NOL Group 2000 Annual Results
'These are the best results we have ever had, but we're not stopping here.'
Mr. Flemming R. Jacobs
NOL Group President and CEO
The Results
FY 2000 Overall Profit US$178 million Up 90%
S$308m
FY 2000 EBITDA US$593 million Up 56%
S$1,020m
FY 2000 Turnover US$4.7 billion Up 9%
S$8.0 b
The Reasons
-- Better rates and volumes
-- New organizational structure
-- Constant focus on cost management
-- Constant focus on operational excellence
-- Strong talented management team
"We are proud that the new organization has, in just over a year,
established, implemented and delivered the service excellence which is core to
whatever we do."
Mr. Flemming R Jacobs
NOL Group Year 2000 Highest Profit Ever
SINGAPORE, March 8 The global transportation and logistics
company Neptune Orient Lines Ltd (NOL) continued its strong positive trend
with a record profit of US$178 million (S$308 million) for the full year
ending December 31, 2000, up from US$94 million (S$159 million) in 1999, when
it benefited from US$66 million in non-recurring profit, particularly from the
sale of the US Stacktrain operation.
NOL Group President and Chief Executive Officer, Mr. Flemming R Jacobs,
said that the results showed that the Company had regained health, allowing
management to build on the now-strong container transportation business and to
focus on growth in the Logistics' business. The Tanker business was also
strong.
"These are the best results we have ever had," he said, "but we're not
stopping here. Better rates and better volumes in the Liner and Tanker
business were certainly one part of the story. But the new organizational
structure and our constant focus on cost management and operational excellence
across the Group are making a sustained and significant impact.
"We are delivering what we said we would, and have achieved our improved
results despite much higher fuel costs and interest rates. We manage these as
we do each and every cost item and part of our business.
"The combination of the new structure, talented management team and a
focus on costs and service excellence will continue to make a difference as we
break out of the so-called 'old economy' mould that some like to put us in,"
he said.
"International trade needs, and will continue to need, reliable container
transportation, and volumes grow every year -- including when there is a
slowdown in some economies. We are growing as well, under the strong brand
name APL -- but we are no longer just a shipping company. Today we are part of
the new and much larger market segment that is end-to-end supply chain
management."
Group turnover was US$4.7 billion (S$8.0 billion), up 9 per cent on the
previous year. The APL Liner business accounted for 81 per cent of turnover,
APL Logistics 10 per cent, and 9 per cent came from NOL Chartering and
Enterprise activities.
The NOL Group achieved a sharp improvement in its EBITDA (Earnings from
business operations Before Interest expenses, Tax, Depreciation, Amortization
and non-recurring items), which was US$593 million in 2000, up from US$381
million in 1999 -- an improvement of 56 per cent.
Total EBIT (Earnings Before Interest expenses and Tax) was US$349
million, up by 163 per cent.
Comparing second half of 2000 with the first half, the Group saw an
increase in turnover of 13 percent, and an increase in overall profit of
168 per cent.
Volumes and Revenues Up In Liner Business
Core EBIT for the Liner business was US$284 million, up 64 per cent from
1999. Turnover was US$3.8 billion, up from US$3.3 billion in 1999 which
included US$240 million from the Stacktrain service sold in May of that year.
Total container lifts increased from 1,238,500 40-foot Equivalent Units
(FEUs) to 1,366,000, or 10 per cent. Volumes increased to 654,000 FEUs in the
Americas region, 429,000 FEUs in Asia and 283,000 FEUs in Europe.
"We received strong support from our customers. This is reflected not only
in these numbers but also in the awards we received from several sources. We
are proud that the new APL organization has, in just over a year, established,
implemented and delivered the service excellence which is core to whatever we
do. Except for the impact of higher fuel costs, we reduced our unit costs
through more efficient operation and management of our business. Our customers
do so in their businesses and they rightly expect us to do the same in ours.
All this leads us to be more strongly positioned for 2001, when volume growth
in some US trades is forecast to slow to a level more in line with historic
growth.
