APL Logistics is taking a “cautious” outlook for the rest of the year and into 2012, despite a strong first half-year performance and growth in emerging markets and automotive logistics.
The logistics division of Singapore’s Neptune Orient Lines Group was the standout performer when the company reported half-year results earlier this month.
With its APL liner shipping operation under pricing pressure in key markets, NOL posted a net loss of $57 million in the period, compared with a $1 million profit in the first half of 2010. But APL Logistics saw core earnings before interest and taxes rise 22 percent year-over-year to $33 million, as revenue increased 18 percent to $682 million.
APL Logistics President Jim McAdam attributed the gains primarily to contract and automotive logistics growth, and improved revenue from emerging markets, particularly in Asia.
“I think it’s going to be challenging,” he said in an interview. “The forecast GDP growth of developed markets is being marked down, equity markets are in a state of disruption and there is uncertainty about sovereign debt issues.”
McAdam said the strength and duration of the peak season is “unpredictable,” so APL is running the business with the same conservatism it showed in 2009.
“It could all be much ado about nothing, but if it’s not then those companies which operated prudently will benefit, so we’ll be cautious in the next six months and see what happens,” he said.
McAdam said a change in how automotive manufacturers organized their supply chains would continue to drive growth for APL Logistics in China and North America. He forecast that Asia’s share of the division’s revenue would rise from the 25 percent achieved in the first half of 2011.
“We’re pretty excited about India both in terms of supporting exports of that country and supporting domestic growth of India,” he said.
McAdam expects double-digit growth in India, and APL, which operates a double-stack rail business in the country, plans to invest more in trucking, warehousing and distribution.
“China contract logistics growth is also expected to be strong, and we’re quite bullish on Indonesia,” he said.
The company in Indonesia offers logistics services for domestic and international markets, and land transportation.
“It’s a very different story in last two years than five years ago. Lots of companies in textiles, apparel and [fast moving consumer goods] are interested in re-entering Indonesia because it also now has rising domestic consumption,” McAdam said.
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