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NOL makes second quarter profit of $3m amidst sale talk
NOL's CEO said the fourth quarter was particularly difficult

NOL makes second quarter profit of $3m amidst sale talk

Neptune Orient Lines (NOL) made a net profit of US$3m in the second quarter of this year amidst rumours of a possible sale of the company.

The figure, which excludes the US$887m gain on the sale of APL Logistics, its supply chain management business, contrasts with a US$54m loss posted over the same period last year.

In a webcast, NOL group president and CEO, Ng Yat Chung, addressed talk of a sale, stating: “The company has a duty to consider all options to maximise shareholder value – it is normal conduct of a business. Hypothetically, if I receive a good price for the company, we will always consider selling.”

“In the same way, we had a fair price for APL Logistics, and then we decided it’s [in] the best interest of shareholder value to do that transaction,” he added. “What I can say now [is that] the company is totally focused on returning the liner business into profitability.”

Although NOL’s revenue fell by 24% to US$1.55bn, the Singapore-based group managed to score a profit through an array of cost-savings, including no longer handling high revenue cargo judged to be “not sufficiently compensatory”.

APL, NOL’s container shipping business, recorded a 12% volume reduction from 662,000 feu to 582,000 feu in 2015’s second quarter.

According to a company statement, this was “due both to weak global demand as well as the carrier’s continued efforts to trim capacity in unprofitable trade lanes to optimise yield”.

Ng said: “The Group’s container shipping business 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.”

“We remain focused on improving our cost competitiveness, yield optimization and service reliability to return the liner business to sustained profitability,” he added.

APL’s average freight rates dipped 17% amidst pressure from over-capacity in the industry while its revenue fell 22% to US$1.3bn versus the same period last year.

Nevertheless, APL made the sixth consecutive year-on-year improvement in its quarterly Core Earnings Before Interest, Taxes and Non-Recurring Items (EBIT), attributing its performance to stringent cost management as well as a yield-focused trade strategy that features network rationalisation and better cargo selection.

With NOL reporting US$100m in cost savings, Ng added: “There is room for further cost savings with another nine vessels scheduled for expiry in the second half of this year.”

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%, above the industry average of 78.3%.