• ITVI.USA
    15,913.180
    -35.240
    -0.2%
  • OTLT.USA
    2.793
    -0.005
    -0.2%
  • OTRI.USA
    22.300
    0.290
    1.3%
  • OTVI.USA
    15,900.990
    -35.610
    -0.2%
  • TSTOPVRPM.ATLPHL
    2.950
    -0.570
    -16.2%
  • TSTOPVRPM.CHIATL
    3.610
    0.650
    22%
  • TSTOPVRPM.DALLAX
    1.370
    -0.240
    -14.9%
  • TSTOPVRPM.LAXDAL
    3.550
    0.210
    6.3%
  • TSTOPVRPM.PHLCHI
    2.320
    0.220
    10.5%
  • TSTOPVRPM.LAXSEA
    4.110
    0.250
    6.5%
  • WAIT.USA
    126.000
    0.000
    0%
  • ITVI.USA
    15,913.180
    -35.240
    -0.2%
  • OTLT.USA
    2.793
    -0.005
    -0.2%
  • OTRI.USA
    22.300
    0.290
    1.3%
  • OTVI.USA
    15,900.990
    -35.610
    -0.2%
  • TSTOPVRPM.ATLPHL
    2.950
    -0.570
    -16.2%
  • TSTOPVRPM.CHIATL
    3.610
    0.650
    22%
  • TSTOPVRPM.DALLAX
    1.370
    -0.240
    -14.9%
  • TSTOPVRPM.LAXDAL
    3.550
    0.210
    6.3%
  • TSTOPVRPM.PHLCHI
    2.320
    0.220
    10.5%
  • TSTOPVRPM.LAXSEA
    4.110
    0.250
    6.5%
  • WAIT.USA
    126.000
    0.000
    0%
American ShipperShipping

NOL benefits from larger, more efficient ships in APL fleet in 2014

Singapore liner company says congestion at U.S. West Coast ports cost it $15 million in fourth quarter.

   NOL Group, the parent company of the liner company APL and APL Logistics, reported a loss for its fourth quarter and fiscal year, but said larger ships added to its fleet in the last three years have helped it lower costs.
   The company said congestion at West Coast U.S. ports increased expenses by $15 million in the most recent quarter, about half of what congestion cost the company in the third quarter of last year.
   Going forward, the company said “more port congestion, resulting from further deterioration in the labor situation on the U.S. West Coast, is a potential risk factor.”
   Singapore-based NOL said it had a $260 million loss for the full year in 2014, compared to a loss of $76 million in 2013, when it benefited from a $200 million gain from the sale of its headquarters building. The company’s revenue of $8.6 billion in 2014 was 2 percent lower than in 2013. (NOL reports results on a fiscal year basis that is almost, but not quite identical to the calendar year. For 2014, it began not on January 1, but December 28, 2013.)
   The company had a core earnings before interest and taxes loss of $76 million in 2014 compared with a core EBIT loss of $167 million in 2013.
   In the fourth quarter of 2014, NOL had a net loss of $85 million compared with a fourth quarter 2013 net loss of $137 million. Revenues in the fourth quarter 2014 were $2.23 billion, five percent lower than the fourth quarter of 2013. The quarterly EBIT loss was much smaller: $17 million in the fourth quarter 2014, compared with $82 million in the fourth quarter of 2013.
   The company’s liner arm, APL, had a core EBIT loss of $143 million for the full year in 2014 compared with $234 million in 2013. Revenue in 2014 was $7.04 billion, down 4 percent from the prior year. In the fourth quarter of 2014 APL’s core EBIT loss was $37 million compared with a core EBIT loss of $104 million in the 2013 fourth quarter. Revenue in the fourth quarter was $1.79 billion, down 7 percent.
   The company noted that its fleet has changed dramatically in the past three years. At the end of 2011, it had 639,000 TEUs on 147 ships with average ship size of 4,300 TEUs. It has shrunk the size of its fleet to 574,000 TEUs, and more than half that capacity is on new ships.
   In the past three years, it added 303,000 TEUs of capacity on 29 ships while disposing of or returning to charterers 64 ships. The new vessels, which have an average size of 10,500 TEUs, make up 53 percent of APL’s fleet today. (This does not include the five 14,000-TEU ships it has chartered out to fellow G6 Alliance member carrier MOL). The other 47 percent of its capacity, 271,000 TEUs, is on 67 ships with an average capacity of 4,000 TEUs.
   Chung said looking forward the company has the opportunity to return 19 ships to charters in 2015.
   The company has no new ships on order, and Chung said it has not made a decision about what size ships it might order in the future.
   Chung noted the company recorded a savings of $430 million in 2014, with 77 percent due to bunker and network-related savings in addition to a 6 percent drop in bunker costs, and 21 percent due to terminal, land operations and equipment cost. With the economies of scale of larger and more efficient ships, the company’s bunker consumption per FEU has fallen from 1.04 metric tons per FEU in 2011 to .78 metric tons per FEU last year.
   Chung said today terminal handling charges, not bunker fuel is the highest cost item for NOL.
   Bunker prices have dropped dramatically since last summer. Chung said the company expects to see some near-term benefits from the drop in fuel prices, but said because overcapacity in the liner industry will persist “what is uncertain is to what extent a lower bunker price will lead to a much more intense competition on freight rates.”
   “APL moved 2,827,000 FEU in FY2014, 4 percent fewer than the prior year; in the fourth quarter 2014 it moved 734,000 FEU 8 percent fewer than in the fourth quarter of 2103,” said Chung.
   Kenneth Glenn, the president of APL, said the volume reduction in the fourth quarter resulted from capacity reductions on unprofitable services in the transatlantic, transpacific and certain intra-Asia issues. He also noted that because of West Coast congestion the company is unable to get weekly turns on vessels, resulting in a loss of sailings.
   APL said it is “working ships hard” with utilization increasing to 94 percent for the full year in 2014 compared with 91 percent in 2013. The liner expects industry overcapacity to persist in 2015.
   Glenn said despite the drop in bunker prices, APL has no intention to increase the speed of vessels.
   “I don’t think the number could go low enough,” he said.
   Chung added that “the primary impact of speeding up release even more capacity that is locked up by slow steaming and exacerbate the oversupply of capacity in the industry. That would not be helpful on the revenue side. We think slow steaming will be with us for quite some time even at reduced bunker rates.”
   However, Glenn said APL could potentially use the lower cost to help ships “recover time where a vessel is off schedule and we need to do a speed up on a given leg to return it to schedule.”
   He did not mention a specific trade where that would come into play, but industry-wide, many dozens of ships are waiting for berths or off schedule because of the congestion issues at U.S. West Coast ports.
   APL Logistics had core EBIT for the full year in 2014 of $67 million, the same as the prior year, while revenue grew 5 percent to $1.66 billion. In the fourth quarter of 2014, core EBIT was $20 million, down nine percent even though revenue grew 5 percent to $458 million.
   Chung had no comment on a possible sale of APL Logistics and said NOL continues to invest in the logistics side to grow the business.
   For example, on Thursday, it reported it had incorporated a new company in Myanmar to grow its logistics business, and entered into a joint venture with CFR Rinkens to create a company that will transport vehicles within the U.S., Mexico and Canada.

Chris Dupin

Chris Dupin has written about trade and transportation and other business subjects for a variety of publications before joining American Shipper and Freightwaves.

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