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NEPTUNE Orient Lines (NOL) is still sailing in an ocean of red ink but with losses stabilising in the second quarter some brave souls are tipping that the worst could well be over for container shipping.
Over-capacity in fleets and plunging demand for exports have battered shipping lines across the world and sent NOL to its third straight quarterly loss and a record half-year loss.
NOL, the seventh largest carrier in the world in terms of volume, racked up a record loss of US$391 million (S$560 million) for the half year - more than the $240.8 million loss it incurred over the same period during the 1998 Asian financial crisis.
It posted a net profit of US$196 million in the first half of last year.
For the second quarter ended June 26, it slumped to net losses of US$146 million, compared with a net profit of US$76 million in the same period a year ago.
Revenue for the second quarter slumped 38 per cent to US$1.39 billion, down from US$2.24 billion a year earlier, due to fewer containers carried and deteriorating freight rates, particularly on Asia-Europe trade routes.
Loss per share for the quarter was 9.95 US cents, compared with earnings of 5.16 US cents last year. Net asset value stood at US$1.52 per share as at June 26, down 8.98 per cent from US$1.67 as at Dec 26.
Yet there was a sliver of optimism in this - the US$146 million loss is its smallest in three quarters and has narrowed compared with the previous quarter.
The first-quarter net loss was a staggering US$245 million, which followed a US$149 million loss in the fourth quarter.
'We are seeing some stability in the operating environment in the later stages of the first half,' such as container volumes and utilisations, said chief executive Ron Widdows at a briefing yesterday.
But he added that feedback from major clients indicated that demand outlook for the rest of the year remained highly uncertain. Most customers are still unclear about the demand for their products, he said, adding that a lot of them are keeping inventory levels very tight.
NOL reiterated yesterday that it expects to post a significant full-year loss and 'a continuation of adverse business operating conditions', despite cost-saving measures that have been undertaken.
Analysts say there could be a long way to go before container shipping firms start posting healthy profits again.
The slump in export demand is being compounded by an oversupply of new ships, leading container lines to slash freight rates to near decade-low levels.
NOL's results 're-affirmed our view that the first quarter of 2009 represented peak losses and the beginning of a slow but nevertheless painful recovery', said a Citigroup research note after the results announcement.
In May, its rival AP Moeller-Maersk, owner of the world's largest container line, warned it would post a full-year loss for the first time in at least half a century.
It had stunned analysts with a 2.13 billion kroner (S$428 million) first-quarter loss, compared with a profit of 5.22 billion kroner for the same period a year earlier.
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