The container leasing company TAL International reported a profit of $37.9 million in the second quarter ending June 30, a 29.4 percent increase over the over the $29.3 million earned in the same 2012 period.
Total revenue in the second quarter was $172 million, 15 percent up from the $150 million reported in the second quarter of 2012.
Brian M. Sondey, TAL's president and chief executive officer, said income "continues to be supported by very high utilization. Our utilization averaged 97.5 percent for the second quarter and stood at 97.4 percent as of July 24, 2013. Our profitability in the second quarter was also boosted by a decrease in our average effective interest rate. During the second quarter, we took advantage of the very low interest rate environment to refinance several debt facilities, and extend and lower the fixed rates on a large portion of our interest rate swap portfolio.
Sodney added that supply and demand of containers is relatively well balanced because "procurement of new containers remains tightly connected to the growth in global containerized trade." He did say that trade growth will likely fall below expectations this year, and this lower growth environment is coupled with a challenging market for new investment.
"A number of our shipping line customers have increased their container purchases this year, perhaps to take advantage of a reduction in new container prices, and the leasing share of new container procurement will likely fall toward 50 percent in 2013, after reaching an estimated 65 percent last year," Sodney said. "New investment opportunities have been more limited in this environment, and market leasing rates have become more aggressive. Nonetheless, TAL has been able to take advantage of our strong customer relationships and extensive supply capability to generate a solid volume of new business." TAL is expecting the delivery of more than $470 million worth of new and sale-leaseback containers this year.
"We currently expect our market environment to hold fairly steady as we head into the second half of the year," he added. "We expect our utilization to remain high and expect our leasing revenue will continue to grow as containers committed to lease are picked up. We will also benefit from a full quarter impact of lower interest rates from the refinancing activity that occurred throughout the second quarter. However, we expect used container sale prices will continue to moderate and cause our disposal gains to continue to trend down to historically normal levels."
An article on container leasing, "To buy or lease," appears on page 40 of the August issue of American Shipper. - Chris Dupin