atans1

NOL underperforms Maersk again, as predicted

In Political governance, Public Administration, S'pore Inc, Shipping on 19/08/2013 at 9:17 am

(Or “Food for tot for PM as scholar, ex-SAF chief, & ex-Temasek MD again under-performs a shipping man?”)

Skip right to the end if you want to read the political and financial implications of this performance in relation to PM’s rally speech . No it’s not a rant against scholars.

According to DBS in early August, NOL reported a net loss of US$34.6m in 2Q13, and after adjusting for gains on sale of assets and realized gains on financial hedging instruments, results were largely in line with expectations of a US$64m net loss in 2Q13. – See more at: http://sbr.com.sg/shipping-marine/news/nol-suffered-us346m-losses-in-2q13#sthash.VZFIoR8g.dpuf. If truth be told, DBS, like other brokers got it dead wrong: NOL’s losses were 46% lower than expected. Only in stockbroking is such a discrepancy in line with expectations.

On 16th August, Maersk Line, the world’s biggest container shipper, reported a US$439m profit for the second quarter of the year, up from US$227m million a year earlier. Again this was unexpected by analysts, who tot it would only make half the amount. “Maersk Line has made strong and consistent progress and is now an industry leader in terms of profitability,” its CEO said.

It now expects earnings to be “significantly” more than last year’s US$461m rather than simply “above” them as it had stated before. NOL posted a half year net profit of US$41 million compared to a loss of US$371 million last year, and its CEO says  “The Group’s results demonstrate that we are on target in our strategy to deliver a better performance through cost management. We will continue in our efforts to strengthen the company’s competitiveness for the long term.”

Analysts say the volumes of goods being shipped around the world is continuing to rise following the recessions that affected many of the world’s big importers. http://www.bbc.co.uk/news/business-23722423

Global container shipping volumes(FT)

Note Maersk Line is run by a true blue shipping man*, while NOL is run by a scholar, and former defence chief, and ex-MD at Temasek. But Maersk is the largest container shipping co, while NOL is a distant 8th. It (and the Taiwanese) shippers decided in the late 1990s and early noughties not to fight Maesk for market share, instead focusing on profits. But profits were elusive for all because of overcapacity.

Related post: https://atans1.wordpress.com/2013/07/22/why-nol-has-problems/

In yesterday’s rally speech, PM rightly warned that the increase in welfare and social spending has to be met by cuts in other bits of the Budget or by increased taxes. Defence is a Budget sacred cow, taking about 25% of the budget or 4ish% of S’pore’s GDP. Given NOL’s relative unperformance under the tenure of an-ex-defence chief, PM should direct Ng Eng Hen to look at the operational cost effectiveness of the SAF. Could S’pore more bang for a smaller buck?

*Another characteristic of any good CEO, is their ability to understand fully the often complex scope of their company’s operations.

It is a challenge which can be made easier by a manager gaining as much experience as possible while climbing the promotion ladder. http://www.bbc.co.uk/news/business-23681605

According to DBS, NOL reported a net loss of US$34.6m in 2Q13, and after adjusting for gains on sale of assets and realized gains on financial hedging instruments, results were largely in line with expectations of a US$64m net loss in 2Q13. – See more at: http://sbr.com.sg/shipping-marine/news/nol-suffered-us346m-losses-in-2q13#sthash.VZFIoR8g.dpuf
  1. “The increase in welfare and social spending has to be met by cuts in other bits of the Budget or by increased taxes. ” but why?Temasek Holding has so much of our money,isn’t that a reliable source of fund?Looking at the international situation,and as a General, I do not think PM Lee has the heart to cut defence spending,nor other spending which should be increased if PAP want to have a slighting better chance(though still slim) to retain power in 2016,
    Given NOL’s relative unperformance under the tenure of an-ex-defence chief, PM should order a detailed study of performance of all ex-defence high flyers in our economic affairs and dealing with our money..

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