What’s next for NOL after three straight loss-making years?

The firm is bracing for more headwinds ahead.

There is no safe harbor for loss-making Neptune Orient Lines this year. After posting losses for three consecutive years analysts warn that NOL is in for rougher seas going forward.

According to OCBC, overcapacity in the liner industry and port congestion in the U.S. West Coast will offset gains from lower bunker fuel prices.

“While we think lower bunker price is good for NOL in the near-term, we remain cautious as competitors may make use of lower bunker price to adjust freight rates in the longer term. We also note that NOL now has a leaner fleet with more fuel-efficient vessels (i.e. lower bunker consumption) with no new deliveries expected in FY15. Hence, while the impact from lower bunker costs and lower bunker consumption is positive, it is likely to be offset with depressed yields expected in FY15 on overcapacity reason,” stated OCBC.

Meanwhile, DBS warns that there is no sharp recovery in freight rates in sight yet, while capacity discipline and high net gearing remain big causes for concern.

“Despite the slow global economic recovery and the industry overcapacity, lower bunker fuel prices and lower slot costs from the return of expensive chartered-in ships may enable NOL to achieve normalised returns earlier than anticipated. High net gearing of over 2x is a cause for concern but this may be resolved to an extent by the possible sale of its logistics business, which may also result in one-off gains and catalyse its share price,” noted DBS.