Congestion woes drag NOL into loss in Q3

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APL_POLA_1-14-36_lowresContainer shipping line APL posted a revenue contraction in the third quarter of 2014 due to lower rates, lower volumes, and increased costs from Southern California port congestion.

The carrier, a subsidiary of Singapore-based Neptune Orient Lines (NOL), reported revenue for the quarter of US$1.7 billion, a year-on-year dip of 2 percent. Its core EBIT (earnings before interest, taxes, and non-recurring items) for the period is $6 million, up 100 percent from $3 million in the same period last year.

APL said volumes were partly impacted by port congestion issues in Southern California, which have also caused a significant increase in operating costs.

“Our unwavering focus on reducing fixed costs continues to show results,” said APL president Kenneth Glenn. “Unfortunately, the industry-wide port congestion issues in Southern California have adversely impacted our performance. Given APL’s significant business presence in Southern California, we are working simultaneously on several fronts to urgently address these issues. This includes realigning our network to facilitate smooth cargo flow through the US West Coast, and working with our partners on equipment and productivity challenges.”

NOL reported a consolidated third quarter 2014 net loss of $23 million from a profit of $20 million year-on-year. Year-to-date, the group reported a net loss of $175 million from a profit of $61 million in the same period last year. Year-to-date core EBIT loss amounted to $59 million, a 31 percent reduction from the $85 million loss recorded in the same period last year.

It added that its cost management and efficiency drive has delivered $290 million of cost savings year-to-date. The savings were primarily achieved through a more efficient fleet and network optimization.

“Our focus on increasing operational efficiencies remains on track,” said NOL CEO Ng Yat Chung. “However, our liner business faced tough operating conditions in the second and third quarters due to severe port congestion in Southern California, and this has negatively impacted our financial performance.”

NOL’s supply chain management business, APL Logistics, recorded third quarter 2014 revenue of $399 million, an increase of 8 percent from a year ago. It recorded third quarter core EBIT of $15 million.

“APL Logistics continued its steady performance year-on-year as a result of growth in key emerging markets,” said APL Logistics president Beat Simon. “We remain focused on growing our business in key industry verticals and high-growth markets.”

APL Logistics’ positive performance was driven by broad-based and steady demand growth across all markets, particularly in the Asia-Middle East region.

NYK profit is flat

On the other hand, Japanese ocean carrier Nippon Yusen Kaisha (NYK) reported that net profit for the first half of its financial year ended March 31, 2015 dropped a little as a result of weak freight rates and excess capacity.

For the first six months ended September 30, 2014, NYK made a net profit of JPY20 billion ($195.1 million) from JPY20.5 billion year-on-year. Its revenue for the same period inched up to JPY1.18 trillion from JPY1.09 trillion n the same period the preceding year

“The environment surrounding the shipping industry was generally characterised by soft freight rates caused by an excess supply of vessels. In response, the NYK Group strove to further reduce fleet and operational expenses by rationalizing assignments and further enhancing the fleet,” said NYK of conditions in the first half of its financial year.

The company has kept it full-year forecast of JPY35 billion. It expects its container shipping business to encounter a slackening in demand in the winter season. “Measures are being taken to restore freight rates by reducing assignments on east-west routes, while slow-steaming and other initiatives are being thoroughly implemented to reduce costs.”