NOL profits up 45 percent despite losses in terminals division

NOL profits up 45 percent despite losses in terminals division Singapore-based liner carrier, logistics and terminal operating company Neptune Orient Lines on Aug. 7 reported a net profit for the first half of 2008 of $196 million, an increase of 45 percent over the same period in 2007.
   NOL's core container shipping business, APL, saw revenues rise 32 percent to $3.94 billion from January through June, and 31 percent for the second quarter, to $1.92 billion.
   Second quarter average revenue per FEU was $3,014, 14 percent higher than the same period in 2007. This largely reflected higher bunker adjustment factor collections, NOL said. APL carried record volumes of 1.27 million FEU in the first half of the year, 13 percent in the first half of 2007, with volume increases in most major trade lanes.
   The APL Logistics unit recorded a 9 percent improvement in first half revenue to $681 million, with second quarter revenue up 6 percent at $318 million. But revenue from the company's terminals division is down 6 percent for the first half, to $283 million, with before tax losses of $31 million, down 30 percent from the previous year.
   'Our results for the year to date show a good financial performance in the first quarter and reflect the more difficult business environment experienced in the second quarter,' said NOL Group Chairman Cheng Wai Keung. 'As a result of the healthy operating cash flows generated, the NOL Group’s balance sheet continues to be in a strong position.'
   Newly named NOL Group President and CEO Ron Widdows, said the company has performed well in difficult times.
   'The Group has reported a positive operational and financial performance for the first half, despite a significantly more challenging business landscape,' Widdows said. 'The second quarter was impacted by a large run up in bunker costs and a deterioration in core rate levels in the Asia-Europe trade.
   'At the top line, the company has generated more than $900 million in additional revenue for (the first half of 2008) compared to the same period last year, showing the benefits of higher volumes carried and a focused approach to fuel cost recovery.
   'A major achievement was the outcome of transpacific contracting where we implemented floating bunker fuel surcharges on a majority of customer contracts that took effect in May. Overall, the company's bunker recovery was much higher than in the previous year.'
   Widdows added that earnings in the second quarter dipped compared with the first quarter as fuel costs escalated.
   As for the declining revenue from terminals, NOL noted that the performance reflected the significant industry-wide reduction of container flows over the U.S. West Coast. Stronger volumes through the U.S. East Coast somewhat offset the problem, as 'shippers looked to diversify the gateways they use to protect supply chains against potential problems on the West Coast.'
   Looking forward, Widdows said the second half could be troublesome.
   'Deteriorating market conditions and high bunker prices will result in a significantly more challenging operating environment for container shipping lines in the second half of this year compared to the first half,' he said. 'In the period ahead, NOL will maintain focus on keeping its asset base tight, while continuing to manage costs and productivity.'