Neptune Orient Lines back in black with quarterly profit of US$890 million
SINGAPORE's Neptune Orient Lines (NOL) reported a second quarter net profit of US$890 million, having reversed itself out of a $54 million year-on-year net loss.
Even excluding the US$887 million gain made from the sale of its APL Logistics unit, NOL would have made a net profit of US$3 million, drawn on revenues of $4.3 billion, up 18 per cent year on year.

NOL said that the second quarter saw severe freight rate erosion with rates in major trade lanes falling to some of the lowest levels seen in recent years.

Despite the tough operating environment, the group posted a second quarter 2015 core EBIT (earnings before interest, taxes and non-recurring items) of $29 million versus last year's $15 million quarterly loss.

NOL's second quarter EBITDA (earnings before interest, taxes, depreciation and amortisation) was US$119 million, up 53 per cent year on year from $78 million.

"The group's container shipping business - APL - continued to face a challenging environment characterised by over-capacity and weak market demand.

"Nonetheless, APL reversed a core EBIT loss in the second quarter last year to a positive position this year," said NOL president and CEO Ng Yat Chung. "We remain focused on improving our cost competitiveness, yield optimisation and service reliability to return the liner business to sustained profitability."

NOL reported $100 million in cost savings in 2Q, bringing its total cost savings for the first half to $255 million.

Following the completion of the sale of APL Logistics in May for $1.2 billion, which after expenses of the sale, NOL reaped a gain of $887 million.

APL posted a 12 per cent quarterly decline in volume year on year due to weak demand and continued efforts to trim capacity to optimise yield. Average freight rates fell 17 per cent because of industry-wide over-capacity. APL second quarter revenue fell 22 per cent to $1.3 billion.

Despite this, APL achieved a core EBIT of $20 million compared to a $28 million year-on-year second quarter loss. This is its sixth consecutive year-on-year improvement in APL's quarterly core EBIT.

APL attributed its performance to stringent cost management as well as a yield-focused trade strategy that emphasises network rationalisation and better cargo selection, said a company statement.

The carrier returned five expensive chartered ships in the second quarter. As a result, total cost of sales per FEU fell 15 per cent year-on-year. APL also kept its headhaul utilisation above 90 per cent, mitigating lower volumes and low freight rates.

Said the NOL statement: "APL's schedule reliability also improved. According to the June edition of the Global Liner Performance Report published by SeaIntel Maritime Analysis, APL was the most reliable carrier in May 2015 with a global on-time performance of 85.5 per cent, above the industry average of 78.3 per cent."