NOL lifts 1st-quarter profits with stronger container result
Singapore-based Neptune Orient Lines continued to raise its profits in the first quarter, with a quarterly net profit of $163 million that was eight times the amount of last year’s $20-million net profit.
The jump in first-quarter result, generated entirely by the container shipping activities of APL, follow Neptune Orient Lines’ record net profit reported for 2003 as a whole.
First-quarter group revenue increased 16 percent to $1.55 billion from $1.34 billion. Core earnings before interest and tax soared to $176 million from $42 million a year ago.
Exceptional profits for the latest quarter include a gain of $8 million on the sale of NOL’s tanker shipping subsidiary Neptune Associated Shipping in March.
APL lifted its earnings before interest and tax to $176 million in the first quarter from $5 million in the same period last year, although the first quarter is a seasonally weak quarter in international container shipping. APL’s revenue rose 29 percent to $1.23 billion, due to continued strong demand in all key trade lanes, active yield management and a higher freight rate base at the beginning of the year, the company said.
APL reported that it cut its cost per unit 4.7 percent between the fourth quarter of 2003 and the first quarter of this year, despite the increase in vessel charter and bunker costs.
“The tight supply in the charter market and rising oil prices have put pressure on our costs,” said David Lim, president and chief executive officer of NOL. “Nonetheless, we managed to reduce costs in our liner operations by $17 million in the first quarter, and are on track to achieve our target of reducing costs by $100 million for the whole year.”
In the first quarter, increases in charter rates on renewals and new charters added about $5 million to charter costs, the company said. The company estimates that the annual impact of higher vessel charter rates is about $22 million.
APL Logistics made earnings before interest and tax of $3 million in the latest quarter, as compared with a loss of $1 million in the same quarter of last year. The logistics unit’s revenue increased 25 percent to $288 million in the first quarter, due particularly to its contract logistics activities in the Americas and international services in Asia and Europe.
With the positive business environment, yield management and continued cost cutting, NOL expects to raise its profits in 2004 as a whole, barring any unforeseen circumstances.