NOL Books USD 105Mn Net Loss amid Market Overcapacity

Singapore-based Neptune Orient Lines (NOL) Group today reported a net loss after tax of USD 105 million for the first quarter of 2016 against a backdrop of weak global demand and excess capacity in the industry.

APL’s first quarter year-on-year volume fell 6% due mainly to weak backhaul volume, while average freight rates fell 23% during the same period. As a result, APL’s 1Q 2016 revenue contracted 29% from the year before to USD 1.14 billion.

APL said that it kept its headhaul asset utilisation rate above 90%, staying focused on “its rigorous cost management and yield-focused trade strategy that emphasised network rationalisation and better cargo selection.”

In the first quarter of 2016, APL achieved cost savings of USD 60 million, which, coupled with savings through a lower bunker price, reduced APL’s total cost of sales per forty-foot-equivalent unit (FEU) by 16% year-on-year.

“Worsening overcapacity of shipping tonnage in 2015 hit the industry well into first quarter 2016. Freight rates which declined across major trade lanes to historic low are expected to remain weak in the face of slower demand growth,” said NOL Group President and CEO Ng Yat Chung.

“The difficult market condition is prompting consolidation and changes in alliances in the industry. While APL continues to make progress in taking out costs and improving yield, the proposed acquisition of APL by CMA CGM will help APL achieve scale to stay competitive in the industry.”

On 29 April 2016, CMA CGM announced that it had received anti-trust regulatory clearance from the European Commission for its acquisition of NOL.

The remaining pre-conditions relating to anti-trust regulatory clearances are expected to be satisfied by mid-2016, NOL added.