Business at NOL still 'depressed'

Business at NOL still 'depressed'
CEO says difficult dynamics to 'be with us for some time'

05:55 AM Aug 07, 2009

FEWER goods being shipped due to the global trade slowdown and cheaper shipping rates have caused net profits of Neptune Orient Lines (NOL) to slump for the third straight quarter.

The Mainboard-listed container shipping firm reported a second quarter net loss of US$146.2 million ($210 million), reversing a net profit of US$75.8 million in the same period a year ago.

While the second quarter losses was an improvement to the first quarter loss of US$245 million, the company expects business conditions to remain tough going forward and will likely post a "significant" full-year loss.

NOL's chief executive Ron Widdows said that "although volumes and operating performance improved in latter months of the first half, business conditions remained depressed, and this continued to impact our financial performance".

He added: "It's going to continue to be very difficult, so we've provided guidance that we anticipate a significant loss. These conditions that we see in place today, the dynamics affecting the industry, will be with us for some time."

The lower second quarter net profits was on the back of a 38-per-cent decline in group revenue for the three months ended June to US$1.4 billion. This was largely due to falling revenue from its container shipping division APL, which dropped 39 per cent to US$1.2 billion from the previous year due to declining cargo volumes.

The container shipping business accounts for about 80 per cent of NOL's revenue.

APL president Eng Aik Meng said: "In terms of volume, there has been an across-the-board reduction of 19 per cent. Most significant was the reduction in the Americas. Trans-Pacific trade had a 25-per-cent reduction in volumes in Q2 '09 versus Q2 '08." Europe had a similar reduction of 26 per cent and Asia/Middle East had a relatively smaller reduction of 8 per cent, he added.

For the rest of the year, the shipping firm said that it will continue to focus on improving asset utilisation, yields and productivity.

With the completion of its rights issue last month which raised nearly $1 billion, the company said that this will help it to better weather the downturn with a stronger balance sheet. 938LIVE