NOL feared to remain loss-making in 1Q13

It lost US$419.4m in 2012.

Neptune Orient Lines's 4Q12 performance disappointed analysts at OCBC as thier forecasts called for another positive performance.

Although there were YoY improvements - its revenue grew 4% YoY to US$2,498.6m and net losses narrowed to US$98.1m from US$320.4m - continued weakness in demand on the Asia-Europe and Intra-Asia routes negated the higher freight rates enjoyed by the liner in the seasonally weaker quarter.

On a full-year basis, NOL saw revenue inch higher by 3.3% YoY to US$9,511.6m and net losses fell to US$419.4m from US$478.2m.

Here's more from OCBC:

Is the worse over? Yes and no. Management states that the Group will likely post an improvement in results, and our FY13 projections - assuming no further deteriorations in volumes for FY13 - agree with this assessment.

However, the disappointment over its 4Q12 results forces us to re-evaluate the timing of this turnaround. In addition, while overall freight rates according to the Shanghai Containerized Freight Index have indicated slight increases, bunker fuel prices have also ticked higher.

Therefore, 1Q13 will likely remain in a marginal net loss position, and the return to profitability for NOL will be delayed to the onset of the peak season.

Still a turnaround; maintain BUY
Collective action by major container shipping lines continue to be encouraging with general rate increases across the board, and this will help to provide a supportive base for the liners in 2013. Nonetheless, the more pertinent factor remains capacity management across the industry. NOL has charters of 27 vessels totalling 152K TEUs expiring between 2013 and 2014 so there is some manoeuvrability for the Group.

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