Oil price rout turns the tide for loss-making NOL

NOL might finally make a profit this year.

The ongoing oil rout will turn the tide for loss-making Neptune Orient Lines. According to DBS, lower bunker fuel prices could finally swing NOL into profitability, after three consecutive quarters of loss.

NOL booked massivelosses for the first three quarters of FY14. It was hit with a $97.9m in the first quarter, followed by a $53.7m loss in the second quarter, and finally a $23.1m loss in the third quarter.

According to DBS, NOL could be in for better luck in FY15, with bunker fuel prices declining from US$600/
MT to less than US$300/MT in a little over six months.

“Given that NOL’s liner business consumes about 3m MT of bunker fuel per year, this implies significant cost savings. It has to be kept in mind though that part of the fuel price decline will be passed through to customers through lower fuel surcharges and bunker adjustment factors on long-term contracts. However, the fact that NOL has lagged its peers in terms of fuel efficiency and margins in the past means there is more room for improvement, given the razor thin margins involved. This will be aided by the return of 19 expensive chartered-in ships in 2015. We thus revise up our FY15 net profit expectations from US$46m to US$203m,” stated DBS.

DBS further noted that the sale of NOL’s logistics dovosopm could provide a one-off catalyst, with NOL expected to book a one-off gain of up to $332m (US$250m).