South Korean shipping line Hyundai Merchant Marine (HMM) has announced plans to reign in costs as it reports a significant decline in its financial performance for the first quarter of 2023.
The company reported a staggering 58% decrease in revenue, plummeting to KRW 2,082 billion (US $1.5 billion) from KRW 4,919 billion in the same period last year. This sharp decline in revenue was accompanied by a 90% drop in operating profit, which fell to KRW 307 billion (US $230 million) from KRW 3,149 billion. The net profit also experienced a considerable dip, reaching KRW 285 billion (US $213 million), down from KRW 3,132 billion.
The weakening of HMM’s financials can be attributed to various factors, with the easing of global supply chain pressures being the most prominent one. The normalization of the container shipping market had adverse effects on HMM’s revenue and profits. This was evident in the Shanghai Containerized Freight Index (SCFI), which recorded a substantial decline from 4,851 points in Q1 2022 to an average of 969 points in Q1 2023.
Despite the challenges, HMM managed to eke out a profit from its container and bulk businesses, albeit with lower freight rates.
In a response to the prevailing economic downturn, HMM expressed concerns about high inflation pressure stemming from the rising costs of energy and raw materials. These factors have led to increased interest rates and a decline in demand. “This downward trend in the global economy is expected to continue with no encouraging sign of restoring consumer confidence in the near term,” HMM said.
To address these challenges, HMM has outlined a commitment to implement a wide range of cost-cutting measures and enhance operational efficiency to stay competitive amid market volatility and widespread uncertainties.
HMM is also continuing to emphasize its dedication to an ESG-oriented (environmental, social, and governance) approach. It plans to reinforce its environmental competence through constant investment and the establishment of state-of-the-art IT infrastructure.
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