NOL’s announcement that Q3 losses came in more than forecast is a pretty good leading indicator of just how Scrooge-like this Christmas buying season is going to be in the West. Expect a couple of tear-jerker holiday movies this season to depict champagne-sipping bankers yelling “Let them eat cake”.
From today’s BT “NOL’s losses mount, more storms ahead, expects to incur significant losses in Q4 and H1 of 2010“
Neptune Orient Lines (NOL) continued to sink deeper in the red in the third quarter ended Sept 30, racking up net losses of US$138.9 million, compared to a net profit of US$35.1 million a year ago.
For the first three quarters of 2009, NOL has reported cumulative net losses of US$529.7 million. Nine-month loss per share came to 28.52 US cents, against the previous corresponding period’s restated 14.23 cents.
Given the severity of the downturn in container shipping, the group said it expects to incur significant losses in the fourth quarter and at least through the first half of next year.
Revenue for the third quarter slipped 34 per cent year-on-year to US$1.56 billion. At the core Ebit (earnings before interest and tax) level, NOL posted a loss of US$115 million for the third quarter.
‘As anticipated, the third quarter saw a continuation of adverse business operating conditions,’ said NOL group president and CEO Ronald D Widdows. ‘Despite some improvements in certain trades, container shipping freight rates remain at uneconomic levels.’
Container shipping revenue from APL during the quarter slumped 36 per cent year-on-year to US$1.31 billion as volumes and freight rates declined. The Ebit loss from this segment stood at US$143 million.
Q3 volumes carried by the container shipping business dipped 6 per cent year-on-year at 586,000 FEUs (forty-foot equivalent unit) due to declines in volumes in Europe and Americas trade.
Even a price-fixing agreement back in July amongst the container lines failed to stem the red ink, which goes to show just how strong the clamps are on American wallets. From Bloomberg on July 7 “NOL and 13 shippers tries to end price war and panic”:
NOL’s APL Ltd. unit, China Cosco Holdings Co. and 12 other container lines agreed to raise rates on Asia-U.S. routes, seeking to end a price war caused by slumping demand, overcapacity and “panic.”
The lines decided on a $500 increase for carrying a 40-foot box from Aug. 10 as a “voluntary guideline,” the Transpacific Stabilization Agreement said in an e-mailed statement yesterday. The companies will also raise fuel levies and may add peak season surcharges, the group said.
Container lines will try to raise rates again after an April increase collapsed amid rising competition and a 20 percent drop in demand, the TSA said. Spot market Hong Kong-Los Angeles rates have slumped to as low as $900, according to Lloyd’s List, as U.S. retailers pare orders for Asian-made furniture and toys on weak consumer spending.
“The eastbound transpacific trade lane has been driven by panic,” Lee Won Woo, chief executive of TSA member Hanjin Shipping Co.’s container unit, said in the statement. “Panic is difficult to stop once it has begun.”
China shippers aren’t doing much better, as pointed out in Shipping Guide’s “Chinese Container Carriers Suffer As Freight Rates And Cargo Levels Fall“:
CHINA, 28 Oct – Reality bit this week for two more of Asia’s market leaders. Cosco Pacific and China Shipping Container Lines both posted figures showing substantial last period declines. Cosco, responsible for more than twenty container terminals in the region, joined with its two larger competitors, Hong Kong based Hutchison Port Holdings and Singapore Group PSA International in producing results which demonstrate the depths which cargo levels have fallen to. The group, also based in Hong Kong showed a profit fall of almost 50% in Q3 against the previous year.
China Shipping fared even worse seeing a nett loss for the same July to September period of almost $280 million representing a worsening against last years loss over the same period of around $40 million. Both companies cited falling traffic levels from China to Europe and the US as entirely responsible for the depressing figures. Although spokesmen from each were keen to point out that there are signs of an upswing in cargo levels both admitted that the recovery appeared to be moving slowly and the talk is very much of “less bad” than an instant return to former figures.
And from Llyod’s List “Box Barometers”:
THE past few months have been so awful for the container shipping industry that it is hard to remember that this crisis is little more than a year old.
This time last year, Neptune Orient Lines was in the black — just. It was the final quarter of 2008 that tipped lines into the red, and that is where they and most others remain, with cash fast running out.
There were no words of comfort from NOL when it published its latest results, which showed a $139m loss in the third quarter. That is certain to be followed by another significant deficit in the final three months of the year, with NOL warning that these difficult conditions are likely to continue at least through the first half of 2010.
In fact, that may be the one note of optimism. There are still those who believe something will happen to turn markets around, but it is hard to see what. The number of surplus ships continues to rise and demand remains in the doldrums.
Just take a look at the latest inbound figures for Long Beach, which provide a reasonable barometer. The port saw a drop of 19% from a year ago, with the numbers down by almost a third compared with 2007.
Charter rates remain way below operating costs, and many owners are technically bankrupt. Most container shipping players will continue to lose money until the massive overhang of capacity is absorbed. And that could take years.
The US bankers are, in their own inimitable manner, inflicting even more pain to the American consumer: banks like Citi jacked up credit card rates to 29.99% on unsuspecting customers, other banks are following suit (hoping to avoid a new law coming into effect) by punishing credit card holders who pay on time.
With smart moves like these, it’s no wonder entire invasion-of-Troy-sized fleets of cargo ships will continue to sit idle off the coast of Singapore.
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