Published February 11, 2009

NOL runs up US$149m loss for Q4

Deficit is reversal from US$196m profit a year earlier

By VINCENT WEE

	Email this article
	Print article
	Feedback

(SINGAPORE) The economic and financial tsunami that swept the world exacted a heavy toll on Neptune Orient Lines (NOL), with the national shipping line yesterday posting a fourth-quarter net loss of US$149 million.

Related links: Click here for NOL's news release Financial statements

Although the management had guided for a loss, the deficit was a complete reversal from the US$196 million net profit seen in the previous corresponding quarter.

And more bad news are in store as the management warned that 'conditions similar to those in the fourth quarter of 2008 are expected to continue through 2009'. For the full year of 2008, NOL also reported an 84 per cent plunge in net profit to US$83.1 million from US$522.8 million. 'NOL anticipates reporting a loss for the year 2009,' the management added.

Revenue dipped 6 per cent in the fourth quarter to US$2.29 billion from US$2.42 billion in Q407 while full-year revenue still managed to show a 14 per cent increase to US$9.29 billion from US$8.16 billion previously.

'The results we are announcing today show the impact of a severe market downturn in the latter part of 2008, caused by reduced consumer confidence in the wake of the global economic crisis. They also take account of significant restructuring costs, which reflect actions taken in the fourth quarter to place the company on a better footing for the conditions ahead,' said group president and CEO Ron Widdows.

NOL took a restructuring charge for the year of US$71.7 million for costs associated with the restructuring exercise announced in the last quarter. Net debt also jumped to US$816 million from US$87 million in 2007 and subsequently net gearing went up to 0.33 times. A final dividend of four cents per share has been recommended, bringing dividend for the year to eight cents per share. NOL is changing is dividend policy to pay an annual dividend of 20 per cent of net profit instead of the current 20 per cent or 8 cents per share whichever is higher.

Over the full year, the core APL container shipping unit managed to increase revenue 19 per cent to US$7.95 billion on increased bunker recoveries and a 5 per cent rise in volumes to 2.47 million forty-foot equivalent units (FEUs) but Ebit was still 92 per cent lower at US$34 million.

Big falls in Q4 also saw volume drop 14 per cent from the same period in 2007 and utilisation rate down to 83 per cent despite a 2 per cent reduction in capacity. On an Ebit basis, the container division reported a US$143 million loss for Q4 although revenue stayed flat at US$1.96 billion. The container trade will remain challenging due to weak demand, a large supply of new tonnage and pressure on freight rates, NOL warned. 'We've not yet seen the floor in demand levels but we're probably getting close,' said Mr Widdows.

NOL's other units, APL Logistics and the terminals business were slightly less affected. Logistics full-year revenue stayed flat at US$1.32 billion and managed to increase Ebit 5 per cent to US$64 million. The terminals business reported a 5 per cent dip in full-year revenue to US$577 million and 23 per cent fall in Ebit to US$72 million.

NOL continues to put a lot of energy into cost reductions and efficiency increases, Mr Widdows said. Various initiatives are expected to derive about US$250 million in cost savings this year and other moves should reap more benefits next year too. NOL CFO Cedric Foo also did not rule out more restructuring in the year ahead if conditions made it necessary.

NOL shares closed six cents higher at $1.24 yesterday.