HMM Reports 90% Decline in 2023 Net Profit Amid Falling Demand and Freight Rates

SEOUL - HMM Co., South Korea's leading container shipping company, witnessed a significant downturn in its financial performance for the year 2023, with net profit plummeting by 90% compared to the previous year. This sharp decline was attributed to a combination of sluggish demand across the shipping industry and lower freight rates, according to a regulatory filing released by the company on Wednesday.

According to Yonhap News Agency, HMM's net profit for 2023 stood at 1.01 trillion won (approximately US$760 million), marking a drastic reduction from the previous year. The company also reported a 55% decrease in sales, which amounted to 8.4 trillion won, while operating income fell by 94% to 584.9 billion won. These figures reflect the challenging conditions faced by the global shipping industry, characterized by reduced demand and competitive pressures leading to decreased shipping rates.

The Shanghai Containerized Freight Index, which serves as a gauge for global freight rates, averaged 1,006 points last year, experiencing a 71% drop from 3,410 points recorded a year earlier. This decline in freight rates has had a direct impact on HMM's profitability and operational performance.

Despite these financial setbacks, HMM reported a slight improvement in its financial health, with the operating margin standing at 7% for the year. The company also managed to reduce its debt-equity ratio to 20%, down from 25%, indicating a stronger balance sheet.

However, market analysts have expressed concerns that HMM's poor performance in 2023 could affect the ongoing efforts to sell the company. The Korea Development Bank (KDB) and the Korean Ocean Business Corp, both state-controlled entities, currently hold a 57.9% stake in HMM. Recent reports indicate that negotiations with a local consortium for the sale of this stake have been suspended due to unresolved disagreements on key issues.

The backdrop of these developments includes the financial crisis faced by HMM's predecessor, Hyundai Merchant Marine, which led to a bankruptcy and subsequent takeover by KDB in 2016 following a 6.8 trillion won public fund injection in 2013.

Despite the broader market downturn, HMM shares showed resilience, closing 0.39% lower at 17,750 won on the Seoul stock exchange on Wednesday, a performance that outpaced the overall Korea Composite Stock Price Index's 1.1% decline.

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