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NOL Navigating Through Choppy Waters

logo_nol Neptune Orient Lines Ltd. (SGX: N03), NOL for short, yesterday released its 3Q 2013 results yesterday after the market closed.

Neptune Orient Lines (NOL) is the largest global container shipping and logistics company listed on the Singapore Exchange. With over 11,000 employees, NOL covers all aspects of global container transportation and logistics through its two core businesses: APL and APL Logistics. Each year, NOL handles over 3 million forty-foot equivalent units (FEU) across 115 countries.

Basic Figures

Revenue for 3Q2013 was down 10% to US$2.063 billion from US$2.302 last year, the lowest in approximately four years on lower freight rates and volume. Net profit attributable to shareholders slumped 60% to US$20 million with lower miscellaneous gains and higher operating expenses.

In the 9 months of FY2013, the revenue fell 7% from US$7.013 billion to US$6.497 billion on a year-to-year basis. While there was a decrease in revenue, net profits for 9M2013 had a huge jump from a loss of US$321 million to a positive US$61 million.

It should be noted that the primary reason behind the jump in profits is because of a one-time gain from the disposal of the NOL headquarters building in Singapore earlier in the year, further assisted by higher operational efficiency and cost management.

As at 20 September 2013, the Group has a net debt (Taking away cash balances from Gross debt) of US$3.665 billion, equivalent to a net gearing ratio of 1.65 times. A poor debt position adds on to the woes of the firm which has yet to turn in a profit if the sale from the main HQ is excluded.

“This is one of the weakest peak seasons we have seen in recent years, characterised by depressed freight rates and industry over-capacity,” said NOL Group CEO Ng Yat Chung. He continued, “Nevertheless, our business units delivered encouraging results. We improved our operational performance significantly from last year. Our focus on operational efficiencies is putting us in good stead for the long term.”

Outlook

As a result of the constant poor performance, it is not surprising that the languishing stock price has underperformed the Strait Times Index (SGX: ^STI) for these past few years. Unfortunately, sliding freight rates and over-capacity are still expected to impact the bottom-line in the near term. On the other hand, there may be better times ahead for the container shipping industry as industry oversupply may ease from FY2014 as vessel deliveries slow.

Valuation

Shares of Neptune Orient Lines closed at S$1.06 on Wednesday. Net asset value per share was marginally up at S$1.04 as compared to S$1.01 on 28 Dec 2012. No dividends were declared for this quarter.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.