Global transportation and logistics company Neptune Orient Lines Ltd (NOL) today reported net profit for the year to the end of the third quarter* (3Q) of US$294.6 million, compared with a loss of US$184.2 million for the same period last year.

NOL’s profit before exceptional items for 3Q was US$107 million, up from negative US$20 million for the same quarter last year, and up 30 per cent on the US$82 million recorded for the first half of 2003.

Revenue was US$3.98 billion year-to-date, up 19 per cent on revenues to the end of 3Q 2002 of US$3.34 billion. This was despite the sale of crude oil transportation company American Eagle Tankers (AET) completed during July, which therefore only contributed revenue to 22 July 2003.

NOL made a net profit for the 3Q of US$206 million compared with a loss for the same quarter last year of US$28 million. The company’s 3Q results include the proceeds from the sale of AET, which contributed significantly to the US$99 million of exceptional items.

The strong performance reflects the successful implementation of the Group’s strategy for its two core businesses, container transportation company APL and supply chain management company APL Logistics (APLL), to be more focused on the bottom line, Chairman Mr Cheng Wai Keung said.

“The extent of the Group’s turnaround has as much to do with our focus on yield management and cost containment as it does about rate recovery in the liner business,” Mr Cheng said. “This focus will continue into the future and help the Group achieve its goal of sustained profitability.”

“We are determined to provide the quality, reliability and services our customers value while keeping a tight rein on costs,“ Group CEO Mr David Lim said. “As a consequence we have seen our businesses grow. We anticipate that growth will continue,” he said.

“The key has been responding promptly to customer needs. In the liner business, for example, we rebalanced the trades to meet our customers’ demands for more equipment in the Trans-Pacific and Asia-Europe trade lanes and to maximise the use of our assets,” Mr Lim said.

“That flexibility is a strategy we will continue to pursue,” he said.

“I am also pleased with APL Logistics’ improved results,” Mr Lim added. “While there is some way to go yet, this unit has reorganised to better meet customer needs and reduce costs.”

Group Chief Financial Officer, Mr Lim How Teck said that the improved performance of the Group together with the sale of AET had resulted in a substantial reduction in debt levels and a much stronger balance sheet.

“Our borrowings have reduced,” he said, “and net gearing was lowered to 1.58, down from 4.46 at the end of 2002. We will continue to reduce our debt levels and net gearing through operating profits and disposal of non-core assets as part of our on-going financial management,” he said.

Mr Lim How Teck said the Group was looking at divestment opportunities for non-core businesses, including the product tanker company Neptune Associated Shipping (NAS).

Barring unforeseen circumstances, Mr Cheng said, the NOL Group maintained its positive outlook and expected to deliver a very good set of results for the full year 2003.

APL Liner
For the year to the end of the 3Q, APL’s Core EBIT was US$227 million compared with a loss of US$64 million for the same period in 2002, representing to a turnaround of US$291 million.

APL’s Core EBIT for 3Q improved 1900 per cent from US$7 million on revenue of US$843 million in 3Q 2002 to US$140 million on revenue of US$1.06 billion for 2003.

Cost savings totalling US$112 million for the year had been achieved by the end of the 3Q, and the company is on target to achieve its goal of full year savings of between US$150-200 million.

While volumes appeared to be flat, key trades grew strongly, reflected in core EBIT. Freight rates increased 37 per cent in Asia-Europe and 20 per cent in Trans-Pacific.

“We continued to respond to the strength of both the Asia-Europe (AEU) and Trans-Pacific (TP) trades in the third quarter,” said APL’s CEO Mr Ron Widdows, “increasing market share in the headhaul (TP eastbound, AEU westbound) legs of these trades.”

Volumes in the Trans-Pacific eastbound increased eight per cent and Asia-Europe westbound 10 per cent year-on-year.

“At the same time, we saw healthy growth in the West Asia and Middle East market, which are both part of the Intra-Asia trade. The growth in the Middle East was largely unrelated to the rebuilding of Iraq,” Mr Widdows said.

“The Trans-Atlantic trade also grew in both volume and rates, and capacity remains tight. Latin America continued to feel the impact of the challenging economic situation in the region.”

Overall, Mr Widdows said vessel utilisation was high and forecast to remain so for the rest of this year and well into 2004.

APL is continuing to expand its capacity through upsizing vessels and partnership arrangements with other carriers. This will continue through 2004.

APL is on track to achieve significant profits in 2003.

APL Logistics
For the year to the end of the 3Q, APL Logistics moved from a core EBIT of negative US$11 million to positive US$5 million.

APLL’s Core EBIT for 3Q 2003 was US$2 million, compared with zero core EBIT for the same period in 2002.

Revenue to the end of 3Q 2003 was US$689 million, up 20 per cent on the US$573 million for 2002. More than half (56 per cent) of the revenue growth for the year to date was in the Americas region.

There was strong growth in all regions in the 3Q: in the Americas centred around warehousing and transportation management; in Europe centred around forwarding; and in Asia, the consolidation business.

“With proven capabilities in consolidation at point of origin, as well as warehousing and transportation/freight management at destination, our priorities lie in integrating these origin and destination services while focusing on managing our operational cost down,” said APLL CEO Mr Hans Hickler. “This will further build on the gains we have made so far this year.”

APL Logistics is on track to achieve operational profitability for full year 2003.

Chartering
With the sale of AET concluded towards the end of July, and AET being the largest contributor to the Chartering division’s revenues, its 3Q revenue fell to US$39 million and core EBIT reduced by 33 per cent to US$2 million compared with 3Q 2002.

NOL has now effectively exited the crude oil tanker chartering business.

Demand for the largest remaining business within this division, product tanker operator Neptune Associated Shipping (NAS), is expected to remain firm for the balance of the year. As indicated earlier, NOL is looking at divestment opportunities for this business.
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* NOL’s third quarter is to 19 September, 2003

About NOL

NOL is a global transportation and logistics company engaged in shipping and related businesses. Its container transportation arm, APL, provides customers around the world with container transportation services that combine high quality inter-modal operations with state-of-the-art information technology while APL Logistics provides end-to-end supply chain management services through its global network.