Neptune Orient Lines (NOL) cut its losses in core EBIT (earnings before interest, taxes, and non-recurring items) to US$120 million in the first half of 2013, a 45 percent improvement from the same period a year ago that it traced to cost-cutting.
Singapore-based NOL said it saved $240 million largely by improving its bunker and network operational efficiency as well as by increasing productivity at the terminals and reducing empty repositioning.
Including a non-recurring gain of $200 million from the completed sale of the NOL headquarter building in Singapore in the first quarter, NOL posted a half-year net profit of US$41 million compared to a loss of US$371 million last year.
“Market conditions have worsened in the second quarter of this year compared to a year before,” said NOL group CEO Ng Yat Chung.
APL, NOL’s container shipping business, reported first-half revenue of $3.7 billion, sliding 8 percent from last year. APL posted a loss of $146 million in core EBIT, a 39 percent improvement from a year ago.
“Weak demand coupled with an over-supply situation in the industry has continued to put severe pressure on freight rates. This has impacted revenue significantly,” said APL president Kenneth Glenn.
In the first half of 2013, APL’s average revenue per 40-foot equivalent unit (FEU) dropped 7 percent, while efficiency improvements helped reduce cost of sales per FEU by 8 percent.
Glenn said their current beefing up of fleet is expected to “further make significant improvements to our cost base.”
As of the first half of 2013, APL has taken delivery of 19 out of 34 new vessels. These larger, more fuel-efficient vessels are replacing smaller and older ones in the fleet, and will increasingly reduce vessel slot costs, a company release said.
Meanwhile, APL Logistics, NOL’s supply chain unit, posted revenue growth of 4 percent to $781 million in the first half of 2013 year-over-year, as core EBIT climbed 18 percent to $26 million. Core EBIT margin improved to 3.4 percent from 2.9 percent owing to greater operating efficiency and productivity growth.
“While we were adversely impacted in the second quarter by an unseasonal slowdown in our automotive segment, all our other lines of business have grown on a year-on-year basis,” said APL Logistics president Jim McAdam.
NOL foresees little sign of a quick recovery as market conditions and freight rates continued to deteriorate in the second quarter of 2013. The company plans to continue improving its operating efficiency, aided by lower vessel slot costs with the delivery of its newbuilds.