Neptune Orient sells office for $380m, returns to profit

Neptune Orient Lines, Singapore’s biggest shipping company, will sell its head office for $380 million as it pursues a cost-cutting drive that helped generate a first profit in seven quarters.

The company expects to complete the sale of the NOL Building to Fragrance Group by the end of February, it said in a statement today. It separately reported net income of US$50 million ($61.2 million) for the three months ended Sept. 21.

Neptune Orient is selling the property to fund “strategic investments,” it said, without elaboration. The company is also adding larger and more fuel-efficient ships to help contend with higher bunker prices and rising competition.

APL, Neptune Orient’s container-shipping arm, moved the equivalent of 2.21 million 40-foot boxes in the third quarter, 1% more than a year earlier. Average revenue per box was US$2,601, a 2% increase. The unit filled 94% of capacity in the third quarter, unchanged from a year earlier.

Neptune Orient, which also has a logistics business, will book a US$196 million gain from selling the office. The ship operator will lease the building in Singapore’s Alexandra district until the end of June 2014, according Jones Lang LaSalle, which brokered the sale.

The company has also returned some leased ships and sold others to pare its fleet as part of its US$500 million cost- cutting efforts. It achieved USUS$360 million in the first nine months, it said.

Neptune Orient’s sales rose 4% to US$2.3 billion in the third quarter. The company posted a loss of US$90.2 million a year earlier. It forecast a full-year loss after losing money in the first two quarters.

FALLING RATES
Spot rates to haul a 20-foot container to Europe from Asia have now dropped to US$1,076, the lowest price since the last week of February, according to the Shanghai Shipping Exchange. Lines need at least US$1,200 to make money, according to shipbroker ICAP.

“Europe is the biggest drag in terms of end demand,” Jon Windham, a Hong Kong-based Barclays Plc analyst wrote in an Oct. 22 note. “The current trend is for an absolute decline in goods into Europe in the second half.”

A.P. Moeller-Maersk A/S, owner of the world’s biggest container shipping line, and other operators have cut more than 300,000 standard containers of capacity on the route in recent weeks in a bid to revive rates. Maersk and others are seeking increases starting Nov. 1.

Neptune Orient gained 0.9% to close at $1.17 before the earnings announcement. The stock has advanced 4% this year, compared with a 16% increase in the benchmark Straits Times Index.

APL operated 132 vessels with a combined capacity of 597,000 20-foot boxes as of Sept. 21, Neptune Orient said. It has received seven ships and expects to get three more this year, another 21 in 2013 and three in 2014.