APL parent NOL posts $105m loss in Q1

Neptune Orient Lines attributed the loss to deteriorating freight rates, but anticipates the proposed acquisition of APL by CMA CGM should help the company regain profitability.    Neptune Orient Lines Limited (NOL), the parent company of container carrier APL, posted a net loss of $105 million in the first quarter of 2016, a sharp increase from the $11 million loss it reported in the first quarter of 2015.
   Revenues totaled $1.14 billion in the first quarter this year, down 43 percent from the $1.99 billion in the same period the prior year.
   Part of last year’s first quarter revenues came from APL Logistics, which was sold in May 2015 to Japan’s Kintetsu World Express for $1.2 billion. Ignoring the logistics revenue, this quarter’s liner operating revenues were still down 29 percent from $1.6 billion.
   “Worsening overcapacity of shipping tonnage in 2015 hit the industry well into first quarter 2016. Freight rates, which declined across major trade lanes to historic lows are expected to remain weak in the face of slower demand growth,” NOL Group President and CEO Ng Yat Chung said. “The difficult market condition is prompting consolidation and changes in alliances in the industry. While APL continues to make progress in taking out costs and improving yield, the proposed acquisition of APL by CMA CGM will help APL achieve scale to stay competitive in the industry.”
   Against a backdrop of weak global demand and excess capacity in the industry, APL’s said it carried about 624,000 40-foot containers (FEU) in the first quarter of 2016, 6 percent less than it did in the first quarter of 2015. The company primarily attributed the decline to weak backhaul volumes.
   APL’s average revenue per FEU totaled $1,594 in the first quarter of 2016, compared with $2,063 in the first quarter of 2015, a 23 percent drop, while cost of sales per FEU declined only 16 percent.
   “In this challenging environment, APL maintained prudent management of its deployed capacity, keeping its headhaul asset utilization rate above 90 percent,” the company said.
   APL also noted it focused on rigorous cost management and a yield-focused trade strategy that emphasized network rationalization and better cargo selection. Overall, the company said it reduced costs by $60 million in the first quarter.