NOL third-quarter net income plunges 60% to $20m

Weak peak season erodes yoy profits.

Neptune Orient Lines' (NOL) 3Q13 attributable net profit of US$20mn, which on a yoy basis, was 60% lower than 3Q12 as a result of a weak peak season in 2013, according to Barclays Research in an analysis following the release of NOL's latest quarterly results.

But this net profit in 3Q13 was an improvement from 2Q13 during which NOL posted a net loss of $35m.

Barclays noted the return to profitability this quarter was helped by the container liner operations, which roughly broke-even with the logistics business, contributing the majority of operating profit.

The sequential improvement was on the operations side with gross margins expanding to 9.4% in 3Q13 from 7.2% in 2Q13, the research firm added.

But the 3Q13 was far from a stellar performance.

3Q13 revenue was -10% yoy and flat qoq. 3Q13 realized freight rates were -9% yoy and volumes were down 5% yoy. The logistics business grew revenue a slight 3% yoy and was able to offset some of the weakness in the liner business.

Still, 3Q cost of sales/feu was -7% yoy primarily driven by deployment of more fuel efficient vessels and rolling off of high cost charters, while YTD vessel capex of $1.1bn was +65% yoy.

"One concern would be the US$1.1bn of capital expenditures YTD to deploy larger vessels, which has been funded by US$586mn in new debt and US$556 proceeds from selling he corporate headquarters. 3Q13 net debt-to-equity is 165%," noted Barclays.