HMM Reports Record Profits, Prompting Renewed Reports of Privatization
South Korea’s HMM reported record profits for 2021 more than offsetting nearly a decade of losses and immediately prompting renewed speculation that the government will proceed with the privatization of the country’s largest container shipping company. The shipping line, whose profits were only exceeded so far for 2021 by companies including Samsung and PSCO as the largest in the country, has been controlled by the Korea Development Bank and Korea Ocean Business Corporation for nearly six years after they saved the then Hyundai Marine from bankruptcy.
“Revenue and profits reached a record high in 2021, primarily driven by high freight rates and efficient fleet operations,” said HMM reporting its results. The strong market helped the company to more than double its 2021 revenues to over $11.5 billion while net profit went from essentially flat last year to $4.6 billion, a more than 40-fold increase. The profits exceeded analysts’ estimates by 11 percent according to a report in the Korea JoonAng Daily.
"Fourth quarter is usually an off-season for the container shipping business, but increased loads for Asia-America routes, due to the major promotions like Black Friday, boosted the demand for shipping and drove up prices," the company said in its press release. Reflecting these strengths, HMM reported revenue more than doubled in the fourth quarter versus the prior year and were 10 percent ahead of the third quarter. Profits in the fourth quarter were up more than 19-fold.
The strong results led the Korean media to renew speculation of the pending privatization of the shipping company. Over the past five years, the banks have helped the company to modernize its operations and improve efficiency. HMM highlighted the addition of 12 containerships each with a capacity of 24,000 TEU and the addition of a total of 20 new ships in 2021. HMM currently has just over 800,000 TEU of total capacity and is targeting expansion to 1 million TEU. In June 2021, they announced an order for 12 new 13,000 TEU containerships.
Speculation over the timing of a privatization of the shipping company started a year ago when the chairman of KDB talked openly about exploring the possibility of selling the bank’s shares. They speculated that it would be a multi-stage deal involving the conversion of bonds into equity. Late in 2021, Korean government officials confirmed that discussions were underway to develop a plan for the privatization of the shipping company. The undersecretary of the Ministry of Oceans and Fisheries said he expected a plan to be finalized by the first quarter of 2022.
Some of the speculation in South Korea is that the government wanted to move while the container shipping market continued near its peak. Others have warned that the government might be moving too quickly that HMM needs to stabilize and consolidate its recent gains while continuing the modernization of its fleet.
Adding to the speculation, The Korea Times reported today that the creditors have selected former Hyundai Glovis and Hyundai Wia CEO Kim Kyung-bae to take over the leadership of HMM. The current CEO’s term is set to expire in March. The newspaper reports that the government approached Hyundai Glovis in 2016 to acquire HMM and based on Kim’s close ties to the company they are speculating that he could help to renew the acquisition plan.
HMM in its earnings report cited the pressures on oil prices as one of the challenges for the year ahead. They said that about 80 percent of their capacity is on ships outfitted with exhaust scrubbers, which they predicted would give the company the ability to respond to rising oil prices.