JACOBS: NO PROFIT AT APL WITHOUT HIGHER RATES
Neptune Orient Lines will not make a profit this year unless container freight rates improve, said Flemming Jacobs, group president and chief executive officer of NOL and head of APL, its liner unit.
“We have said before that we are not optimistic about the business climate for 2002,” Jacobs told shareholders at the annual general meeting of the group. “Rates in the liner business continued to fall through to the end of 2001, which meant that we started this year from a lower base.”
In the first quarter of this year, container rates were 16 percent below the same period last year, Jacobs reported.
Despite the improvement in volume and cost reductions, “no realistic amount of cost reduction can compensate for the freight rate reductions,” he said. “So unless we start to see more substantial improvements, it will be difficult for us to achieve profitability this year.”
NOL posted a net deficit of $57 million for 2001, as compared to a profit of $178 million in 2000.
APL carried 10 percent more volume in the first quarter of this year, but rates were down overall. In the Asia/Europe trade, though, there were “slight improvements in freight rates,” the company said.
“We are starting to see some better trade volumes,” Jacobs said.
To build profitable growth, Jacobs said his company must “deliver” for its customers. “By reliably and consistently performing beyond their expectations we are able to generate customer loyalty, repeat business and cross-selling opportunities.” Jacobs noted APL’s recent award as Wal-Mart’s international ocean carrier of the year for 2001 as testimony to this effort.
The NOL group, of which APL’s liner arm is the largest business, said it would continue “with aggressive cost reduction targets on many fronts.”
“This will help us to better cope with the cyclical nature of the industry, and achieve sustained profitability when trade and freight rates return to more historic levels,” Jacobs said.
NOL also reported that tanker shipping rates are “as low has they have been in the past 20 years,” and that its logistics business, although growing, was impacted as well by the pressure in international trade.