NEPTUNE Orient Lines will cut more than 1,000 jobs to reduce costs as the global recession reduces demand for moving sea cargo.
Most of the job cuts will be in North America, where its costs are the highest, the company said in a statement to the SGX on Wednesday morning before the market opened.
This is 'to place the company on a more sustainable footing through an expected severe and prolonged downturn in global container shipping', said the statement.
About 50 positions will be lost at its Singapore headquarters. The job cuts represent about 9 per cent of its 11,000-strong workforce.
Neptune Orient Lines is the parent company of container shipping line APL, based in Oakland, California.
The cuts come after NOL last month said it would reduce capacity between Asia and Europe by close to 25 per cent, and 20 per cent on the trans-Pacific route.
Those cuts will significantly reduce operating costs but the market has worsened considerably over the past month, the company said in a statement, forecasting a 'grim' outlook for profitability in 2009.
'The negative conditions we are seeing in the marketplace are unprecedented in our industry's history. This necessitates these very difficult decisions', said NOL's group president and chief executive officer Ron Widdows.
'This reflects our considered view that what we are seeing goes beyond a normal cyclical downturn'.
Mr Widdows said NOL's plan would lead to a restructuring charge of about US$33 million (S$50.44 million) in fourth quarter results, but this would 'deliver positive financial outcomes in future years'.
However, brokers say the firm's move to cut operating and overhead costs may not be enough to offset the slump in the shipping industry.
'While we are positive on the measures announced by NOL, the cost cutting initiatives may not be able to offset the severe top-line pressure', said CIMB-GK analyst Raymond Yap.
NOL last month reported that third-quarter net profit plunged 82 per cent.
Net profit for the three months to September was US$35 million, down from US$191 million in the same period in 2007 because of falling demand.
Container shippers, bulk operators and port authorities across Asia are reporting slowdowns in business while the global economy slows. Container shipping was hit first earlier this year as demand for Asian-made goods in the US and Europe dropped off.
In a chain reaction, the countless Asian factories churning out electronics and consumer items for the US and European markets began lowering output, and the need for raw materials declined.
Neptune Orient Lines is 66 per cent owned by Singapore's state-linked investment firm Temasek Holdings.