"The new management team has made a big difference," Mr. Jacobs said. "It
managed the turnaround and at the same time expanded our services. It improved
our service coverage and position in the trans-Atlantic with a new alliance
agreement and expanded also on the intra-Asia routes.
"We have always been strong in the trans-Pacific trade, and being amongst
the market leaders in that arena is important to us. But with growth in the
Asia region and with the plans and steps already taken for Europe, we are
developing a more balanced global presence.
"Container trade grows every year and whilst we have not grown our
capacity in recent years, we are now doing so. We have contracted to add about
one third of our current vessel capacity over the next two years, taking
advantage of good newbuild prices to rejuvenate our fleet and prepare for
future needs. The majority of the new vessels will be chartered and therefore
off the balance sheet," he said.
"The program is carefully co-ordinated with the tonnage plans of our
partners in The New World Alliance (TNWA) to ensure an orderly introduction."
Improved Operational Cost Structures
Average fuel prices for APL increased by 67 per cent over 1999. "Of course
this hurts, but it was mitigated by our various cost efficiency initiatives as
well as an acceptance by our customers to share this burden with us,"
Mr. Jacobs said.
"We manage all our costs aggressively and expect to improve performance
further and benefit when oil prices go down, as we hope they will," Mr. Jacobs
said. "We set specific cost reduction targets in 1999 and even higher targets
in 2000. We achieved these and it is interesting to see how new initiatives
are coming forward from the organization all the time. For example, in 2000
the focus on equipment imbalances was particularly successful, also assisted
by the improved inbound volumes to Asia. But the benefits of the Ocean
Shipping Reform Act (OSRA) are being experienced more and more in the
contracting with individual customers for business which fits our container
flows better. Closer cooperation within TNWA is also providing opportunities
for better cost efficiencies to mutual benefit. It has become a much more
focused alliance."
IT Innovation
Commitment to IT innovation helped to keep APL at the forefront of the
industry.
"The key objective of our IT innovation is to make it easy for our
customers to do business with us," Mr. Jacobs said. "That means we provide
them with choice. And more and more they are choosing to transact business
with us via the Internet.
"Half of all transactions through our Internet HomePort portal are
inquiries about shipment status. At around 150,000 transactions a month during
2000, and constantly going up, we will soon be saving nearly a million phone
calls a year. These sorts of efficiencies will compound over time, because not
only do we save resources, but we free people from the phone to go do more
business."
Mr. Jacobs said foundations were also laid for further revenue generation
through the Global Transportation Network (GTN) -- a cross-carrier, neutral
partnership with a technology company which will help standardize e-commerce
transportation transactions. "In addition" Mr. Jacobs said, "GTN will provide
products to help customers manage their internal workflows better, yet another
facilitator to save costs. Further developments and products in GTN are
expected throughout 2001," he said.
Outlook for 2001
"It is always difficult to beat a stellar year, particularly in the light
of increased capacity coming on stream and the slowing US economy. However, we
are better positioned now and our growing European activities give us a better
balance. Based on present indications, we expect overall results in the Liner
business not significantly different from last year's," Mr. Jacobs said.
Logistics Set for Growth
Gross turnover of APL Logistics (APLL) increased by 29 per cent in 2000,
from US$372 million to US$479 million. Overall core EBIT for the Logistics
business was US$37 million, up 12 per cent from 1999.
"Logistics is a core activity which we will grow even faster," Mr. Jacobs
said. "With our new APLL CEO Dick Metzler, appointed in June, we have
continued our thorough planning and preparation for growth. Whilst this was
done there was still double digit growth in the current business.
"There has never been a better time to invest in our Logistics business.
The Group is strong and focused, we have sought input from our customers and
they have told us the solutions and services that are relevant to them and how
they want them delivered. So, we have clear signposts for the direction we are
going, and we have the people, the resources and the strategy to get there. We
are ready to make the necessary investments, joint ventures and alliances to
support our growth," Mr. Jacobs said.
