Neptune Orient Has Third Straight Loss on Shipping-Rate Fall

Neptune Orient Lines Ltd., Asia’s No. 3 container line, posted a third straight quarterly loss because of falling freight rates and higher fuel costs.

The $91.1 million loss in the three months to Sept. 23 compared with a profit of $282.3 million a year earlier, the Singapore-based company said in a stock exchange statement today. Sales dropped 9 percent to $2.21 billion.

Ng Yat Chung, who took over as chief executive officer on Oct. 1, has to contend with excess capacity in the global fleet that caused the company’s average container rates to tumble 19 percent in the third quarter. China Cosco Holdings Co. and Evergreen Marine Corp., the operators of Asia’s two biggest container lines, also reported quarterly losses.

“It could get worse” because of rising U.S. inventory levels, said Johnson Leung, head of regional transport at Jefferies Group in Hong Kong. “We can’t be sure when we will hit bottom.”

A U.S. Census Bureau index of retail inventories reached 470.43 in August, the highest since December 2008.

APL Ltd., NOL’s container-shipping arm, moved 699,000 40- foot boxes in the third quarter, 7 percent more than a year earlier. Average revenue per box was $2,539. The shipping line filled 94 percent of its vessels, compared with 97 percent a year earlier.

Full-Year Loss

NOL reiterated that it expects to report a loss for 2011. Mitsui O.S.K. Lines Ltd. and Nippon Yusen K.K., Japan’s largest shipping lines, today said they are cutting container services amid expected losses in the year ending in March.

“The liner shipping industry is faced with slowing trade demand, excess capacity and fuel costs that are significantly higher than a year ago,” Ng said in the statement. “Our urgent priority is to drive down costs and increase efficiency.”

The price of 380 Centistoke marine bunker fuel, used by ships, also averaged $661.04 per metric ton in the third quarter in Singapore trading, 49 percent higher than a year earlier, according to data compiled by Bloomberg. It dropped 2.4 percent to $682 today.

NOL has tumbled 48 percent this year, the worst performance on Singapore’s Straits Times Index. It fell 0.9 percent to close at S$1.14 today. Earnings were announced after the market closed.

Asia-Europe Routes

Average freight rates dropped on Asia-Europe routes by 39 percent in the third quarter from a year earlier, according to Leung at Jefferies. Trans-Pacific charges fell 22 percent, he said. Container-shipping capacity may expand 8.7 percent next year, surpassing an expected 8.4 percent increase this year, he said.

Container lines were also forced to cut and delay peak- season surcharges that usually help bolster earnings in the third quarter because of the excess capacity, said Jee Heon Seok, an analyst at NH Investment & Securities Co. in Seoul.

Ng joined NOL from Singapore state investment company Temasek Holdings Pte, the shipping line’s biggest shareholder. Prior to that, he also served as the city-state’s defense force chief. Ng succeeded Ron Widdows, who remains at the shipping line as a senior advisor.

APL operated 147 vessels with a combined capacity of 593,542 20-foot boxes as of March 6, according to Neptune Orient’s website. It is scheduled to receive 10 ships next year, 17 in 2013 and seven in 2014.

To contact the reporter on this story: Kyunghee Park in Hong Kong at kpark3@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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