NOL suffers 84pc loss, but revenue rises 14pc in 2008

SINGAPORE's Neptune Orient Lines (NOL) has posted an 84 per cent year-on-year net profit loss in 2008 of US$149 million compared with a profit of $196 million the previous year.

Revenue rose 14 per cent to $9.3 billion, but the global downturn and significant restructuring costs drove the company into loss, and into its first quarterly deficit in six years, reported Bloomberg.

The severity of the collapse in global trade over recent months is without precedent, said NOL chief executive Ron Widdows. Since late September 2008, we have seen a consistent, week-by-week drop in shipment levels across nearly all trade routes.

NOL's container arm APL, carried 574,300 FEU in the three months ending December 26, based on company filings with freight rates gaining 7.2 per cent in the period to $3,077 per FEU.

NOL said profits before interest and tax was US$213 million, down 64 per cent from the previous year.

Said Mr Widdows: Though we recognised early the pattern of decline in market conditions, adjustments could not fully counter the speed and dramatic nature of the downturn.

NOL cargo fell 14 per cent in the last quarter as the global recession cut demand to move Asian-made toys and furniture.

The container-shipping industry is just starting to get worse, Soeul-based Shinyoung Securities analyst Um Kyung A told Bloomberg. There's no guarantee we can see a recovery in the second half.

APL recorded a five per cent year-on-year rise in annual volumes to 2.47 million FEU with particularly strong Intra-Asia growth. This, combined with enhanced bunker recoveries, saw APL achieve revenues for the year of US$7.95 billion, 19 per cent higher than in 2007, said the company statement.

But a rapid deterioration in demand across all trades in the fourth quarter followed, said the company statement. APL's 4Q08 revenues were down two per cent to $1.96 billion, said the NOL statement.

APL recorded a core EBIT [earnings before interest and taxes] level loss for 4Q08 of $84 million. As a consequence the container shipping segment reported a reduced core EBIT for the year of $73 million, compared to $428 million in 2007, the statement said.

Despite capacity reductions, APL's average fourth-quarter global utilisation level was 83 per cent, compared to 93 per cent in the equivalent quarter of the prior year.

In container shipping, average revenue per FEU for 4Q08 was seven per cent higher year-on-year, said the statement. These additional revenues were derived primarily from transpacific trade as a result of the company's success earlier in the year in implementing floating bunker fuel surcharges in most transpacific customer contracts, which were not included in the 4Q07, the statement continued.

Said APL president Eng Aik Meng: "Core freight rates, excluding bunker adjustment factors, came under extreme downward pressure during the latter part of the year. APL's bottom line continued to be affected by significant cost pressures. During the fourth quarter, fuel costs dropped from the record levels experienced in 3Q08, but were still on average 13 per cent higher a year-on-year, excluding bunker hedging factors.

"APL took steps during the fourth quarter to address costs. We announced capacity reductions of 25 per cent in the Asia-Europe trade, 20 per cent in the transpacific and 16 per cent intra-Asia," said Mr Eng.

APL Logistics delivered 2008 core EBIT of $64 million, up five per cent. Logistics core EBIT was $16 million for 4Q08, down 24 per cent year on year.

Said APL Logistics president Brian Lutt: During the final quarter the global economic slowdown severely impacted the supply chains of the multinational corporations that form the backbone of APL Logistics' customer base, and the results of the logistics segment came under pressure, especially in the automotive and forwarding segments.

Source: American Shipper