NOL Group - Cost Reduction Initiatives

Thursday, November 20, 2008

Neptune Orient Lines Limited (NOL), the parent company of container shipping line APL and of APL Logistics, announced a package of measures to place the company on a more sustainable footing through an expected severe and prolonged downturn in global container shipping.
The actions to be taken will bring the organisation into line with the reduced capacity the company will be operating as a result of initiatives announced on 21 October 2008. The capacity reductions will lower the NOL Group’s vessel network costs by about US$200 million in 2009 (This figure includes some fixed vessel and charter hire costs).
NOL said it did not see a recovery from the challenging conditions for quite some time and the potential exists for them to persist for the next few years. The company said the market environment has worsened considerably over the past month and that it anticipated further deterioration in trading conditions going forward. It described the outlook for profitability in 2009 as grim.
NOL has, therefore, decided on a number of additional actions:
•    A continuing strong focus on productivity measures and reducing operating costs as well as overhead costs.
•    A reduction of the Group’s global workforce of about 1,000 positions with the largest impacts being in North America, where the company's cost base is highest.
•    The relocation of the Group’s Americas’ regional headquarters from Oakland, California to a more cost effective location elsewhere in the United States. A decision on the location and time frame for transition to the new regional headquarters will be announced in December 2008.
•    Additional business adjustments in Europe and across the company’s Asian regions. A staff reduction of about 50 positions is expected at the company's Singapore office.
•    Changes in the way the APL Logistics business is managed to create efficiencies and clearer line of sight of roles and accountabilities.
NOL is committed to providing a range of support and assistance services for affected employees.
NOL Group President and CEO Mr Ron Widdows said: “The negative conditions we are seeing in the market place are unprecedented in our industry's history. This necessitates these very difficult decisions.”

“Last month, we initiated capacity reductions which will significantly reduce our vessel network and operating costs. Now, in view of the deteriorating market conditions, we take these additional steps. This reflects our considered view that what we are seeing goes beyond a normal cyclical downturn,” he said.

The bulk of the staff reductions will be in non-customer facing roles, reflecting the Group's ongoing commitment to delivering high-quality services to customers.

Mr Widdows said it was anticipated that NOL’s plan would lead to a restructuring charge of approximately US$33 million in NOL’s fourth quarter 2008 financial results, but would deliver positive financial outcomes in future years. Additional charges are anticipated for 2009.

“Our aim is to ensure a viable future, to shape the company to handle the turbulence ahead and to be positioned for success when the global economy recovers,” concluded Mr Widdows.


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