NOL Returns to Black, Sees Brighter 2000

Neptune Orient Lines (NOL) returned to the black in 1999 after suffering losses the previous two years, and CEO Flemming Jacobs said the shipping group could expect to sustain its profits in 2000.

"There is no doubt that the turnaround is real. In the second half of 1999, we built profitability back into the business...but now there is no looking back," Jacobs said.

For the year ended December 31, 1999, the national shipping company reported a net profit of $92.8 million, compared to a net loss of $246.8 million in 1998. Turnover grew 12 percent to $4.2 billion, largely due to improved operations.

Barra Global Estimates has a consensus net profit forecast of $61.4 million for 1999.

Jacobs said NOL, which would report its future earnings in U.S. dollars, expected its first-half 2000 performance to be better than second-half 1999, and 2000 earnings to be in line with last year's.

Future growth would be generated mainly from its logistics operations, which accounted for nine percent of NOL's sales last year. Chartering accounted for 77 percent of total sales in 1999. The strategy was to further restructure its logistics business with investment focus more on information technology development rather than asset acquisitions, Jacobs said.

A review of the logistics strategy was expected to be under way within two to three weeks, he said, adding that consultants were being appointed.

The company was in the process of appointing a new chief executive officer to propel the logistics growth.

NOL had said in previous occasions that its medium term target was for an even split in contribution between container shipping and logistics operations.

On concerns over NOL's vulnerability to rising prices of bunker fuel, which accounts for six percent of total costs, Jacobs said the group enjoys more flexibility in negotiating freight rates with customers this year. "The significant increase in fuel costs has worried many. However, our customers understand the situation and the need for compensation this year," he said.

Jacobs planned to further reduce NOL's gearing from 2.7 times as of end-1999, when total debt stood at $2.2 billion. - (Reuters)