Neptune Orient Lines


 

 

Neptune Orient Lines (NOL) is a global transportation company that was established in 1968 as Singapore’s national shipping line. Today, the NOL Group’s core businesses are container transportation, terminal operation and supply chain management. NOL is listed on the Singapore Stock Exchange, and Temasek Holdings, the investment arm of the Singapore government, is its largest shareholder with a 68% holding. In 2009, the company employed more than 11,000 staff globally, operated a fleet of over 100 vessels and transported over two million forty-foot containers.

Origins
NOL was formed on 30 December 1968 as a shipping line wholly owned by the Singapore government. It was envisaged that the company would support Singapore’s industrial development by carrying a share of the nation’s trade at fair freight prices, and maintain a supply line of essential cargoes during times of crisis.

Then Finance Minister Dr Goh Keng Swee was the key decision-maker in the planning and establishment of the company, including issues regarding leadership and trade routes. Other officials involved in the planning of NOL’s aims and objectives, capital structure and trade activities included Hon Sui Sen, J. Y. Pillay, Sim Kee Boon and Eric Khoo.

Early years
The company’s immediate priorities were to acquire ready ships to enter the major trade lanes, which were at that time the Far East-Europe, Australia and United States trades. NOL also wanted to acquire tonnage to charter to third parties. NOL’s first ship, the eighteen-year-old Neptune Topaz, was purchased from the Hansa line and delivered in 1969. NOL also purchased its first tanker that year, the Neptune Taurus from Worldwide Shipping Group.
    
NOL faced initial difficulties as newcomers to the Far East-Europe trade. Many problems arose from its dealings with the Far-East Freight Conference (FEFC), which controlled the majority of the trade, including setting freight rates and the ports a line could visit. To be viable, NOL had to be part of the FEFC, but the company also had to fight to gain entry and for an equitable share of the trade.

In addition, the company’s inexperience, operational weaknesses and lack of knowledge of the shipping market made it difficult to secure high-value cargo. After some initial reluctance, local and foreign companies began to ship with NOL, its early customers included Lee Rubber, Tropical Produce and Ang Woo Liang.

The Singapore government understood the early challenges of entering the shipping trade, and supported NOL with capital and direct loans. Realising that the company was under-capitalised, the government converted its loans to capital, improving NOL’s gearing and reducing the carrier’s losses. In November 1969, the government transferred ownership of NOL to Temasek Holdings. In mid-1970, NOL started its cadet training ship programme, and developed its ship management capabilities.

NOL became profitable under the leadership of Goh Chok Tong, who later became Singapore’s second Prime Minister. Goh implemented a cargo management system, improved staff welfare and morale, and separated the company’s ship owning and operating concerns. NOL saw its first annual profits in 1975, despite a slump in the shipping industry. Goh left NOL in September 1977 to begin his political career.

With the industry moving towards containerisation in the 1970s, NOL was constrained by its relatively small size as well as FEFC trading limitations. It started accepting containers on its conventional ships, and revamped its fleet accordingly. In 1970, NOL also extended its network into the Australia trade, joining two conferences on that route, and planned its drive into the tanker market.

In 1975, NOL formed the ACE consortium with OOCL, “K” Line and Franco-Belgian Services, with the Korean Shipping Corporation and Cho Yang joining two years later. The new consortium became known as the “third force” in the container-shipping world, after Trio and SCANDUTCH. By the end of 1976, ACE became the first grouping to offer fixed-day weekly services between the Far East and Europe.

Under Goh’s successor, Lua Cheng Eng, NOL broke into the highly competitive and profitable trans-Pacific route between Asia and the United States. The company invested in land-side terminal infrastructure in the US in the early 1980s, and later worked with KSC and OOCL to extend its reach there.

Stock listing
In 1981, NOL became the first wholly government-owned company to be listed on the Singapore Stock Exchange. The float brought S$155.7 million in net proceeds, much of this used to diversify from the container trade and move into the bulk carrier market. NOL also entered the Far East-Mediterranean trade.

After the expansion and diversification drives of the 1980s, NOL was in the liner, tanker, bulker markets and other businesses like logistics, ship management and marine services. A mid-1980s slump in the shipping industry caused a loss of S$60.1 million in 1986, but a turnaround followed and NOL posted a record profit of S$50.7 million in 1988.

In the early 1990s, NOL diversified into the lightering business with oil and petroleum product tankers, setting up American Eagle Tankers (AET) and Neptune Associated Shipping (NAS).

