ACL''s Course for Profits

ACL''s Course for Profits

Copyright 2004, Traffic World, Inc.

Atlantic Container Line''s strategy of mixing specialized roll-on, roll-off cargoes with containerized freight helped float the shipping line through the bust cycle that saw many of container lines plunge into the red. ACL has managed to report a profit each year since it went public in 1994, and now that the economy is heating up it hopes to hold that course.

Last year ACL''s volume increased by 10 percent, reaching its highest level in 10 years, while net profit increased 15 percent to approximately $9.5 million from about $8.6 million in 2002.

Even more impressive than its profits is the 20 percent return on capital invested that ACL has averaged since 1994.

Right now ACL''s vessels are running full in both directions across the Atlantic, said President and CEO Andrew J. Abbott. "The total market is probably in the mid-80 percent range on both legs, but we''re carrying 100 percent in both directions."

Abbott credits the shipping line''s success to its unusual cargo mix. "We carry cargoes that the other guys don''t carry and go to ports that they don''t call on," said Abbott. "We like to pick and choose the cherries off the tree."

That "cherry-picking" strategy helps ACL avoid unprofitable freight. Rates on oversize cargo are rising without "pushback" from shippers, Abbott said. As for containers, "We don''t even pay attention to container rates. Rates on the eastbound leg are going up but even if they double they are still so low that we wouldn''t make money."

ACL operates five combination container/ro-ro ships on its weekly trans-Atlantic service to Europe, and serves the Mediterranean and West Africa that ACL reaches through transshipments in Antwerp to routes operated by its parent, the Grimaldi Group of Naples. "We''ll move containers on occasion, but they''ll just be part of our ro-ro service."

On the westbound leg, the volume is mostly autos. Agricultural equipment and construction machinery dominate the eastbound trans-Atlantic leg.

ACL''s five hybrid ships on the trans-Atlantic carry ro-ro cargo on lower decks and up to 1,850 TEUs of containers on top decks. The ro-ro cargoes and containers are loaded and discharged at the same time. On the trans-Atlantic, the stable revenue base comes mostly from the autos it carries on the two lower decks under long-term contract with Wallenius Wilhelmsen, which leases the space to ship Saabs and Volvos to the U.S. market. With this stable revenue base, ACL can move premium, specialized project cargoes, trucks, cars, containers and "everything from soup to nuts" for other customers, said Abbott.

One of the more unusual cargoes ACL has been carrying across the Atlantic every week for almost two decades are the long wing-structure components for Airbus passenger jets manufactured at a former Textron plant in Nashville, Tenn. ACL landed the order in the early 1980s when Airbus discovered that the high-value components were getting scratched in transit on the large Antonov cargo planes it was using to transport them to its U.K. assembly plant. Airbus asked ACL to design and build specialized 40-foot trailers to truck them from Nashville to Norfolk, where they are driven aboard ACL''s vessels.

As Airbus jets grew in size over the years, so too did the trailers, which now measure 110 feet long. ACL sold the trailers to Airbus, which now drives them to Norfolk from where they are shipped to Liverpool and driven to Airbus''s U.K. assembly plant. Once assembled with flaps, wiring and controls, the completed wings are transported by barge to Bordeaux and then to Toulouse in France for final assembly into the Airbus planes.

Liverpool is but one of the ports that ACL''s competitors in the trade don''t call. Others include Gothenberg, Sweden, where ACL loads the Saabs and Volvos that make up its stable car-carrying trade, and Baltimore.

One of ACL''s fastest-growing markets is West Africa where it is experiencing "triple-digit growth" in the year and a half since it introduced weekly service. The service uses two new combination ro-ro and container vessels that ACL charters to Grimaldi to transship its cargo from Antwerp. "Virtually everything we carry there is used, cars, trucks, clothing, everything except oil-drilling equipment," said Abbott. "I think the Nigerians must be the world''s greatest mechanics when I look at the condition of some of the vehicles we ship there."

ACL''s Mediterranean business, served through transshipment on Grimaldi vessels, is growing as well, though not as fast as West Africa. It employs pure ro-ro vessels on these routes, which carry "project cargo, cars, trucks, tractors, boats - you name it we''re shipping it." Business is good enough in both markets that ACL is planning to introduce direct services from U.S. ports on three or four new vessels in the near future, though Abbott refuses to "buy new vessels at today''s prices." He said he would wait to see what vessels might become available through Grimaldi.

ACL plans to replace its existing fleet of five vessels by 2010, when they will turn 25 years old. Abbott said the vessels are in good shape because "We drydock them every year and give them a full paint job and engine overhaul."