NOL earnings improve

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Luisa Cheshire

BY LUISA CHESHIRE

NOL earnings improve

NOL Group’s performance improves in the first quarter of 2014, buoyed by cost management and efficiency gains

NOL earnings improve

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Singapore-based global container shipping and logistics company Neptune Orient Lines (NOL) this week (14 May) posted a first quarter 2014 net loss of US$98m, compared to a US$76m profit in the same period last year which included a US$200m gain from the sale of the NOL headquarter building in Singapore.

But the group, which comprises shipping arm APL and logistics business APL Logistics, nonetheless reported 14 per cent improvement in its first quarter 2014 Core Earnings Before Interest, Taxes and Non-Recurring Items (EBIT), narrowing its loss to US$65m from a year ago.

NOL attributed this improvement to its continuing focus on cost management and operational efficiency, which delivered US$80m worth of cost savings in the first three months of 2014.

“Operating conditions in the first quarter had been difficult, with severe weather disruptions in Europe and North America. This compounded the challenges posed by continued excess capacity in the container shipping business,” NOL group president and CEO Ng Yat Chung said in a press release.

“Nonetheless, both our business units delivered better year-on-year operating results this quarter. Going forward, global economic prospects and trading conditions remain uncertain. Oversupply of shipping capacity will continue to exert pressure on liner freight rates. The Group aims to improve its financial performance in 2014, through its continued focus on cost discipline and drive for operational efficiency. We will also seek growth opportunities, particularly in our logistics business.”

APL, NOL’s container shipping business, lifted its 1Q 2014 Core EBIT by 10 per cent over the same period last year, recording a loss of US$83m. Cost savings and efficiency gains helped reduce cost of sales per forty-foot-equivalent unit (FEU) by 6 per cent. APL reported first quarter 2014 revenue of US$1.9bn, while its year-on-year volume grew 2 per cent, and its average freight rates dipped 6 per cent.

“APL’s emphasis on capacity management, as well as savings in areas such as bunker consumption and vessel and voyage operations, helped cushion the impact of falling freight rates in this year’s first quarter,” said APL president Kenneth Glenn. “As more of our new buildings come on stream in the following months, along with the scheduled return of less efficient chartered tonnage, we are on track to continue lowering slot costs and further strengthen our competitiveness.”

APL’s headhaul utilisation was at an optimal 95 per cent in the first quarter of 2014. APL registered a 9 per cent volume expansion with stable freight rates in the Asia-Europe trade. Volume was firm in the Trans-Pacific trade with freight rates falling 5 per cent, while its Intra-Asia trade grew 1 per cent in volume against an 11 per cent dip in freight rates, amid intense market competition and excess tonnage cascading from the Asia-Europe trade.

NOL’s supply chain management business, APL Logistics, made a year-on-year Core EBIT improvement of 13 per cent in the first quarter of this year, which reflected its continuing focus on profit optimisation. Its revenue of US$423m was relatively unchanged from that of the same quarter last year.

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