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Singapore, 21 Aug, 2003 – Global transportation and logistics company Neptune Orient
Lines Ltd (NOL) today reported a first half (1H) net profit of US$88.7 million on turnover
of US$2.6 billion.
At the half-year mark in 2002, the company reported a loss of US$155.7 million with a turnover
of US$2.2 billion. Freight rates in NOL’s biggest revenue generating business, container
shipping company APL, reached record lows at that time, while volumes climbed.
Turnover for the Group for 1H 2003 reached US$2.6 billion, an improvement of 19 per cent
on 1H02, with each of the Group’s three core businesses, APL, supply chain management company
APL Logistics and crude oil transportation company American Eagle Tankers (AET), all improving
their overall performance.
“The results show that at an operational level there has been a fundamental shift across
the Group,” Chairman Mr Cheng Wai Keung said. “The turnaround that began at the beginning
of the year has been sustained, with rates continuing to correct to more historic levels
on all of APL Liner’s trade lanes, APL Logistics’ performance improving and Chartering
rates remaining relatively strong.”
The effect of the sale of AET announced in April and completed at the end of July would
only be reflected in third quarter results, he said.
Group CEO, Mr David Lim, said the disciplined focus on cost containment and maximising
yield, and on providing customers with value would serve the Group well into the future.
“We are working out strategies that would see NOL grow and achieve its potential over the
coming years,” he said. “But common to all, we need to squeeze the bottom line by being
lean in terms of cost and we need to maximise our top line by ensuring we provide customers
with excellent value in our services.
“This will help us smoothen the cycles and occasional shocks experienced in world trade
and sustain profitability. With costs controlled, an on-going focus on providing value,
and our hard working and capable team, we can implement the right strategy and make the
most of future opportunities for our company’s growth,” he said.
Group Chief Financial Officer, Mr Lim How Teck said that traditionally the second half
of the year saw better results than the first half, with the peak season for both the Liner
and Logistics companies beginning around July/August.
“With the proceeds from the sale of AET flowing through in the second half of the year,
we expect our balance sheet to be reasonably strong by the end of the year,” the CFO said.
“We will continue to look at ways of addressing debt and improving cash flow to further
reduce our gearing and strengthen our balance sheet and position ourselves for future investment
and growth.”
Mr Cheng said the Group would continue to assess other non-core businesses for divestment,
including the product tanker company Neptune Associated Shipping (NAS), to focus on the
core Liner and Logistics operations.
Barring unforeseen circumstances, Mr Cheng said, the NOL Group maintained its earlier positive
outlook and expected to achieve significantly better results in the second half of 2003.
APL Liner
APL performance at an operating level built on the success of the first quarter of 2003,
with core Earnings Before Net Interest Expense and Tax (EBIT) of US$87 million – compared
with a 1H 2002 core EBIT loss of US$71 million.
Cost savings of US$36 million were achieved in the second quarter, bringing the total savings
in 2003 to date to US$70 million, compared with the same period last year.
“The focus on yield management, changing the mix of our business to maximise contribution,
and beginning to improve how we go about optimising our global network saw our revenue
increase overall by 14 per cent,”APL CEO Mr Ron Widdows said. “While the volume of containers
moved globally reduced two per cent between 1H02 and 1H03 to 736,000 forty foot equivalent
units (FEU), main headhaul volumes in the key revenue generating trade lanes, Trans-Pacific
increased 11 percent and Asia-Europe increased eight per cent, improving revenue.
“Freight rates for 1H03 averaged US$2358 per FEU overall, a 17 percent improvement on 1H02,
while average rates in the second quarter were US$2517, an increase of 26 per cent on the
same period last year. Rates on the Trans-Pacific and Asia-Europe trades recovered to targeted
levels but have yet to reach levels we’ve seen in the past,” Mr Widdows said.
He noted that despite the expansion of the world container fleet, space was again becoming
an issue. “Trade growth has largely absorbed the capacity added to the world fleet, including
the 2003 additions, with growth on the Trans-Pacific eastbound and Asia-Europe westbound
both increasing 20 per cent industry-wide in the first half of this year.”
Utilisation remained strong and the pressure on space is forecast to continue beyond this
year, he said.
APL Liner remains on track to achieve significantly better results in the second half of
2003, barring unforeseen circumstances.
APL Logistics
NOL’s supply chain management company improved its performance at the half year point with
core EBIT of US$3 million. This compares with a first half core EBIT loss of US$11 million
in 2002.
Revenues increased a further 22 per cent to US$454 million over the same period, the result
of a mixture of new business and expanded business from existing customers, and costs were
further reduced.
“In our sales efforts, we are focusing on introducing our customers to our complete portfolio
of services and the value that comes from truly integrated solutions. This customer focus,
along with a strong internal drive to improve operating fundamentals, is paying off,” APL
Logistics CEO Mr Hans Hickler said.
APL Logistics is steadily improving its performance and expects be operationally profitable
for the year 2003.
Chartering
Charter rates for both crude oil and product tankers continued to be strong in the second
quarter, although not reaching the record highs of the first quarter. NOL’s Chartering
division’s revenue increased 68 per cent to US$263 million compared with US$157 million
in 1H 2002, while core EBIT rose 689 per cent to US$71 million.
“We continued to enjoy a good income from our tanker division in the first half of the
year,” Mr Lim How Teck said. “And while we receive income for only one month of AET’s operation
in the second half of the year, since the sale to Malaysia International Shipping Corporation
(MISC) was completed at the end of July, there is provision for an increase in the equity
price should AET achieve certain performance milestones over the next two years.”
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.
Media
Inquiries
Sarah Lockie, tel:
(65) 6371.5022 or sarah_lockie@nol.com.sg
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