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NOL still losing money despite sale

SINGAPORE: NOL Group, majority owned by Singapore's sovereign wealth fund Temasek, reported a net profit of US$879 million on revenue of US$3.5 billion for the first six months of 2015.

Excluding the US$887 million net gain on the sale of its APL supply chain management business to Kintetsu World Express, the company posted an overall net loss of US$8 million for H1 compared to a loss of US$152 million year-on-year.

NOL said it experienced "severe freight rate erosion" with rates in major trade lanes falling to some of the lowest levels it has seen in recent years. Average freight rates fell 17 percent in the second quarter because of over-capacity, it added. As a result, revenue for Q2 fell 24 percent to US$1.5 billion; EBIT was US$29 million and net profit excluding the Kintetsu sale, US$3.0 million.

NOL "The Group's container shipping business continued to face a challenging environment characterized by over-capacity and weak market demand. Nonetheless, APL reversed a core EBIT loss in the second quarter last year to a positive position this year," said NOL Group president and CEO Ng Yat Chung. "We remain focused on improving our cost competitiveness, yield optimization and service reliability to return the liner business to sustained profitability."

NOL reported US$100 million in cost savings in 2Q 2015, bringing its total cost savings for the first half of the year to US$255 million. "There is room for further cost savings with another nine vessels scheduled for expiry in the second half of this year," added Ng.

Commenting on speculation that the shipping group is up for sale, Drewry Maritime Research said: "There are several obstacles to a full sale of NOL: its parent company is not under pressure to sell and is unlikely to accept a low price, there are few willing buyers, and its fleet is not an attraction. More likely, Temasek will remain as a substantial shareholder after either a direct stake sale or indirect stake sale through [its investor subsidiary] Lentor.

"There is one good reason for Temasek to stick with NOL," Drewry added. "As full owner of container terminal operator PSA International it could use NOL, and its G6 Alliance partners, to utilize Singapore's new 65 million TEU per annum capacity mega-port at Tuas. The first-phase (25 million TEU capacity) is scheduled to be ready in six years."

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