HMM’s Future Still Unclear Despite Huge Cash Holdings
HMM, the largest container carrier in South Korea, posted an operating profit of no less than 7.3775 trillion won last year, getting out of its 10-year slump at once. The state-run Korea Development Bank has been the owner of the company for six years, and the operating profit means that the bank’s primary goal of turning the shipping company around has been achieved. However, the bank’s ultimate goal, that is, finding a new owner, is not easy for now, which may undermine the carrier’s future growth.
As of the end of March, HMM’s current assets totaled 12.2236 trillion won and its cash and cash equivalents were 2.9036 trillion won, up 273 percent and 136 percent from a year ago, respectively. This is in stark contrast to its performance in 2009 to 2019, when its average annual operating loss was 440 billion won. In the first quarter of this year, HMM’s operating profit amounted to 3.1486 trillion won and its debt ratio, which amounted to 2,499 percent in 2015, dropped to 59.7 percent. In short, it has become a completely different company.
Concerns lie in its long-term vision. At present, HMM has no new investment plan and its business plans are limited to new ships and cargoes and marketing and IT system improvements. On the other hand, many other companies in the industry are rapidly increasing their investments, based on their cash that rapidly increased in the recent pandemic period, in order not to be affected by shipping market conditions. For example, Maersk is trying to find more opportunities in land and air transport.
HMM’s focus is still on container transport. This is because it cannot but be conservative in investment under creditor control. It is said that the state-run bank needs to make more effort to seek a new owner.
Source: Business Korea