Drewry urges NOL to cut costs further

Singapore: Shipping consultants Drewry has urged Neptune Orient Lines (NOL), which runs Singaporean containerline APL, to work on lowering its fixed unit costs if it is to get back into the black.

In a report which compared NOL to Hong Kong’s OOCL, Drewry noted: “NOL’s chances of a turnaround are dependent on lowering its high fixed unit costs as a sustained recovery in freight rates is still a few quarters away.”

NOL’s asset base has historically been focused on charter-in tonnage leading to higher unit costs, Drewry noted. In a bid to significantly lower its cost base, NOL embarked upon a massive fleet renewal program coupled with a major cost savings program in early 2012.

“The company did manage to cut its costs significantly over the previous years but still lags behind many of its peers,” the maritime consultants noted.

NOL has seen its balance sheet strained rapidly with net gearing increasing from a meagre 11.7% at the start of 2011 to ~182% by end-2013.

“This has put a severe strain on NOL’s operating cashflows, which are failing to meet rising interest costs,” Drewry stated.
Nevertheless, Drewry anticpated “improved results” for NOL in 2014 as it takes “the right steps to reduce its cost base, gearing levels and restructure its fleet”.  [01/04/14]

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