11 February 2010

APL Logistics reported a 16.0% year-on-year drop in Core EBIT for 2009

Neptune Orient Lines (NOL) experienced a substantial loss in the face of extremely demanding market circumstances. The Group announced a net loss of US$741.0 million for 2009, compared with a net profit of US$83.0 million for 2008. For the fourth quarter of 2009 (4Q09), NOL recorded a net loss of US$211.0 million, compared to a net loss of US$149.0 million for the fourth quarter of 2008 (4Q08).

At the Core EBIT level, NOL posted a loss of US$651.0 million for 2009, compared to a profit of US$213.0 million for 2008. Core EBIT for 4Q09 was a loss of US$183.0 million, compared with a Core EBIT loss of US$45.0 million for the corresponding period in 2008. Revenue for 2009 was down year-on-year by 30.0%, to US$6.5 billion.

The 2009 results were disappointing and show the impact of sharp falls in demand and freight rates, especially in the first half of the year, evidenced by a dramatic reduction in annual revenue. Through the later part of 2009, improved volumes and active capacity management led to higher utilisation rates, but earnings remained depressed due to low freight rates, which continued below levels which enable full cost recovery. Towards the end of the year, NOL achieved a stronger market position in a number of key liner shipping trades with better volumes and freight rates.

> Container Shipping

2009 revenue for the Container Shipping segment was US$5.5 billion, down 31.0% year-on-year. Overall volumes carried by NOL’s Container Shipping business, APL, for 2009 declined year-on-year by 7.0%, to 2.3 million FEU (forty-foot equivalent unit). Some shifts in the volume mix occurred, with the Asia/Middle East segment contributing 39.0% of total volumes over the course of the year, compared to 35.0% in 2008.

For 4Q09, volumes increased by 28.0% to 733,000 FEU, compared to 4Q08, with the improvement due to higher volumes lifted in all major trade lanes. Average revenue per FEU decreased by 25.0% and 28.0% for 2009 and 4Q09 respectively, due to lower core freight rates and lower bunker fuel cost recovery as well as changes in trade mix.

APL achieved an average vessel utilisation rate of 89.0% across 2009, and 93.0% for 4Q09. Overall revenue for APL for 2009 was US$5.5 billion, down year-on-year by 31.0%. 4Q09 revenue of US$1.7 billion was 14.0% lower than 4Q08.

APL posted a Core EBIT loss of US$731.0 million for the year. For 4Q09, the Core EBIT loss was US$212.0 million, compared to a loss of US$84.0 million in 4Q08. The increase in the 4Q09 Core EBIT loss, as compared to the 3Q09 Core EBIT loss of US$140.0 million, was due to a combination of a longer 4Q09 by 2 weeks and additional costs associated with a larger operating fleet including voyage and bunker costs. APL’s 4Q09 EBIT loss was also affected by non-recurring costs relating to restructuring.

> Terminals

In the Terminals business segment, revenue of US$503.0 million was achieved for 2009, a year-on-year decrease of 13.0%, due to lower overall volume throughput. 4Q09 revenue was 14.0% higher than for 4Q08, reflecting improved Container Shipping volumes. Terminals’ Core EBIT for the year was US$32.0 million, compared with US$72.0 million in 2008. Core EBIT margin was 6.4%, compared to 12.5% in 2008.

> Logistics

APL Logistics achieved 2009 revenue of US$976.0 million, a year-on-year decrease of 26.0%. This was primarily due to lower volumes across various Logistics services, coupled with lower freight rates in the freight forwarding business segment. Revenue in 4Q09 was US$306.0 million, down 7.0% compared to 4Q08. Logistics achieved Core EBIT of US$54.0 million for 2009, a decline of 16.0% year-on-year, mainly due to lower volumes and revenues. Core EBIT Margin for the segment was 5.5%, compared to 4.8% in 2008.