Spectacular turnaround at NOL
Neptune Orient Lines, parent company of APL Liner and APL Logistics, completed a spectacular turnaround last year as the group recovered from heavy losses of $330 million in 2002 to report net profit of $429 million in the year ended Dec. 26.
The $759-million profitability swing was mainly due to a $488-million improvement in APL Liner's annual operating results, and also reflected capital gains on the sale of Neptune Orient Lines’ tanker shipping activities.
APL Liner reported an operating profit (earnings before interest and tax) of $406 million for last year, compared to a loss of $72 million in the previous year. Revenue at the container-shipping unit soared 21 percent to $4.2 billion, as average freight rates rose 20 percent to $2,512 per forty-foot equivalent unit from $2,092 per FEU in 2002. APL Liner increased its traffic 1 percent in 2003 to 1.52 million FEUs.
Neptune Orient Lines reported group-wide earning before interest and tax of $465 million for 2003, compared to a loss of $84 million in 2002. Group revenue climbed 19 percent last year to $5.5 billion.
Neptune Orient Lines said 2003 “was an outstanding year for (the) liner business.” It noted the turnaround of the liner shipping industry, which “allowed the successful implementation of the general rate recovery programs.” The Singapore-based group said its yield management and cost-cutting also contributed to APL’s increase in profits.
APL’s liner business generated 75 percent of the revenue of the group in 2003, virtually unchanged from the previous year’s percentage.
APL Logistics, which accounts for 18 percent of group revenue, also returned to profit last year, with an operating income of $7 million on revenue of $975 million. This compares to an operating loss of $27 million and revenue of $813 million in 2002. APL Logistics' profit resulted from an increase in revenue, operational improvements in contract logistics and international services operations, and “improved pricing discipline,” the company said.
Neptune Orient Lines also reported $75 million in operating profit for 2003 from its tanker-chartering arm, now sold.
In 2003, APL Liner increased its carryings in the headhaul, or dominant, directions of the east/west trades: by 7 percent in the eastbound transpacific, 15 percent in the westbound transatlantic and 11 percent in the Asia-to-Europe trade. By contrast, the carrier said it deliberately reduced its carryings in the westbound transpacific “as equipment was quickly repositioned empty” back to Asia to move other high-yield eastbound shipments.
APL Liner reduced various costs $163 million in 2003, but still saw its average cost per FEU rise last year due to increased expenses on inland transport, equipment and fuel.
APL Liner predicts a firm outlook for the liner shipping industry this year, with “supply and demand in relative balance.”
“Volumes will increase and rates in key trades are projected to recover further this year due to favorable economic conditions and supply constraints,” the carrier said.
Following the sale of its tanker shipping arm, Neptune Orient Lines reduced its total debts from $2.8 billion at the end of 2002 to $1.3 billion at the end of last year, and reduced its debt-to-equity ratio from 5.1 to about 1 over the same period.
Neptune Orient Lines' directors are proposing to resume the payment of dividends to stockholders.