Singapore-based carrier APL saw its revenue in the first quarter of the year fall on lower freight rates and volumes but managed to cut its losses through capacity management and lower bunker costs.
Its mother firm Neptune Orient Lines (NOL) said group net loss in the quarter was slashed to US$11 million from a $98-million net loss in the same period last year, as the company benefited from cost savings of $155 million and cheaper fuel.
Group core EBIT (earnings before interest, taxes, and non-recurring items) in the quarter turned positive to reach $30 million, compared to a $65 million loss last year.
Core EBITDA (earnings before interest, taxes, depreciation, and amortization) also went up, amounting to $133 million in the first quarter from $33 million last year.
Overall revenue for the same period declined 13% to $2 billion year-over-year, pulled down by freight rate erosion, planned capacity cuts in unprofitable trades, and adverse impact from the U.S. West Coast port congestion.
“The group’s container shipping business continued to operate in a challenging environment. Nonetheless, APL has reduced its losses through capacity management, and improved cost and operational efficiencies,” said group president and CEO Ng Yat Chung. “While congestion in the U.S. West Coast is easing, the liner industry continues to face persistent over-capacity and uncertain global economic prospects.”
APL, NOL’s container shipping business, reported a positive first quarter core EBIT of $13 million, compared to a loss of $82 million over the same period last year. Cost of sales per forty-foot-equivalent unit fell by 8% year-on-year.
Its revenue totaled US$1.6 billion, a 15% slide year-on-year, as first quarter year-on-year volume also fell 15%. The company attributed both contractions mainly to planned capacity cuts in unprofitable trade routes and the impact of the American port congestion. APL’s average freight rates dipped 8% versus the same quarter last year.
“APL eliminated unprofitable capacity for better yield in the first quarter of 2015. We extracted cost savings from lower bunker cost and through more efficient land and terminal operations as well as vessel and voyage operations. These efforts helped mitigate the impact of lower volumes and freight rates that we saw in the first quarter,” said APL president Kenneth Glenn.
He said they plan to improve yields through further capacity management, network design, and cargo selection. “Network design will help to reduce complexity in our business, lower slot cost and improve reliability; and better cargo selection will improve round-trip profitability in our key trades.”
Meanwhile, NOL’s supply chain management business, APL Logistics, posted stable year-on-year core EBIT and revenue at $17 million and $406 million, respectively, despite headwinds from a strong US dollar. More than 30% of APL Logistics’ business was transacted in non-US dollar currencies, said the company.
“Despite a challenging environment, APL Logistics maintained a high level of business activity in the first quarter of 2015,” said segment president Beat Simon. “We remain focused on seeking growth opportunities through the verticals of automotive, consumer, industrials and retail in high-growth markets.”
NOL announced the planned sale of its logistics business to Kintetsu World Express, Inc. on February 17 this year to focus on container shipping. The transaction is expected to be completed by mid-2015 subject to regulatory approval.
