High fuel costs pushes NOL into the red

Rising fuel costs and soft trade during the Chinese New Year period sent Neptune Orient Lines (NOL) sailing into the red for the first quarter.


The shipping giant posted a net loss of US$10 million for the period to April 8 - a sharp improvement on the US$98 million deficit recorded last year, although it still came after three consecutive profitable quarters, reported Straits Times.


The first-quarter result was also better than the predicted loss of $22.9 million from three analysts polled by Bloomberg.


"In spite of year-over-year volume growth, a softer-than-expected Lunar New Year period and rising fuel costs have interrupted our momentum,'' said NOL president and chief executive Ron Widdows.


NOL has posted net year-on-year quarterly profits since the first quarter last year, fuelled by a strong recovery in trade after the global recession.


In the first three months of this year, revenue grew 16 per cent from a year ago to $2.4 billion.


But costs rose 12 per cent from the first quarter last year to $2.25 billion, mainly stemming from higher volumes and increased bunker charges.


Revenue at APL, NOL's core container line shipping business, grew 15 per cent to $2.1 billion over the same period last year.
Container shipping volume rose nine per cent to 764,000 FEUs, mainly due to higher volumes on the intra-Asia and Asia-Europe trade lanes, although freight rates declined on both trades.
The average revenue per FEU grew three per cent from a year ago to $2,598, mainly due to improved freight rates on the transpacific trade route.


APL president Eng Aik Meng said: "Our emphasis must remain on operating efficiency, as well as slow-steaming our ships to conserve fuel and counteract the effect of rising fuel prices, which were 28 per cent higher per metric tonne in the first quarter of 2011 than they were in 2010.''


The company's logistics business posted a first-quarter revenue of $368 million, up 24 per cent from a year ago, on higher volumes and recovering rates across the various segments of its business.


The shipping industry has faced rising fuel prices and uncertainty over new vessels coming onstream, which could depress freight rates.


Oil prices breached $100 a barrel in March as political unrest swept parts of the Arab world, although they have now inched back down to $98.


NOL said market conditions remain uncertain.


"Increased operating costs - particularly related to fuel cost increases - and competitive pressure on rates are expected to continue for the near term. Should these conditions persist, our results will be negatively impacted.''
(Source:http://www.cargonewsasia.com)