bae said HMM's joining of THE Alliance, one of the largest groups of shipping companies, will resuscitate the company's profitability.
Last year, HMM was invited to join THE Alliance as a regular member, and recently won approval from the U.S. Federal Maritime Commission on the membership. It will start offering services with other members in April after approvals are granted from other countries.
The participation in THE Alliance helps the South Korean shipper join the alliance's decision-making process, thus enabling its own controls for coping with market uncertainties.
"Joining THE Alliance is the best outcome for HMM," Bae said. "Since the group is short of mega container vessels, HMM's mega container vessel fleet will become a huge strength for THE Alliance in terms of slot cost."
Before joining the THE Alliance, HMM was a member of 2M, another group of shipping companies comprised of Maersk and MSC. However, the company was registered as a strategic partner, not a regular member of the group. At THE Alliance, HMM is a regular member along with Hapag-Lloyd of Germany, ONE of Japan and Yang Ming of Taiwan.
In September 2018, HMM ordered 12 24,000 twenty-foot equivalent unit (TEU) container vessels to Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries, and will introduce those ships for the company's European routes from April this year.
Adding the new container vessels, HMM's total tonnage increases to 800,000 TEU, up from 450,000 TEU currently. As the company's total tonnage increases, HMM will exchange spaces with the members of THE Alliance, which Bae described as one of the key benefits coming from the alliance.
