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Neptune Orient Predicts Better Performance After Cutting Costs

Neptune Orient Lines Ltd. (NOL), Southeast Asia’s biggest container-shipping company, said cost cuts and new ships will help it post a “better performance” this year after reporting its third annual loss in four years.

“The company will start 2013 with a better cost base as a result of a modern fleet,” the Singapore-based company said in a statement yesterday. Barring unforeseen circumstances, the company expects a better performance than in 2012.”

With trade slumping on the Asia-Europe route because of weak economies and rising unemployment, Neptune Orient -- selling its headquarters, shedding assets and disposing older vessels -- pared costs by $504 million last year, according to the statement. The company joined A.P. Moeller-Maersk A/S, owner of the world’s biggest container-shipping line, in forecasting an optimistic outlook for this year.

Maersk Line, which reported earnings yesterday, also reduced its fleet and slowed vessel speeds last year to curb overcapacity as falling worldwide consumer demand stints cargo volume and hurts freight charges. Maersk Line said profit this year will be higher than the $461 million reached in 2012 as the company cuts costs and container demand-growth accelerates.

“General market conditions in 2012 remained challenging,” Group Chief Executive Officer Ng Yat Chung said in the statement. “But thanks to our focus on increasing efficiencies throughout the group, we are in a better competitive position than before. We are starting 2013 on a stronger footing than a year before.”

Severe Oversupply

The net loss in the three months ended Dec. 28 was $98 million, compared with the average $12.6 million loss forecast of five analysts’ estimates compiled by Bloomberg. A year earlier, the company had a $320.4 million loss, according to a statement the shipping liner sent to the Singapore stock exchange yesterday.

The company, which had a loss in seven of the past eight quarters, had a full-year net loss of $419 million.

“The container shipping industry continues to face severe oversupply,” Neptune Orient said in the statement.

APL Ltd., Neptune Orient’s container-shipping arm, moved 802,000 forty-foot equivalent cargo boxes in the quarter, 3 percent lower than a year earlier, because of trade between Asia and Europe.

The euro-area economy will shrink for a second year in 2013, driving unemployment higher as governments, consumers and companies curb spending, the European Commission said yesterday. The 17-nation euro zone’s gross domestic product will fall 0.3 percent this year, compared with a November prediction of 0.1 percent growth, the Brussels-based commission forecast.

Selling Headquarters

Neptune Orient, whose business include container shipping, terminals and logistics operations, gained 0.4 percent to close at S$1.225 yesterday before the earnings announcement. The stock has advanced 7 percent this year, compared with a 3.8 percent increase in the benchmark Straits Times Index.

The company is selling its headquarters to fund “strategic investments,” it said in October, without elaborating. The ship operator is also adding larger and more fuel efficient ships to compete amid rising competition.

APL Ltd. earned an average revenue per box of $2,419, a 3 percent increase. The unit filled 92 percent of capacity in the three-month period, unchanged from a year earlier.

Spot rates to haul a 20-foot container to Europe from Asia rose 5.2 percent to $1,218 in the fourth quarter, according to the Shanghai Shipping Exchange. Those to the U.S. west coast dropped 19 percent to $1,112. Lines need at least $1,200 to make money, according to shipbroker ICAP.

APL operated 129 vessels with a combined capacity of 587,000 20-foot boxes as of Dec. 28, Neptune Orient said. It has received 10 ships last year, another 15 in 2013 and nine in 2014.

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

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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