NOL contains 2Q13 net loss to $35m

"Better than expected" says Barclays.

NOL announced 2Q13 results after the Singapore market close on 7 August and hosted an analyst briefing at 6 p.m. on the same day. The company reported 2Q13 net loss of US$35mn, which was generally better than we expected given the weakness in container freight rates in 2Q13, said Barclays Research in its company report.

The 2Q13 net loss of US$35mn is down from the 1Q13 net profit of US$76mn which included US$200mn gain from sale of NOL building in Singapore.

Core operating loss narrowed q/q to a loss of US$35mn, from 1Q13 operating loss of US$69mn, primarily driven by cost savings which helped offset the decline in freight rates. Cost savings in 1H13 amounted to US$240mn.

Cost savings were primarily the result of bunker fuel savings. Cost savings were derived by the deployment of new vessels, slow steaming and retiring high cost charters.

Realized freight rates down 3% q/q: The q/q decrease in blended freight rates was primarily due to -11% q/q fall of Asia-Europe freight rates. 2Q13 total volume was -9% q/q. 2Q13 Shanghai-Europe spot rate averaged at US$781/teu, -55% y/y and -38% q/q. We expect the recent rebound in spot freight rates to flow into 2H13 profits as the year-long price war come to an end. Asia-to-Europe freight rates to US$1,501/teu, +192% from its 21 June trough of US$514/teu.

"We expect the recent rebound in spot freight rates to flow into 2H13 profits as the year-long price war come to an end. Asia-to-Europe freight rates to US$1,501/teu, +192% from its 21 June trough of US$514/teu," reckons Barclays.

NOL carries US$4.6bn of gross borrowings and 1H13E net debt to equity ratio rose to 158%, from YE12’s 139%.

"The high degree of leverage and limited cash from operations is our primary medium-term downside risk," concludes Barclays.