TERMINALS
Our Terminals business helps customers build speed and predictability into their supply chains. In the unit’s first year as a separate business, good progress was made toward the stated goals of increasing productivity, revamping systems and striving for cost leadership. Existing facilities were also enhanced and new concessions secured in areas where long-term customer demand will be greatest. However, like NOL’s other businesses, Terminals felt the pressure of much-reduced demand, particularly in the latter part of 2008.
Performance Summary
In 2008, Terminals’ full-year Core EBIT was US$72 million, down 23% on the previous year. Revenue decreased by 5% to US$577 million, reflecting large-scale capacity reduction by its container shipping customers, combined with demand deterioration in US West Coast container trades. Volumes dropped 10% year-on-year, mostly due to industry-wide container ship capacity reductions and further deterioration in market demand. US West Coast facilities were the most significantly affected, with the Global Gateway South facility in Los Angeles posting a fourth quarter volume decline of 20% year-on year. The decrease in total revenue that resulted from lower volumes was partly offset by higher revenue per lift, which rose by 5% to US$260 as a result of improvements to the mix of business.
In the fourth quarter, worsening business conditions forced a rapid fall in demand. Volumes for this period dropped 18% year-on-year. Fourth quarter revenue fell 9% to US$148 million and fourth quarter Core EBIT was down 33% to US$18 million.
APL and its New World Alliance (NWA) partners – Mitsui OSK Lines and Hyundai Merchant Marine – continued to provide the bulk of volumes through the APL Terminals facilities. NWA’s share was down slightly to 24%, with APL now contributing 67% of total volumes. Third-party business remained at 9% year-on-year.
Building for Growth
In 2008, the completion of two years of reconstruction at the Global Gateway Central facility in Oakland, California was celebrated. The project doubles the facility’s cargo-handling capacity without expanding its footprint. The US$68 million project also improved terminal operating efficiency, permitting future cargo volume growth in Oakland, while minimising environmental impact. Expansion work was also completed at the Vietnam International Container Terminal (VICT), in which NOL has a 47% share. This work raises VICT’s total berth length to 678 metres, with capacity expanded to 900,000 TEU. The facility expansion was accompanied by new investment in wharf side cargo handling equipment, including six brand-new Kalmar rubber-tyred gantry cranes (RTGs) with plans to add another 11 RTGs in the near future.
In early 2009, NOL announced a 50-50 joint venture to operate a new two-berth container terminal at the Port of Salalah, Oman. This will be a 28-hectare deep sea facility with a total quay length of 700 metres and an annual capacity of 1.6 million TEU, capable of servicing container vessels of more than 10,000 TEU.
The APL Korea visits our Yokohama terminal in Japan. This natural deep sea port is an ideal strategic location for our facility.
Continued Innovation
During the year, Terminals improved customer service and reduced operating costs through the application of technology. At our Seattle and Los Angeles facilities, Real Time Locating Systems (RTLS) were deployed to increase the accuracy and efficiency of container moves and hand-offs. RTLS allows Terminals to view every truck and container and automate their interaction at the terminal gate, yard, rail and quay. This delivers considerable productivity improvements.
In Asia, VICT adopted the Navis SPARCS terminal operating system, which is also deployed in many of the Terminals unit’s facilities globally. The system enhances VICT’s yard and vessel planning capabilities to maximise terminal management and container handling productivity. Terminals’ efforts to achieve environmentally sustainable performance continued in 2008. In the US, container yard vehicles now use low sulphur fuels and diesel oxylitic converters. At the US West Coast facilities, container handling equipment runs on bio-diesel, while older container yard tractors have been replaced with newer models that consume less fuel and produce fewer emissions.
As worldwide shipping volumes recover, there will be renewed pressure on global terminal capacity, meaning the long-term outlook for this sector is positive.