APL, PARENT NOL HIT BY $151-MILLION FIRST-HALF LOSS
Operating losses in container shipping and logistics have forced Neptune Orient Lines, the parent company of APL, to report a net deficit of $151 million for the first half of this year — its worst result since 1998.
The big loss for the Singapore-based shipping and logistics group compares with a net profit of $11 million in the first half of 2001.
Group revenue dropped 5 percent, to $2.2 billion, as a result of falling freight rates in liner shipping and lower rates in chartering.
The group’s “core earnings before interest and tax” was a deficit of $79 million, a reverse from the prior year’s profit of $78 million.
NOL reported an operating loss (core earnings before interest and tax) of $72 million from its liner arm, as compared to an operating income of $31 million a year earlier.
Commenting on the liner arm APL, NOL said: “Despite an increase in volume handled by 12 percent, turnover declined 7 percent to $1.65 billion (2001: $1.77 billion), due mainly to lower freight rates which impacted revenue negatively by $308 million compared to rate levels in the same period 2001.”
APL carried 753,500 forty-foot equivalent units in the first half, up from 671,800 FEUs a year ago and “significantly above expectations,” the company said.
However, average rates per FEU decreased 16 percent in APL’s America region, 24 percent in Europe and 9 percent in the Asia/Middle East.
“Although significant reduction in unit operating cost was achieved, this was not enough to offset the impact of the freight rate decline,” NOL said.
NOL’s logistics arm posted an operating loss of $11 million in the first half of this year, on revenue of $373 million, compared to a deficit of $9 million and revenue of $330 million in the first half of 2001.
The group’s chartering business — which comprises tanker shipping activities — posted an operating profit of $9 million, down from $50 million, while its revenue decreased to $154 million, from $189 million in the first half of 2001.
Group operating result after interest and depreciation was a loss of $137 million, as compared to an operating profit of $24 million in the first half of 2001.
Operating cash flow from operating activities decreased to $104 million, from $201 million in the first half of last year.
NOL expects to report a loss in the second half of this year, although it said “results are expected to be better than the first half.” The second half of the year is traditionally the more profitable one for container shipping lines.
“We took a hit in the first half,” said Flemming Jacobs, group president and chief executive officer of NOL. “However, there is increasing evidence that a recovery has begun, not only illustrated through better volumes but also through some rate improvements.”
Freight rates have improved compared to the lows earlier in the year, the company said. However, NOL warned that the liner business, which accounts for about 75 percent of the group’s revenue, will continue to face a difficult environment for the rest of 2002.
NOL also said chartering business is expected to remain profitable for the rest of 2002, and the operating environment for its logistics business “will remain difficult for the rest of the year.”
NOL shares closed at S$0.66 on Friday on the Singapore stock exchange, down from S$0.68.
In magnitude, the $151-million net deficit of NOL is comparable to the $145-million pre-tax loss posted by P&O Nedlloyd for the first half of this year.