NOL Group’s extensive cost-cutting paid off in the third quarter as the Singapore-based shipping line posted a net profit of $20 million even as its revenue declined.
NOL’s profit was 60 percent lower than the $50 million it earned in the same quarter last year but was a swing of $55 million from its $35 million loss in the second quarter of 2013.
NOL, the world’s eighth-largest liner company as measured by capacity, eked out its third-quarter profit in the face of weak demand and sliding freight rates. Its global revenue fell 10 percent to $2.062 billion from $2.301 billion in the same quarter last year.
“This is one of the weakest peak seasons we have seen in recent years, characterized by depressed freight rates and industry over-capacity,” said NOL Group CEO Ng Yat Chung.
NOL said it expects volatile freight rates and over-capacity will continue. But it said it “remains on track to deliver a better performance than in 2012” through continued cost-cutting and a focus on operating efficiencies.
NOL’s operating profit as measured by core earnings before interest and taxes in the third quarter of 2013 was $22 million, down 73 percent from its operating profit of $80 million in the same quarter last year.
APL, NOL’s liner shipping subsidiary, posted an operating loss of $130 million as measured by core EBIT, but this was an improvement of 23 percent from its $168 million operating loss in the same quarter last year.
APL revenue in the quarter was $1.7 billion, down 13 percent from a year earlier, which NOL attributed to “capacity management and a steep decline in freight rates.”
Container volume slid 3 percent to 2.1 million 20-foot-equivalent units.
“We are taking decisive actions to trim capacity and reconfigure our service networks to better align to the lower demand levels,” said APL President Kenneth Glenn. “We continue to strengthen our competitiveness, evidenced by our ability to generate positive operating results despite a difficult market. We believe that our improved cost structure will position us well in a low growth and volatile freight rate environment.”
NOL’s supply chain management business, APL Logistics, earned a third-quarter operating profit of $19 million, with core EBIT margin staying steady at 5.1 percent, compared to the same quarter last year.
“In a tough marketplace, APL Logistics has improved our overall margins. We will continue to drive profitability by focusing on cost and service delivery to our customers,” said APL Logistics President Jim McAdam. “APL Logistics’ business expansion in the emerging markets remains firmly on track, and our recent acquisitions in the U.S. and China are contributing to our earnings.”