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A.P. Moller-Maersk A/S (AMKBY, MAERSK-A.KO, MAERSK-B.KO) on Friday warned global demand for seaborne containers will grow more slowly than the group forecast four months ago because of declining trade to Europe as the world’s largest container-shipping company reported a sharp rise in third-quarter net profit.
The Danish shipping-to-oil group, whose Maersk Line unit has a 15% share of global seaborne freight, making it a bellwether for world trade, benefited from a rise in freight rates, a divestment gain, lower financial costs and a reduced tax bill.
Maersk’s resilience in the face of slowing global trade underscores its recent measures to focus on profitability rather than growth. The group has reduced its own capacity and increased freight rates to counteract the glut in global container-shipping capacity, as new vessels ordered before the financial crisis in 2008 have come into service, a problem made worse by slackening trade flows particularly between Europe and Asia which account for 40% ofMaersk Line‘s volumes.
Maersk Line reduced capacity through slow-steaming, the industry term for sailing at lower speeds, which means each ship makes fewer trips and takes longer to cover the distance.
Maersk Line raised the rate per container on Asia-Europe routes by $500 from Nov. 1–like airline ticket prices, freight rates vary hugely according to destination and other factors–and increased rates on refrigerated containers by as much as 30%.
Net profit for the group rose to 5.15 billion Danish kroner ($883.8 million) in the three months to Sept. 30, up from DKK1.64 billion for the same period of 2011, when Maersk Line, which accounted for 48% of third-quarter revenue, reported a loss of DKK1.58 billion. Analysts in a Dow Jones Newswires/Factset poll had forecast net profit of DKK6.29 billion.
The shipping operation is to swing into “a modestly positive” profit this year from its 2011 loss, thanks to higher average rates in the second half of the year, Maersk said.
Jacob Pedersen, an analyst at Sydbank, said the shipping business has done better than expected.
“This clearly underlines a more efficient Maersk Line,” Mr. Pedersen said. “Their earnings potential seems bigger with the result today.”
Maersk now expects demand for seaborne containers to grow 3% this year, down from its previous industry forecast, given in August, when Maersk said it expected global demand for seaborne containers to increase 4% in 2012. The global market for shipping grew 7% in last year, according to shipping consultants Drewry Shipping Consultants Ltd.
Maersk now expects to report net profit of $3.7 billion, equivalent to around DKK21.7 billion, for the group for fiscal 2012, compared with $3.4 billion last year. The company releases forecasts in dollars and results in kroner.
As well as the turnaround at Maersk Line, the group said raised its forecast for its Maersk Oil unit to an improvement in net profit above last year’s $2.1 billion partly due to lower exploration costs. Its previous guidance was for a flat performance. In contrast, the group expects delays in the start up of new contracts to peg back the performance at Maersk Drilling.
“We [delivered] a good result for the quarter considering the challenging economic environment,” the group’s Chief Executive Nils Andersen said.
But Mr. Andersen said he expects the overcapacity in the shipping industry to continue next year and likely also into 2014.
As of Thursday’s market close, the market value of the company was DKK170.64 billion.
– Katrina Gustafsson, (c) 2012 Dow Jones & Company
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