Neptune Orient Lines (NOL) reported net profit of US$187 million for the first half (1H) of 2006, down 52% from the same period of 2005. The company posted a second quarter (2/Q) net profit of US$67 million, 66% lower than in 2005.
NOL Chairman Mr. Cheng Wai Keung, said, ‘After record financial performances in the past three years, we are now in a more challenging business environment, which is reflected in reduced earnings for the first half of 2006.
‘Business conditions for both our liner and logistics segments have become more difficult. Freight rates have softened, but our cost management efforts continue, mitigating the cost pressures from high fuel prices.’
NOL’s policy is to maintain an annual dividend of 8 Singapore cents per share net, or a full year dividend payout of 20% of net profits, whichever is higher.
The Board of Directors has recommended an interim tax exempt dividend of 4 Singapore cents per share to be paid on September 18, 2006 to all shareholders whose names appear on the Company’s share register at close of business on August 29, 2006.
1H06 operating performance
1H 2006 total Group revenues rose slightly year-on-year to US$3.52 billion, while the Group’s Core Earnings Before Gross Interest Expense, Tax and Non-Recurring Items (EBIT) of US$227 million was down 47% from the corresponding period of 2005.
Mr. David Lim, NOL Group President and CEO, said, ‘While demand for our services remains strong across most trades, continued higher fuel costs and a softening of rates in some trades have impacted earnings ’ particularly when compared with the performances of 2003 to 2005. In the second quarter we continued to see growth in volumes but the revenues of both the liner and logistics businesses declined slightly in the quarter.
‘Over the past three years, NOL consistently demonstrated its ability to outperform its competitors. We are focused on continuing to perform at the top of the industry in less favorable market conditions,’ said Mr. Lim.
‘We are actively developing capabilities that provide greater service reliability and help customers more effectively manage overall supply chain costs. We also continue to pursue opportunities to better integrate our liner and logistics service offerings,’ said Mr Lim.
Average revenues per FEU for NOL’s liner business, APL, in 1H 2006 were US$2,650, down four percent compared to the previous year.
Container volumes were 5% higher than a year before at 1.01 million FEU, with headhaul capacity increasing by 8%.
1H 2006 Core EBIT for APL was US$194 million, down 52% from the same period in 2005. Core EBIT in the second quarter was US$71 million, 65% lower than in the comparable period in 2005.
Headhaul utilization remained healthy at 95% for both 1H 2006 and for the second quarter, compared to 95% for 1H 2005 and 98% in the second quarter of 2005.
‘Slightly lower utilizations are a result of our active yield management strategy,’ said Mr. Ron Widdows, CEO of APL. ‘We continue to manage our business mix to ensure we carry cargo which provides the maximum yield.’
Bunker costs combined with rate softening continued to be the major factors leading to compressed margins for the industry.
In the second quarter, total costs per FEU rose three percent, due mainly to the impact of fuel prices which were US$60 million higher than in the corresponding prior year period.
‘Excluding the impact of fuel, costs per FEU in the second quarter were down two percent from the same period of 2005. This reflects our continuing efforts to control costs to offset the oil price challenge,’ said Mr Widdows.
Mr. Widdows said, ‘APL’s focus is on continuing to provide our customers with the best possible services while keeping our network tight, working our assets hard and growing capacity sensibly, and largely in line with the market.’
APL has increased new vessel commitments to 32 scheduled for delivery over the next four years. Only three of these ships will enter the fleet in 2006, which is co