APL Liner sees costs pinch margins
APL said first-quarter cost increases ate into its operating profit, reporting a moderate 12 percent rise in core earnings before interest and tax to $201 million, while revenue climbed 20 percent to $1.5 billion.
“APL achieved better year-on-year results in quarter one because demand growth remains strong, but rising costs will continue to put pressure on margins,” said David Lim, president and chief executive officer of Neptune Orient Lines (NOL), parent company of APL.
NOL reported that cost pressures continue to rise, especially on U.S. inland transportation, as well as fuel and vessel charter hire. APL’s overall liner costs per unit increased 7 percent in the first quarter, about the same percentage increase as that of its revenue per 40-foot equivalent unit.
“Charter rates are higher due to a buoyant charter market,” NOL said. “Additional charter expenses were $9 million more than the first quarter last year, and are expected to be $37 million higher for the full year.” Fuel costs went up $29 in the quarter, compared to a year ago.
As a result, APL’s operating margin declined to 13.6 percent of revenue in the first quarter, from 14.5 percent in the same quarter of 2004.
However, due to lower interest costs, NOL reported net profits of $195 million for the first quarter, a 16 percent increase over the corresponding period last year. NOL has moved from a net debt position a year ago to a net cash position at the end of the first quarter of this year. NOL’s group revenue, including logistics and other activities, rose 16 percent to $1.8 billion.
APL shipped 499,137 FEUs in the latest quarter up 13 percent.
“The intra-Asia market remained one of the strongest drivers with a 30 percent year-on-year increase,” NOL said.