Higher rates, volume send NOL profit soaring

Higher rates, volume send NOL profit soaring

Neptune Orient Lines Ltd. on Thursday a better-than-expected sevenfold increase in first quarter net profit, thanks to higher freight rates and increased cargo volumes.

Net profit for the quarter ended April 2 was $163.2 million, up from $20.3 million in the same period last year.

Revenue during the period rose 16 percent to $1.55 billion from $1.34 billion previously.

Rising freight rates due to China's strong trade and a general shortage of vessels have benefited shipping lines such as NOL, which returned to profitability last year after losses in the previous two years.

NOL posted a record net profit last year of $428.8 million after a net loss of $330 million in 2002.

Looking ahead, NOL Chairman Cheng Wai Keung said the group continues to expect to perform better in 2004, amid a positive business environment, yield management and continued cost-cutting.

Longer term, the group aims to maintain the current momentum of double-digit revenue growth, Chief Executive David Lim said, adding that it "is achievable given robust growth trends in global trade, and the rapid development of emerging markets in Asia, Europe and elsewhere."

The group also muted worries over China's attempts to cool down its economy while battling rising inflation, saying NOL's China business was driven by foreign direct investment, which continues to be strong.

Revenue from its liner business, including carrier APL, the second largest container carrier in the U.S. import-export trade lanes, amounted to $1.23 billion from $957 million a year ago, and accounted for 79.3 percent of group revenue.

The company said improved freight rates on its trans-Pacific and Asia-Europe routes, and higher volumes on its Asia-Europe route were the main contributors to the higher revenue.

Average revenue per FEU grew 14 percent to $2,543 during the period, from $2,223 previously, while cargo volumes rose 11 percent to 442,000 FEUs from 397,000 FEUs.

Revenue from NOL's logistics business, which focuses on supply chain management, rose to $288 million from $231 million previously, with strong growth in the Americas especially from warehousing operations and transportation management.

The logistics business accounted for 18.6 percent of total group revenue.

The group said earnings were also helped by an exceptional gain of $8 million from the sale of its tanker business, Neptune Associated Shipping, in March.