NOL’s profit dented 55% in 2006 by lower rates, higher fuel bill

NOLÆs profit dented 55% in 2006 by lower rates, higher fuel bill The downturn in the liner shipping market caught up with Singapore's Neptune Orient Lines, parent company of APL and APL Logistics, as its group net income in 2006 slumped 55 percent to $364 million, from $804 million in the previous year.
   NOL's core earnings before interest and tax (Core EBIT) also dropped 55 percent to $401 million, compared to $898 million in 2005. Revenue for the year was flat at $7.27 billion.
   'NOL delivered a solid performance in 2006 in the face of a difficult operating environment,' said Thomas Held, NOL Group president and chief executive officer. 'Our results show the combined impact of lower average freight rates and increased fuel costs over the past year.'
   NOL's liner unit, APL, saw its annual container volumes rise 8 percent to 2.1 million TEUs, but also a 7 percent drop in average revenue per FEU to $2,632, as liner revenue was roughly in line with that recorded in 2005 at $5.95 billion.
   APL's Core EBIT declined 59 percent in 2006 to $344 million while the group's annual fuel bill rose by $237 million.
   'In our liner shipping operations, we again executed well our approach of keeping our network tight and maximizing yields,' Held said. 'We achieved high utilization rates, averaging 96 percent in the head-haul direction for all trade lanes, in line with the previous year. Our liner operations faced very significant upward cost pressures during the year as a result of higher fuel prices.'
   NOL said it plans to introduce seven containerships into APL's fleet in 2007, raising its capacity by 10 percent, after what it described as a 'cautious approach to expansion' last year. The group is also looking to make 'considerable investment' in dry and refrigerated container equipment, as well as enhancing APL's IT systems.
   APL Logistics saw its Core EBIT dipped 5.3 percent to $54 million, with revenues increasing 1.6 percent to $1.3 billion. 'On the logistics side, this was a year of realigning our business with some growth in our Asian-origin business. We continued to realign our logistics activities to focus on international conveyance and to diversify the service offering and portfolio of business,' Held said.
   Looking forwards, Held said the group is well placed to capitalize on growth markets in the Asia region. 'As we move into 2007, we will seek to create long-term value for our shareholders through a strategy for profitable growth and innovation. This will be built around organic growth, and we will also be on the lookout for merger and acquisition opportunities. NOL Group will continue to innovate and expand its global presence.'
   The Singapore government-controlled investment company Temasek Holdings is the majority shareholder in NOL.