A FINAL PORT OF CALL
After overcoming a series of disasters, CFO Lim How Teck leaves NOL with bright prospects.
By Jennifer Lee

After a quarter of a century with Neptune Orient Lines (NOL), Lim How Teck is retiring from the Singapore state-controlled container shipping and logistics company. When Lim joined NOL in 1979 as a senior accountant, NOL was just a small, regional shipping line. Today, it is a US$6.5 billion-a-year international shipper, with the sixth-largest container fleet in the world.

As its Group CFO, Lim has seen the company through losses and restructuring to winning a CFO Asia award and notching record profits. For all its trials and tribulations, NOL may have put the worst behind it – its pre-tax profits leaped 91 percent in 2004 to US$874 million and it expects another strong year in 2005.

A highlight of Lim’s tenure was the acquisition of American President Lines (APL) in 1997, a company twice NOL’s size and the US’s oldest shipping company. The US$835 million purchase also resulted in a change of name for NOL’s container business, which adopted the better-established APL branding. The merger became a highlight of Lim’s career. The Business Times Singapore quoted him at the time: “It is a milestone, a watershed, and a turning point for me,” he said.

But the elation wore off as 1998 began. An economic downturn hit companies across Asia and NOL was no exception. Its heavy debt and falling freight rates coupled with half-empty ships on routes from Europe and the US, the result of weak demand in Asia, spelled losses for NOL. The company sold non-core assets of around US$320 million and executives took pay cuts – Lim by 7 percent – in an effort to save US$3 million. Travel expenditures were cut and a hiring freeze instituted. NOL slipped further into the red as it booked an extraordinary loss of US$231 million as a result of its purchase of APL.

Yet some items still required investment, and that year Lim instituted a US$40 million three-year program to prepare NOL’s computers for Y2K. Shipping operations were particularly at risk from the ‘millennium bug’ because of its potential to disrupt navigational equipment.

He made other institutional changes as well. In 2002 he outsourced all of NOL’s financial transaction management to US consultancy Accenture. The eight-year agreement, operated from Shanghai, is expected to realize cost savings of 30 percent, and allows the NOL finance department to focus on adding value to the company. At this point NOL needed cost savings in a big way. It reported a record loss of US$330 million for 2002, in part the result of an investment into a fleet of ships that were delivered starting in 2000, just when the US economy entered a period of decline that again sent freight charges plunging.

Disaster struck again in 2003, this time in the form of Sars and the Iraq war. Although nowhere near as fatal to shipping as the economic crisis, these events nevertheless dealt a short-term blow to Asia’s economies. Continuing with the policy of divesting non-core assets, Lim was already prepared to sell US-based American Eagle Tankers (AET), which ships oil from the Gulf to the US. He needed to offload an asset to trim some of NOL’s debt, which stood at US$2.8 billion as of end-2002, and cash-flow positive AET was it. Lim had a number of interested buyers, but when Sars struck, all but one vanished. What cemented the deal was Lim’s handling of a new contract to ship oil from Venezuela, which meant the tankers would earn revenues sailing in both directions. The total value of the final agreement with Malaysia International Shipping was US$1.1 billion, a deal that earned Lim a CFO Asia Deals of the Year Award for mergers and acquisitions.

As the fates would have it, Lim is leaving the company on a high note. Ebit at NOL’s APL key liner business rose 117 percent and more than tripled in its logistics business in 2004. NOL’s share price has more than tripled from April 2003, when it was S$1, to S$3.72 as of March 29 this year. It also has a new owner in Temasek Holdings, which bought 68.6 percent of NOL last September in a deal worth US$974 million.

Lim will have two months to bring his replacement, Patricia Leung, up to scratch on her new job. She starts May 1; he departs June 30. Leung is a Singaporean who comes to NOL from Pacific Century Premium Development, the property arm of Hong Kong telecoms provider PCCW, where she was CFO. She also worked in PCCW’s multimedia unit as CFO.