NOL reports $96m Q3 loss due to ‘severe’ rate erosion

Neptune Orient Lines, parent of ocean liner APL, attributed the poor financial results primarily to weak peak season shipment volumes to North America and Europe, which resulted in lower freight rates for container carriers.    Singapore-based Neptune Orient Lines, the parent company of container carrier APL, reported a net loss of $96 million in the third quarter of 2015, compared to a net loss of $23 million in the same period last year.
   “The absence of the traditional third quarter peak season in Europe and North America led to severe freight rate erosion in major trade lanes,” NOL Group President and CEO Ng Yat Chung in a statement.
   Revenues in the third quarter stood at $1.2 billion down 29 percent from $1.7 billion recorded in the third quarter of 2014.
   APL’s average freight rates fell 21 percent to $1,847 per 40-foot equivalent unit amidst pressure from overcapacity in the industry. Volumes contracted 11 percent, to 577,000 FEUs, which APL attributed, in part, to a significant drop in U.S. exports and weak demand in the intra-Asia short-sea market.
   In a presentation accompanying its earnings release, NOL noted the drop in freight rates from the third quarter of 2014 to the third quarter of 2015 was widespread: the Shanghai Containerized Freight Index, a composite index of rates on 15 individual shipping routes out of Shanghai to different parts of the world was down 38 percent; Asia-U.S. West Coast spot freight rates were down 30 percent; spot rates from Shanghai to the Persian Gulf were off 48 percent; and spot rates from Shanghai to Singapore off 28 percent.
   APL said it voided sailings in response to weak global demand and trimmed capacity in unprofitable trade lanes.
   The carrier was able to maintain high utilization rate, around 93 percent, of its ships on headhauls in the third quarter. The company said it “maintained its rigorous cost management as well as a yield-focused trade strategy that emphasizes network rationalization and better cargo selection.
   APL has reduced the nominal capacity of its fleet from 641,000 TEUs at the end of 2013 to a projected 552,000 TEUs at the end of this year in an effort to cut costs and focus on high-revenue business.
   Six chartered ships were returned in the third quarter, and that APL currently has three ships whose charters are scheduled to expire in the fourth quarter of 2015.
   At the same time, APL has grown the average size of its vessel so that it will be about 6,300 TEUs by the end of this year. That’s up from 6,000 TEUs on average at the end of last year, 5,300 TEUs at the end of 2013, and 4,600 TEUs at the end of 2012.
   The company’s total cost of sales per FEU fell by 17 percent year-over-year during the third quarter.
   Ng said NOL’s “balance sheet has strengthened and we will invest when the conditions are right.”