NOL sinks deeper with $137m loss in 4Q13

But at least full-year loss has narrowed.

NOL posted a 4Q2013 loss of US$137mn, worse than 4Q2012 loss of US$91mn, which has dissapointed a lot of analysts, including Barclays Research. The fourth-quarter plunge resulted from flat y/y volume growth and an 8% y/y decline in pricing.

Still, if there is a silver lining, it's that the company narrowed its FY2013 loss to US$76mn from a FY2012 loss of US$412mn.

Barclays Research warns though that underlying operations continue to be tepid, and that a continued focus on cost reductions will unlikely propel earnings.

Here's the full analysis from Barclays:

NOL announced FY2013 results after the Singapore market close on 20 Feb 2014 that were disappointing. Specifically, the lack of improvement in 4Q13 y/y net loss was disappointing. We maintain our Equal Weight rating on NOL and find its current 1.0x P/B multiple unattractive relative to peers trading at 0.6x with similar ROE and earnings outlooks. FY2013 loss per share of US$0.03

FY2013 loss narrowed to US$76mn from a FY2012 loss of US$412mn. However, much of that improvement was from a US$210mn gain from the disposal of NOL corporate headquarters in 2013. FY2013 core EBITDA was US$150 compared to FY2012 US$121mn. Underlying operations were roughly flat y/y, driven by lower freight rates and lower costs of service per container due to larger average vessel sizes and lower average charter cost.

NOL posted a 4Q2013 loss of US$137mn, worse than 4Q2012 loss of US$91mn. This was particularly disappointing in our view. 4Q2013 volume was flat y/y and pricing was -8% y/y.

FY2013 net debt expands to US$3.9bn. NOL continues to burn through significant amounts of cash. For the second year in a row, operations produced less than US$150mn in operating cash flow, but consumed nearly US$1.0bn per year in vessel investments to support the fleet renewal programme. YE2013 Asset-to-Equity expanded to 4.2x. We remain generally concerned about the future levels of debt given the outlook and net debt growing at approximately US$800mn pa.

NOL’s expectation is for more of the same in 2014, with an expectation for the market to remain weak. NOL continues to focus on cost reductions as does the industry as a whole. Absolute cost reductions are unlikely to drive earnings growth, in our view. Rather, cost reductions will be a relative competition factor driving lower freight rates on average.