Neptune Orient Lines, which made a bid for German rival Hapag-Lloyd, warned its business will be much more difficult in the second half of 2008, as it posted a 19 percent fall in profit due to tough conditions and higher costs.
The Singapore group, which runs the world's seventh-largest container shipping firm APL, said it faced a worsening shipping market and expensive fuel.
Analysts are expecting the industry outlook to darken further as the global economy weakens, causing trade between Asia and Europe to slow and compounding already weak trade between Asia and the United States.
NOL, 66 percent-owned by Singapore sovereign fund Temasek Holdings, said its net profit for the April-June period fell 19 percent to $76 million, from $93 million a year earlier.
"The second quarter was impacted by a large run up in bunker costs and a deterioration in core rate levels in the Asia-Europe trade," said NOL Chief Executive Ronald Widdows in a statement on Thursday.
Revenue for the quarter rose 24 percent to $2.24 billion, but costs rose faster, up 28 percent at $1.96 billion.
The company said it would pay an interim dividend of 4 Singapore cents per share.
NOL said it will continue to invest in resources that improve its shipping business, "with the aim of continuing to perform at the top of the container shipping sector." Last month, it made an indicative bid for Hapag-Lloyd, the shipping arm of Germany's TUI, in a deal that could be worth more than $7 billion and that would create the world's third-biggest container shipping group.
Analysts are mixed about the impact on NOL of a takeover of Hapag-Lloyd, highlighting synergies for the consolidated container business, while citing the risk of NOL overpaying for the acquisition.
NOL is going ahead with the deal despite recent leadership changes.
Widdows, a 28-year veteran of APL, took over as CEO last month after his predecessor Thomas Held, a German who could have been a key player in talks with TUI, resigned abruptly.
NOL is expected to report a 7.6 percent drop in full-year 2008 net profit to $483.29 million, down from $522.76 million the year before, according to the average of forecasts from 11 analysts polled by Reuters Estimates before Thursday's results.
NOL shares closed up 3.8 percent on Wednesday, ahead of the results. Its share price has lost 32 percent so far this year, in line with regional rival Taiwan's Evergreen Marine, also down 33 percent.
But NOL shares have underperformed the broader Straits Times index which is down 17 percent year to date, and global rivals such as Japan's Mitsui O.S.K. Lines, which is down 11 percent, and AP Moeller Maersk, down 3.5 percent.