Abstract
Singapore-based Neptune Orient Lines (NOL) made a net loss of US$149mn in the
fourth quarter of
2008. Although the company reported a year-end net
profit, unprecedented trade conditions severely
affected NOL' s performance
in Q408 and the company did not anticipate a dramatic upswing for this
year. NOL' s 2008 revenues were US$9.3bn, up by 14% on 2007. Core EBIT, EBIT,
and net profit,
however, fell sharply year-on-year (y-o-y). Core EBIT was
US$213mn, 64% lower than in 2007; EBIT
dropped by 74% to US$160mn,
compared to US$613mn in 2007. Net profit also took a dive, ending at
US$83mn - 84% lower than in 2007. While year-end results maintained
profitability, business in the
fourth quarter was significantly weaker.
Revenue dropped by 6% y-o-y to US$2.4bn and in all other areas
results
slid into the red: core EBIT made a loss of US$45mn, EBIT was negative by
US$121mn, and
there was also a net loss of US$149mn. NOL, which operates
major US container division American
President Lines (APL), has been hard
hit by the economic downturn and the resulting slowdown on
major container
trade routes. Bloomberg reports that for the first time in three years, NOL' s
cargo
throughput declined y-o-y in the fourth quarter, by 14%. In a press
release, NOL' s president and chief
executive, Ron Widdows, stated that
' 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' . NOL' s chairman, Cheng Wai Keung,
is quoted as saying that the group had ' faced
some of the most turbulent
conditions in its long history' . NOL does not anticipate a recovery this
year,
with conditions expected to mirror those seen in Q408. NOL
anticipates reporting a loss for 2009.
However, the company is acting to
cut its losses and, indeed, some of Q408' s losses have been attributed
to
the restructuring process. It has already reduced capacity on trans-Pacific
and Asia-Europe routes by
20% and 25%, respectively, and plans to cull a
further 20% and 3% on the trade lanes, accordingly, this
year. The company
has delayed the delivery of some of the 28 vessels it has in its orderbook
until 2012
and, over the intervening period, will also remove 22 vessels
from its fleet as charters expire. Moreover,
NOL announced in late 2008
that it was to cut 1,000 jobs, mostly in North America. The company
expects to save an estimated US$200mn as a result of these measures.
BMI’s newly-released Singapore
Freight Transport Report concludes
that because of global economic cooling the country’s maritime
freight volume will rise by an annual average of 2.5% throughout the five year
2009-2013 forecast period.
Our shipping forecast is based on a number of
factors. Our forecast for economic growth in 2009-2013
now stands at an
annual average GDP increase of 2.1%. NOL and other Singapore-based companies
have
established themselves as world-class players. We expect them to be
significantly affected, but manage
the global downturn reasonably well,
despite the growing competitive challenge from Chinese ports, and
to
position themselves for eventual recovery. Airfreight cargo growth will also
hold up. We are
forecasting 2.9% annual growth over the next five years.
Overall, we now expect average annual growth
in freight tonnage across all
modes to total 2.4% in 2009-2013. With an aggregate score of 68.8 out of a
theoretical maximum of 100, Singapore scores well in the BMI freight rating
for Asia Pacific, coming out
comfortably above the regional average. Its
strong points include low long-term political and economic
risk and a
strong regulatory environment, as well as a moderate, but healthy rate of
infrastructure growth.
For the 2009-2013 forecast period, we expect the
transport and communications sector to be on a par with
the economy as a
whole in value terms. Both will achieve average annual growth of 2.1%. The
total value
of transport and communications GDP will rise to US$27.2bn in
nominal terms by 2013, representing
12.1% of Singapore’s GDP.
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