Freight Rate Erosion Plunges NOL Further into Red

Singapore-based Neptune Orient Lines (NOL) today reported a 3Q 2015 net loss of USD 96 million, compared to a net loss of USD 23 million in 3Q 2014.

The Group posted a third quarter 2015 Core EBIT loss of USD 66 million, versus a Core EBIT of USD 21 million in the same quarter last year.

“The absence of the traditional third quarter peak season in Europe and North America led to severe freight rates erosion in major trade lanes. We continued to make good progress in managing costs. Unfortunately, this was more than offset by weak global demand and huge contraction in freight rates,” said NOL Group President and CEO Ng Yat Chung.

NOL said that its cost savings program yielded USD 80 million in 3Q 2015, bringing its total year-to-date cost savings to USD 335 million.

“NOL will continue to drive cost excellence and yield optimisation. The Group’s balance sheet has strengthened and we will invest when the conditions are right.”

Liner performance

In 3Q 2015, APL, NOL’s container shipping business, reported a revenue decline of 29% to USD 1.2b versus the same quarter last year.

APL’s average freight rates fell 21% amidst pressure from over-capacity in the industry. Volume contracted 11%, which APL attributed to various reasons, including a significant drop in U.S. exports and weak demand in the Intra-Asia short-sea market. APL also voided sailings in response to weak global demand and trimmed capacity in unprofitable trade lanes. The company was able to maintain a high headhaul utilisation of above 90%.

As disclosed in the earnings release, APL maintained its rigorous cost management as well as a yield-focused trade strategy that emphasises network rationalisation and better cargo selection. Six chartered ships were returned in the third quarter. As a result, total cost of sales per forty-foot-equivalent unit (FEU) fell by 17% year-on-year, NOL said in a release.

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