Neptune Orient Lines (NOL) saw a net loss after tax of US$105 million in the first quarter of 2016, attributing the contraction to a backdrop of weak global demand and excess capacity in the industry.
The group said core EBIT (earnings before interest, taxes and non-recurring items) was a loss of $84 million compared to the same period last year, while core EBITDA (earnings before interest, taxes, depreciation and amortization) remained positive at $18 million in the first quarter of 2016.
“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 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.”
APL, the company’s container shipping unit, posted a first quarter year-on-year volume drop of 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 $1.14 billion.
“In this challenging environment, APL maintained prudent management of its deployed capacity, keeping its headhaul asset utilisation rate above 90%. APL also stayed focused on its rigorous cost management and yield-focused trade strategy that emphasised network rationalisation and better cargo selection,” said the company in a written statement.
In the first quarter, APL achieved cost savings of $60 million. Coupled with savings through a lower bunker price, APL’s total cost of sales per forty-foot-equivalent unit reduced by 16% year-on-year.
Meanwhile on the proposed takeover of the group by rival shipping giant CMA CGM, the latter announced on April 29, 2016, that it has received anti-trust regulatory clearance from the European Commission for its pre-conditional voluntary general offer for NOL. The remaining pre-conditions relating to anti-trust regulatory clearances are expected to be satisfied by mid-2016.
