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SINGAPORE, 26 February
2003: – Global transportation and logistics company Neptune Orient Lines Ltd (NOL)
today reported a loss for the full year 2002 of US$330 million. The company had earlier
warned of a potential US$335 million loss for the full year, including US$110 million
of exceptional items.
The company confirmed the full year loss included US$109 million in exceptional items,
which had a direct impact on the Group’s bottom line. At an operating level, core
Earnings from business operations Before net Interest expenses, Tax, Depreciation,
Amortisation and exceptional items (core EBITDA), was positive US$241 million, down
29 per cent on the 2001 figure of US$339 million.
Revenue for the year decreased by around two per cent to US$4.6 billion from US$4.7
billion.
APL continued to contribute the largest proportion of the Group’s revenue at 74 per
cent of the total, while APL Logistics’ share increased to 18 per cent and seven per
cent came from NOL Chartering activities, with the balance of one per cent from other
activities.
NOL Group Chairman, Mr Cheng Wai Keung, said, “While 2002 was tough for the industry
as a whole, it was particularly tough for NOL. We were geared for growth just as the
tide of world trade ebbed, and we did not adjust quickly enough to the changed circumstances.
“That is behind us now,” he said. “Today we are very much focused on getting back
to basics and concentrating on what we do best in each of our core businesses, including
building on the strong synergies between the liner and logistics businesses globally,
which will benefit both these businesses and customers.
“We are currently reviewing our investment in AET and while clearly selling this unit
is one option, we are keeping all our options open,” Mr Cheng said.
“We are also paring down our costs, managing our yield closely and working hard to
recover rates. During 2003, we are looking to further reduce general and administrative
costs as well as operating costs, and this will include some headcount reduction –
although this will not be across the board, but as a result of the core businesses
looking for greater efficiencies.
“Our target is sustainable profitability and we anticipate a substantial improvement
in performance in 2003. We have three capable leaders in each of the CEOs of our business
units who have begun the year by setting high goals for themselves and their teams
and developing the business plans that will help them achieve those goals.
“Meanwhile,” Mr Cheng said, “until a new Group CEO is appointed, we hope within the
next few months, the Executive Committee of the Board will continue to provide support
and guidance to the management team, who remain responsible for day-to-day operations.”
The Group’s Chief Financial Officer, Lim How Teck, reiterated that the Group’s financial
position remained solid with positive operating cash flow. That was forecast to continue,
despite the uncertainty caused by potential conflict in the Middle East.
“We are prepared for operational and financial contingencies that may develop as a
result of a war in the Middle East,” he said. “Depending on the extent of any conflict,
such a war is likely to have either a neutral or slightly positive impact on the Group’s
finances as the US Government increases volumes shipped with carriers.”
APL Liner
APL Acting CEO Ron Widdows said that APL, the principal earner of the Group, had seen
revenues fall five per cent even as volumes increased six per cent in 2002, reflecting
the rate slide that began in 2001 and continued through most of 2002. Rates ended
the year even lower than they were in 2001.
At the same time APL’s volumes increased six percent, headhaul capacity fell four
per cent overall resulting in strong average utilisation rates for the year.
“However, instead of fixed costs increasing as a result of the added volumes, they
actually fell seven per cent (excluding bunker costs), reflecting the aggressive approach
we have taken to reducing costs – and continue to take,” he said.
“Already this year we have restructured and taken out layers of management to allow
for swifter decision making – that means more responsibility and more accountability
from the liner team. But it also gives greater freedom to make effective business
decisions in response to changing business environments.”
Overall, cost cutting and other initiatives had a positive impact of around US$200
million during 2002 and gains of around US$150 – 200 million are forecast for 2003
through cost containment and yield management.
Despite cost reduction activity last year, rates continued to be unsustainable across
most trade lanes in 2002, with Asia Europe and the Trans-Pacific hardest hit. In line
with the industry, APL is pursuing rate increases during the current contract negotiations
with customers and early signs are positive.
While APL is seeing the usual seasonal downturn in the first quarter of this year,
volumes were high at the end of 2002 and remain significantly higher than historical
levels even now. Low rates mean there are few gains on the bottom line, but the volumes
are putting pressure on capacity, and this is only likely to continue as the seasonally
busy period begins towards the middle of the year.
“Strong measure have been taken to turn APL around,” Mr Widdows said. “We have clear
goals and know what we must do to achieve them.”
APL is targeting a significant improvement in performance in 2003.
APL Logistics
CEO for APL Logistics (APLL), Hans Hickler, said 2002 had not been the turnaround
year that had been hoped for APLL.
In contrast to the Group’s other business units, revenue had once again increased,
but the bottom line was impacted by depreciation and amortisation associated with
past acquisitions, and exceptional items, including losses from the sale of the operating
unit known as APL Direct Logistics and IT development costs.
“Since October last year, we have established a tighter, flatter organisational structure
that will both reduce costs and improve our decision making. Our business plans build
on both our integrated supply chain capabilities and our long-recognised and valued
core business capabilities in both origin and destination logistics services such
as freight consolidation, warehousing and distribution management. We are also leveraging
our global network and our links with our sister company, APL,” Mr Hickler said. “With
this will come strong organic growth and a solid base for future expansion.
“In addition we, like the rest of the Group, have our sights firmly on reducing our
costs. Our investment in IT and our commitment to asset-light business solutions help
to manage those costs, but there is more we can do,” he said.
APLL is targeting an improved performance in 2003.
Chartering
NOL’s Chartering division CEO and President, Joseph Kwok, said the division’s principal
business, crude oil transportation company American Eagle Tankers (AET), had remained
profitable despite charter rates falling substantially during 2002.
“Our oil transportation business was profitable in 2002 despite a tough year. However
the exceptional items in the other chartering activities negatively impacted the division’s
results,” he said. 2002 chartering revenue fell four per cent to US$343 million due
to lower charter rates.
With the possibility of stricter regulations around older, single-hulled vessels in
the wake of the oil spill off Spain in November, 2002, there has been a strong recovery
in tanker chartering rates for quality double-hulled Aframax tankers and Very Large
Crude Carriers (VLCCs). AET with its fleet of 31 modern vessels, all double-hulled
or double-sided, will benefit in this environment.
Chartering’s other principal, but substantially smaller, business, product tanker
company, Neptune Associated Shipping (NAS), formed in 2001, registered a small operating
loss for 2002.
Overall, the Chartering division is expected to further improve on its 2002 performance.
About NOL
NOL is a global transportation and logistics company engaged in shipping and related
businesses. Its container transportation arm, APL, provides customers around the world
with container transportation services that combine high quality inter-modal operations
with state-of-the-art information technology while APL Logistics provides end-to-end
supply chain management services through its global network. Its crude oil transportation
company, American Eagle Tankers (AET) provides quality services to the oil industry,
principally in the Caribbean and Gulf of Mexico region.
Media inquiries:
Sarah Lockie Tel: (65) 6371 5022 Email: sarah_lockie@nol.com.sg
NB: Following is a summary of the 2002 Annual Results. For more detailed information
please visit www.nol.com.sg
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