APL raises 1st-half operating profit 9% despite cost increases

APL raises 1st-half operating profit 9% despite cost increases    APL, the container shipping arm of Singapore-based Neptune Orient Lines (NOL), increased its core earnings before interest, tax and non-recurring items 9 percent to $403 million in the first half, despite a 21 percent jump in operating costs to $2.5 billion.
   Liner costs per unit increased 7 percent in the first half, “mainly due to higher fuel, charter hire and costs of inland transportation services, especially in the U.S.,” NOL said. Vessel charter expenses, as a result of higher charter rates, were $14 million more in the first half than in the same period of last year, and are expected to be $35 million higher for the full year. Bunker costs in first half were $74 million higher year-on-year.
   “Operational expenses have risen year-on-year, driven by volume increases and also escalating fuel prices, which affect both vessel expenses and inland transportation costs,” NOL said.
   APL increased its traffic volume 13 percent to about 960,000 forty-foot equivalent units (FEUs) in the first half. Its average revenue per FEU rose 7 percent to $2,769 over the same period. These increases resulted in a 19 percent rise in liner revenue at APL to $2.9 billion for the first half.
   Due to higher costs, APL’s operating margin as a percentage of revenue declined to 14 percent in the first half from 15 percent a year ago.
   NOL also reported Thursday a group net profit of $392 million for the first half, up 11 percent from its result for the first half of 2004.
   NOL’s group revenues increased 16 percent to $3.5 billion in the first half, with both liner and logistics businesses registering higher revenues. Logistics increased its revenue 11 percent to $613 million in the latest six-month period.
   NOL’s group earnings before interest, tax and non-recurring items increased 10 percent to $426 million, with logistics activities also raising their profits.
   “Both the liner and logistics businesses generated revenue and profit growth despite rising cost pressures within a competitive marketplace,” said Cheng Wai Keung, chairman of NOL.
   David Lim, president and chief executive officer of NOL, said APL’s margins in the latest period were “good, but were under some pressure due to rising costs, which we continue to manage tightly.”
   “Congestion also remains an issue, with some locations experiencing worse delays than others,” he added.
   Ron Widdows, CEO of APL, said maximizing the use of assets, keeping the APL network tight and working to control costs remains a top priority. APL’s load factor in the second quarter averaged 96 percent for the eastbound transpacific trade, 99 percent for the westbound transatlantic and 91 percent for the eastbound transatlantic.
   NOL said it does not expect the appreciation of the Yuan to have a significant impact on China’s exports. “We do not see it impacting our business volume for the rest of the year,” the company said.