(Bloomberg) — Neptune Orient Lines Ltd. said its container-shipping arm, Asia’s third-biggest, had the first quarterly profit since 2010 because of higher freight rates and cost-savings.
APL Ltd. posted core earnings before interest and taxes of $7 million in the three months ended in June compared with a $53 million loss a year earlier, according to a statement today. The group’s logistics division had a $9 million profit on the same basis. Singapore-based NOL’s net loss was $118 million, weighed down by $112 million of restructuring charges.
The shipping unit’s average freight rates rose 3 percent in the second quarter as lines boosted cooperation and ended price wars that caused industrywide losses last year. NOL has also found $225 million of annual cost-savings as it works toward a $500 million goal.
“We have seen a steady move up in rates in the second quarter,” APL President Kenneth Glenn told reporters and analysts in Singapore. Rates are still steady and the company may seek increase if the opportunity arises, he said.
NOL’s second-quarter sales rose 8 percent to $2.3 billion. The company was expected to make a net loss of $41.1 million, based on the average of five analyst estimates compiled by Bloomberg.
The company rose 1.3 percent to close at S$1.22 in Singapore trading before the earnings statement. It has advanced 8 percent this year, compared with a 15 increase for the benchmark Straits Times Index.
The container line used 7 percent less fuel than a year earlier, even as volumes rose 4 percent. The unit also saved $19 million in the first half by improving how it returns empty containers to Asia, according to the statement. NOL has also announced plans to sell its Singapore headquarters to raise funds for investments.
The company’s Asia-Europe rates climbed 15 percent on average in the second quarter, while volumes fell 4 percent. On Transpacific routes, rates fell 7 percent and volumes rose 5 percent.
Shipping lines, including APL and A.P. Moeller-Maersk A/S, raised Asia-Europe rates once in the first quarter and three times in three months ended June. On Asia-U.S. routes, 15 lines including APL set a $500 per box guideline for increases in annual contracts starting after May, the Transpacific Stabilization Agreement said in February.
NOL received six new 10,000-container ships in the first half, with four more to come by the end of the year. It will get 20 new ships next year and four the year after. The tally includes ten 14,000-container ships, half of which will be chartered out to Tokyo-based Mitsui O.S.K. Lines Ltd.
NOL’s fleet totaled 141 ships with a capacity of 630,000 boxes at the end of June. The company has funding in place for all of its on-order ships, said Chief Financial Officer Cedric Foo. Older vessels that will be replaced by the new ships have already been identified, he said.
The shipping line also has “tremendous” flexibility regarding capacity as many charter contracts are up for renewal in the next two years, he said. It has no plans to sell more vessels, he said.