"The first such step was the acquisition of GATX Logistics from
1 February, 2001," said Dick Metzler. "With this we have taken a major step in
providing the type of intercontinental supply chain management our customers
say they require. Although to achieve our ambitious goals, everything will not
happen in year one; 2001 will still be dedicated to taking some significant
first steps to build this business and shareholders' value.
"The way we look at logistics -- as an end-to-end supply chain, from
factory floor or before, to store or consumer door -- is new. What makes us
different is that we are not just providing chunks of the supply chain, we are
looking at the entire chain on key international trade lanes within targeted
vertical markets. This is a wide open space and we are at the starting gates
virtually on our own," Mr. Metzler said, and added, "This is just the
beginning. We are positioning to benefit from the outsourcing trend of
multi-national companies, especially in the US.
"The outlook is strong for this business. It has been encouraging that we
started the year with some major contracts and we are already experiencing
synergies coming from the acquisition of GATX Logistics. Customers are
bundling their logistics' needs with APL transportation creating valuable
synergies between the Liner and Logistics businesses. Integration with GATX
Logistics has been smooth and without hitches."
Outlook for 2001
"We expect strong revenue growth in 2001 also coming from the acquisitions
and our building up of the logistics business. Whilst all this may have some
temporary affect on the margins, the underlying business is strong and we
certainly don't intend to under perform against the industry," Mr Metzler
concluded.
Tanker Business Strongly Back in the Black
The chartering business, consisting mainly of the crude oil transportation
activity under American Eagle Tankers (AET), the product tankers under Neptank
and the bulk carrier business, achieved substantially improved results with
core EBIT reaching US$45 million, up from a loss of US$5 million in 1999.
Turnover reached US$333 million, up from US$243 million.
The fleet of Aframax tankers (each with a carrying capacity of around
100,000 deadweight tons) operating mainly in the US Gulf, benefited from
strong charter rates. Whilst the year started relatively soft, rates improved
and held at a high level throughout the year. Aframax rates per day thus
averaged US$28,600 per day in 2000 up 50 per cent on the average in 1999. The
outlook for this sector for 2001, and even beyond, is good.
The Group currently operates a fleet of 22 modern Aframax tankers, with an
average age of just over six years compared with an industry average of around
12 years. A number of newbuildings are being negotiated, and two Very Large
Crude Carriers (VLCCs) and two Aframax tankers have been contracted for
delivery in 2002.
"At the half year point, we said that the tanker business could be a
hidden gem. I think this result confirms that," said Mr. Joseph Kwok, CEO of
Chartering.
Mr. Kwok added, "As part of the refocusing of our business we reduced our
fleet of bulk carriers to four. Whilst we may later expand the product carrier
business, we have decided to exit the bulk carrier segment. We have,
therefore, taken a provision of US$17 million against our long term
contractual obligations for the four bulk carriers."
Outlook for 2001
The tanker business is good, whilst the bulk carriers are expected to
remain unprofitable.
NOL Group Outlook for The Future
Commenting on the year ahead, Mr Jacobs said there was a lot of talk of a
slow-down in the US economy and that some analysts were forecasting a tougher
time ahead.
"The US economy is forecast to grow by about two per cent. For this big
economy it still means continued trade growth, although it will not match that
of last year.
"Overall, it will be difficult to match a record year, but we are now
better positioned. Based on the current outlook for the world's major
economies, the Group result is expected not to vary significantly this year.
"We will continue to work hard and work smart and remain focused on
finding new ways to help our customers manage their business. This will ensure
that we remain at the leading edge and that we continue to generate positive
results for them and for our shareholders," Mr Jacobs concluded.
About NOL
NOL is a global transportation and logistics company engaged in shipping
and related businesses. Its container arm, APL, provides customers around the
world with container transportation services that combine high quality
inter-modal operations with state-of-the-art information technology while APL
Logistics provides end to end supply chain management services through its
global network.
