Global transportation and logistics company Neptune Orient Lines Ltd (NOL) today reported a first quarter (Q1) 2003 profit of US$20.3 million - in contrast to the Q1 2002 loss of US$91.5 million.
Year-on-year, Group revenue for Q1 increased 16 per cent to US$1.34 billion, reflecting revenue increases in all three of its businesses; APL Liner, APL Logistics and Chartering.
Chairman Cheng Wai Keung said, "I am pleased to report that our cost containment efforts have had a marked, positive impact on our results for the first quarter together with strong charter rates in the tanker business, a recovery in APL Liner freight rates on sustained volumes, and an improved operating performance in APL Logistics."
Mr Cheng said the result underlined the capable leadership of the senior management team. "Their strategies and business plans are proving successful," he said "and they and their teams I know are determined to maintain the momentum throughout the rest of the year."
Cost savings of US$34 million were achieved in Q1, compared with the fourth quarter of 2002, with general and administration costs wound back and further efficiencies made within the businesses. Mr Cheng said he expected cost containment efforts to continue throughout the year and into the future.
Mr Cheng warned that despite some recovery in freight rates, overall they were still below average 1999 levels. "To ensure we can continue to invest to meet customers' future needs, we need to do more than achieve profitability in any single year - and we, along with the rest of the industry, have some catching up to do after the past, tough two years when rates reached unsustainable levels," he said. "We will continue to work with customers to address this issue."
This is the first time the Group has provided quarterly results, complying with new Singapore Stock Exchange regulations. Executive Director and Group Chief Financial Officer Lim How Teck said a first quarter profit was historically not typical for the company - and for the industry - reflecting seasonal variations in trade flows. "It is only the second time since 1998 the Group has made a profit in the first quarter," he said. The first time was in 2000.
Looking forward, Mr Cheng said with the progressive recovery in freight rates and continued successful cost management, barring unforeseen circumstances, the NOL Group expects to achieve significant profits for the full year 2003.
In addition, he said, with the proposed sale of crude oil transportation company, American Eagle Tankers (AET), expected to close in July, the Group's balance sheet should strengthen considerably.
APL Liner NOL's liner business, APL, improved its performance at an operating level, with core Earnings Before Net Interest Expense and Tax (EBIT) of US$5 million - compared with the Q1 2002 EBIT loss of US$53 million. Performance improved month on month during the quarter, the unit returning to a net profit in March, Acting APL CEO, Ron Widdows, said.
Cost management was an important component. "Although bunker prices rose in the first quarter," he said, "we achieved our Q1 cost saving targets through initiatives which included productivity gains, network rationalisation, and managing equipment and capacity more effectively - for example moving containers from short-sea service Intra-Asia to the Trans-Pacific where greater yields were possible, increasing volumes in that trade by 15 per cent."
Turnover overall increased 11 per cent, largely as a result of a recovery in Asia-Europe rates and the higher Trans-Pacific volumes, with average freight rates improving ten percent on Q1 2002.
APL Liner is on track to achieve significant profits in 2003.
APL Logistics NOL's supply chain management company ended the first quarter just under breakeven - a significant improvement on the previous first quarter. Turnover improved 18 per cent to US$231 million and core EBIT loss improved by US$6 million, or 86 per cent to negative US$1 million.
"Higher volumes and greater efficiencies, together with a cost saving drive on general and administration expenses helped us to achieve a much looked for improvement in performance," APL Logistics CEO Hans Hickler said.
Some early wins in 2003 securing several global contracts, together with the on-going cost savings and focus on international services, consolidation and forwarding means APL Logistics is confident its performance will remain on track and that it will meet its objective of improved overall performance by year end.
Chartering Significant increases in charter rates for both crude oil and product tankers pushed NOL's Chartering division's revenue up 78 per cent to US$141 million compared with Q1 2002, while core EBIT rose 529 per cent to US$44 million.
"The ripples from the sinking of the Prestige off the coast of Spain continue to be felt, with heavy demand for double-hulled tonnage. With all our crude oil tankers being either double- hulled or double-sided, AET is in demand," said AET CEO Joseph Kwok.
That demand is expected to continue as low crude oil levels in the US are replenished and because restrictions on single-hulled tankers operating in European waters could come into effect in July.
NOL recently announced its plans to sell AET to Malaysia International Shipping Corporation (MISC). The proposal will be put before NOL shareholders on 28 May.
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