NOL Group’s profits down 15% in 2005

NOL Group’s profits down 15% in 2005    Singapore-based Neptune Orient Lines (NOL), parent company of APL and APL Logistics, today reported a 15 percent decline in group net profit for 2005 to $804 million from 2004’s best ever $943 million.
   Annual group revenue increased 11 percent to $7.27 billion last year.
   APL’s “core earnings” before interest, tax and non-recurring items dropped 6 percent to $845 million despite a 12 percent jump in revenue to $5.96 billion.
   APL costs per 40-foot equivalent unit (FEU) rose 7 percent in 2005, a result of higher bunker expenses and inland transportation costs, especially in the United States, connected with fuel cost increases. APL’s charter expenses were $33 million higher in 2005 than 2004.
   APL’s annual traffic rose 9 percent to 1.95 million FEUs with the average freight rate improving 5 percent to $2,841 per FEU from $2,713 in 2004.
   “Although APL has elected to expand its fleet at a modest rate, we were able to grow our overall volumes and business scope through 2005 by collaborating with others,” said Ron Widdows, chief executive officer of APL
   “Our industry partnership model has enabled capacity growth without significant investment in additional ships, and we plan to continue our responsible approach to increasing capacity through 2006. APL’s ongoing focus on cost management resulted in cost reductions of $36 million for the year, helping to offset the fuel and other cost pressures we face. In 2006, we plan to increase the intensity of our focus on costs, and are targeting cost savings of about $100 million.”
   “NOL expects the business environment of the liner industry to become more challenging in 2006. There will be continuing cost pressures and we expect rates to soften in some markets. We also expect a continuing cost impact of high fuel prices, resulting in high bunker and land transportation costs,” said NOL in a statement.
   APL Logistics saw its earnings before interest and tax rise 74 percent to $59 million, with revenues increasing 11 percent to $1.29 billion.
   “In 2005 APL Logistics achieved continued growth in both the International Services and Contract Logistics business segments,” said Brian Lutt, president of APL Logistics. “Our focus on growing our international logistics services businesses, with emphasis on origin services and forwarding, has made a positive contribution to these results. This will allow us to further position ourselves to capitalize on the growth in demand in this segment as a result of the ongoing relocation of sourcing and manufacturing to low cost locations such as China and India.”
   “Going forward, APL Logistics will seek to further leverage our expertise in providing solutions for the automotive, retail/apparel and high-tech and consumer electronics industries,” Lutt said.
   “Our emphasis continues to be on growing both our liner and logistics businesses, and further integrating both businesses with the aim of constantly improving our service offerings for our customers. We will continue to invest and innovate to stay at the forefront of our industry, even as the operating environment becomes more challenging,” said David Lim, NOL’s CEO.
   NOL finished 2005 with a net debt of $368 million. The company has set a capital expenditure budget of $433 million for 2006, more than twice the $208 million spent in 2005.
   The Singapore government-controlled investment company Temasek Holdings is the majority shareholder in NOL.