NOL returns to the black amid 16pc increase in sales

PUBLISHED : Tuesday, 27 May, 2003, 12:00am
UPDATED : Tuesday, 27 May, 2003, 12:00am

Higher freight rates and less reliance on its liner division bolster group's earnings

The tide turned for Singapore's NOL Group in the past quarter to March as the company that traditionally depends heavily on revenue from its liner shipping division posted a net profit of US$20 million.

The result, on the back of a 16 per cent year-on-year jump in sales to US$1.34 billion, was a sharp turnaround from a $91 million loss in the same period last year.

The group, which lost US$330 million last year, recovered partly because of higher freight rates and a reduced dependence on its liner shipping division, American President Lines (APL).

The carrier posted earnings before interest and tax (ebit) of US$5 million and generated 70 per cent of group sales, down three percentage points on last year. APL posted an operating loss of $53 million for the first quarter of last year and $73 million for the full year.

The group cashed in on the shortage of vessels available for hire on the open tanker market in the first quarter as its chartering division raised its contribution to group sales by three percentage points to 10 per cent.

What was a US$7 million contribution to ebit last year swelled to $44 million by March.

Daily rates for vessels on the charter market were driven up by the sinking of the tanker Prestige off Spain, higher oil production and the disruption of supply in Venezuela, which resulted in longer charter voyages.

While APL's container volume between Asia and Europe shrank 4 per cent year on year to 78,000 feu (40-foot equivalent units), it was able to capitalise on a comparative 29 per cent jump in freight rates on the sector. A feu, which last year at this time was moving between Asia and Europe for an average rate of US$1,693, this year fetched almost $2,200.

Demand for shipping capacity on the transpacific also surged in the first quarter. But while the volume of containers APL carried grew 15 per cent year on year to 163,000 feu, freight rates remained static, mitigating gains.

The company's supply chain management division, APL Logistics, lost US$1 million before interest and tax in the first quarter after being $7 million in the red in the same period last year.

Barring unforeseen circumstances, the group projected it would earn 'significant' profits this year.