Monday, August 25, 2014

NOL

NOL could see bigger loss in 2014

25 August 2014
NOL could see a bigger loss than previously estimated despite the sharp rise in spot container rates across the Asia-Europe and trans-Pacific trades. Photo: PA.
Singapore's Neptune Orient Lines, the parent of liner operator APL, could be looking at a bigger 2014 loss than previously estimated. CIMB Securities analyst Raymond Yap said in a report that he believes NOL could incur a $250.5M loss this year, far higher than the $76M loss for 2013.
NOL posted a $54M loss for 2Q14 and its 1H14 loss was $167M is 85% of CIMB's previous full-year forecast. Yap wrote, "Despite the sharp rise in spot container rates across the Asia-Europe and trans-Pacific trades to about $1,500/teu early this month, we maintain a 'Hold' call on NOL as we don't view the spurt as sustainable.
"Firstly, some trans-Pacific volumes may have been frontloaded into 1H14 and growth could slow in 2H14. Secondly, the Asia-Europe trade growth appears to be disproportionately strong relative to flat Eurozone GDP expansion, and the restocking effect may eventually come to an end.
"Separately, both the annual contract and spot rates for the trans-Pacific trade are weaker in 2014 than in 2013, which are offsetting any year-on-year improvements for the Asia-Europe trade."
Yap expects NOL to undertake further cost-cutting measures. NOL returned expensive and fuel-inefficient chartered-in ships over the last three years, replacing those vessels with cost-efficient newbuildings. That move saved NOL about $1Bn in costs during 2012-13 and a further $195M in 1H14, with a similar amount expected in 2H14.