NOL, Cosco (S’pore) report Q1 losses amid weak shipping market

SINGAPORE — Major container shipper Neptune Orient Lines (NOL) and shipbuilder Cosco Corp (Singapore) yesterday reported losses for the first quarter due to weak conditions in the shipping industry.

NOL reported a first-quarter net loss of US$105 million (S$142 million) compared with a US$11 million loss a year earlier, due to falling freight rates. “Worsening overcapacity of shipping tonnage in 2015 hit the industry well into first-quarter 2016. Freight rates, which declined across major trade lanes to (a) historic low, are expected to remain weak in the face of slower demand growth,” said NOL group president and CEO Ng Yat Chung. He said difficult market conditions are prompting consolidation and changes in alliances in the industry.

Its container shipping unit, APL, continued to make progress in taking out costs and improving yield, he said, adding the proposed acquisition by CMA CGM will help APL “achieve scale to stay competitive in the industry”. Amid weak global demand and excess capacity in the industry, APL’s first-quarter volume fell 6 per cent on-year while average freight rates fell 23 per cent, which resulted in the unit’s revenue contracting 29 per cent to US$1.14 billion.

NOL said APL was staying focused on rigorous cost management and yield-focused trade strategy that emphasised network rationalisation and better cargo selection. In the first quarter, APL achieved cost savings of US$60 million.

Giving an update on the proposed acquisition by CMA CGM, NOL said that following the anti-trust regulatory clearance from the European Commission for the pre-conditional voluntary general offer, the remaining pre-conditions relating to anti-trust clearances are expected to be satisfied by mid-2016.

French shipping group CMA CGM has sought to buy NOL for US$2.4 billion to strengthen its position against rivals Maersk Line and Swiss-based Mediterranean Shipping Co.

Cosco Corp (Singapore), meanwhile, reported a first-quarter loss as it borrowed more to fund its operations.

It reported a loss of S$14.4 million for the three months to March 31, compared with a net profit of S$0.8 million a year earlier, due to losses in shipping operations and a 53.9 per cent jump in interest expense to S$59.7 million as a result of higher bank borrowings to fund shipyard operations.

Group turnover fell 27.1 per cent to S$722.3 million from S$991.2 million due to weaker shipyard and dry bulk shipping revenues.