Acquisition of APL
In 1997, NOL made global headlines with its US$825 million acquisition of the nearly 150-year-old shipper American President Lines (APL). Many analysts regarded it as an expensive acquisition, but it gave NOL access to APL’s well-developed assets and brand name as a shipper, as well as a network of logistics support, terminals, stacktrains and agencies in the US and abroad.

Over the next few years, the company cleared the debt created by its purchase by selling assets and launching a US$500 million international share placement, as well as integrating APL into the NOL Group. By 1999, NOL was again profitable and saw record profits of US$178.5 million the following year.

APL was adopted as the major container-shipping brand for customers, under the holding company of the NOL Group. In 2001, APL Logistics was established as a separate business unit.

Recent events
Another industry depression in the early 2000s affected NOL badly, and the company recorded its worst-ever results in 2002 with a net loss of US$330 million. NOL decided to exit the tanker market by divesting AET and NAS, focus on the liner and logistics businesses, and keep a tight rein on costs and yield management. In 2003, NOL returned to profitability with a record US$429 million gain.

In July 2008, NOL explored the possible acquisition of competitor Hapag-Lloyd with a non-binding offer estimated at around US$7 billion, but pulled out of the acquisition process a few months later. NOL’s share prices surged after the news as there had been fears of overpaying for the potential acquisition.

NOL’s performance slumped in 2009, with container volumes and revenue figures falling. In May 2009, it posted its worst quarterly loss in seven years, losing US$245 million in the first quarter of the year. The company attributed the losses to a worldwide decline in shipping demand and falling freight rates. During this period, the company focused on reducing costs and protecting existing revenue streams, and experienced minor rises in container volumes and rates late in the year. In June 2009, it announced plans for a S$1.44 billion rights issue, with about half to be used to repay debts and the rest for investments and working capital.

From 2003 to 2008, NOL was led by three chief executives – Flemming Jacobs departed in 2003 and was followed by Thomas Held, who was then succeeded by APL president Ron Widdows in 2008.



Author
Alvin Chua



References
Chan, R. (2008, October 14). NOL shares surge on end of courtship. The Straits Times. Retrieved November 8, 2009, from Factiva.

Chan, R. (2008, September 30). NOL confirms binding bid for Hapag-Lloyd. The Straits Times. Retrieved November 8, 2009, from Factiva.

Chan, R. (2009, June 3). NOL plans $1.44b rights issue. The Straits Times. Retrieved November 8, 2009, from Factiva.

Corfield, J. (2006). Neptune Orient Lines. In Encyclopaedia of Singapore (p. 207). Singapore: Talisman Publishing.
(Call no.: RSING 959.57003 COR - [HIS])

Elias, R. (2004). Beyond Boundaries: The First 35 Years of the NOL Story. Singapore: Neptune Orient Lines.
(Call no.: SING 338.7613875095957 ELI)

Foo, A. (2009, May 13). NOL posts worst quarterly loss in at least seven years. The Straits Times. Retrieved November 8, 2009, from Factiva.

Neptune Orient Lines. (2010). Retrieved November 4, 2009, from http://www.nol.com.sg

Siow, L. S. (2008, July 23). NOL takes the plunge with bid for Hapag-Lloyd. Business Times. Retrieved
February 16, 2011, from NewspaperSG.

Siow, L. S. (2009, June 3). NOL’s rights sails into smooth waters. Business Times. Retrieved
February 16, 2011, from NewspaperSG.

Singapore: The Encyclopedia (2006). Neptune Orient Lines (p. 379). Singapore: Editions Didier Millet.
(Call no.: RSING 959.57003 SIN - [HIS])

Wee, V. (2008, July 9). Can new NOL captain pull rabbits out of his boxes? Business Times. Retrieved November 8, 2009, from Factiva.

Wee, V. (2009, March 11). NOL sinks below $1 on talk of rights issue. Business Times. Retrieved
February 16, 2011, from NewspaperSG.

Wee, V. (2009, May 26). NOL container volume, revenue continue to fall. Business Times. Retrieved
February 16, 2011, from NewspaperSG.

Wee, V. (2010, January 1). Shipping industry incurs historic losses. Business Times. Retrieved November 8, 2009, from Factiva.



The information in this article is valid as at 2010 and correct as far as we are able to ascertain from our sources. It is not intended to be an exhaustive or complete history of the subject. Please contact the Library for further reading materials on the topic.
 

Subject
Commerce and Industry>>Transportation
Business, finance and industry>>Industry>>Services>>Transportation and logistics
Shipping--Singapore
Organisations>>Companies
Neptune Orient Lines Ltd

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