NOL achieves turnaround in Q2
Singapore
SEVERE erosion in freight rates took its toll on container shipping firm Neptune Orient Lines (NOL) in the second quarter, which saw its liner business post a pre-tax loss even as it said in a press release on Thursday that its liner strategy was "gaining traction".
Though the group was overall profitable in the second quarter, most of its earnings came from gains on the sale of its logistics arm APL Logistics, which was completed in Q2.
Net profit stood at US$889.5 million for the three months ended June 26, a reversal of the net loss of US$53.74 million the previous year. However, stripping out the US$887 million gain on the disposal of APL Logistics, net profit would have been around US$3 million, the group noted in a Singapore Exchange filing on Thursday.
Revenue for the quarter sank 24 per cent to US$1.55 billion year-on-year, NOL said in a separate press release. This revenue figure includes contributions from APL Logistics in April and May 2015 before the sale of that unit to Japan's Kintetsu World Express was completed on May 29 for US$1.238 billion in total.
Freight rates in major trade lanes have fallen to "some of the lowest levels seen in recent years", NOL said, adding that freight rates will "continue to face downward pressure due to persistent overcapacity and weak trade growth".
Its average freight rate tumbled 17 per cent in Q2 from the previous year, while volume also fell 12 per cent.
Group president and chief executive Ng Yat Chung said in a statement that the group would continue to focus on improving its cost competitiveness, yield optimisation and service reliability to return the liner arm to "sustained profitability".
From its continuing operations - that is, its loss-making liner arm - the group made a loss per share of 0.42 US cent. The earnings per share from discontinued operations was 34.74 US cents.
NOL was in the spotlight recently following reports that its parent company Temasek Holdings had put the company up for sale. The shipping liner later said in a Singapore Exchange filing that it has not made any decision on a potential sale of the company or entered into any agreement. Temasek had paid S$2.80 per share in 2004 to boost its stake in NOL from 30 per cent to around 69 per cent. It now owns about 67 per cent of the company, going by Bloomberg data.
The group's net asset value per share was US$1.02 as at June 26 this year, up from US$0.67 as at Dec 26 last year. NOL shares were flat at S$0.92 on Thursday before the results were released.
