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APL’s 2nd quarter profits slump 65%

APL’s 2nd quarter profits slump 65%

   Continuing this year’s depressed financial performances by ocean carriers, Singapore-based Neptune Orient Lines (NOL) said today its container-shipping unit APL’s second quarter core earnings before interest, tax and non-recurring items (Core EBIT) dropped 65 percent to $71 million, from $202 million in the same quarter 2005.

   APL’s second quarter 2006 revenue was down 3 percent to $1.34 billion from $1.39 billion a year ago.

   First half Core EBIT for APL was $194 million, down 52% from the same period last year with its average revenue per FEU down 4 percent to $2,650. APL’s first half revenue was flat at $2.88 billion.

   APL’s container volumes after six months were up 5 percent to 1.01 million FEUs, with head-haul capacity increasing 8 percent. NOL said APL’s head-haul utilization was 95 percent for both the second quarter and first half periods, compared to 95 percent for first half 2005 and 98 percent in the second quarter last year.

   “Slightly lower utilizations are a result of our active yield management strategy,” said Ron Widdows, APL’s chief executive officer. “We continue to manage our business mix to ensure we carry cargo which provides the maximum yield.”

   APL Logistics’ Core EBIT declined 17 percent to $10 million in the second quarter with revenue down 1 percent to $292 million. For the first half of 2006, APL Logistics’ Core EBIT was down 7 percent to $26 million with revenue up 3 percent to $636 million.

   “We experienced more challenging business conditions in the contract logistics segment, with lower utilization levels at multi-user warehouse facilities and as a result of our continuing focus on realigning this business segment with our international conveyance strategy,” said Brian Lutt, president of APL Logistics. “Our international logistics services segment was impacted by a combination of rate declines and new business not materializing at the rate anticipated.”

   NOL posted a consolidated first half net income of $187 million, down 52 percent from $392 million in the same period last year. Group revenue increased 1 percent to $3.52 billion from $3.49 billion in the first half 2005.

   “While demand for our services remains strong across most trades, continued higher fuel costs and a softening of rates in some trades have impacted earnings — particularly when compared with the performances of 2003 to 2005. In the second quarter we continued to see growth in volumes but the revenues of both the liner and logistics businesses declined slightly in the quarter,” said David Lim, NOL’s outgoing president and CEO. Lim will leave the group by the end of the year.

   Looking ahead, NOL, like many of its fellow shipping companies, predicts a tough time ahead.

   “NOL expects the more difficult operating environment in the liner industry to continue over the next 12 months. The freight rate outlook will largely depend on whether the strong demand seen in the first half continues and the extent to which it keeps pace with expected supply,” NOL said in a statement.

   “With high fuel prices in the forward market, NOL expects that fuel will continue to place significant pressure on bunker and land transportation costs. To meet these challenges, the group will continue with its proven strategy of keeping to a tight network, optimizing asset utilization, focusing on yield management and finding opportunities to mitigate and reduce costs.

   “In logistics, the global market for third-party logistics continues to grow in tandem with economic expansion, and more outsourcing. We expect the logistics industry to continue to consolidate and restructure, reflecting the changing nature of global supply chains.

   “APL Logistics will continue to invest in new capabilities and to expand its business. We expect that the investments made this year will only begin to add to the group’s revenues and profits next year,” NOL said.