COPENHAGEN, Aug 12 (Reuters) – A.P. Moller-Maersk’s progress in cutting costs reassured investors on Friday after the Danish shipping and oil giant reported a sharp decline in quarterly profit and its new chief executive confirmed that earnings would fall this year.
The Copenhagen-based company fired its CEO in June and replaced him with Soren Skou, head of its Maersk Line container business, indicating it could split it into separate companies and sell off part of the group, including its oil division.
Skou, a company veteran who has to respond to a shipping industry recession and tough oil markets, is expected to present the results of a strategy review in late September.
Maersk Oil is seen as a prime candidate for sale. In 2018, it will produce only half of what it does today after losing a major contract to operate Qatar’s largest offshore oilfield.
“Therefore we see less strategic rationale for having Maersk Oil in the Maersk Group going forward,” analyst Espen Landmark Fjermestad from Fearnley Securies said.
The group is fighting to remain the world’s largest container shipping carrier as a wave of mergers and acquisitions, particularly in Asia, creates new challengers.
Earnings figures illustrated the problems faced by Skou, who has been with the company for three decades.
Maersk’s net profit fell 90 percent to $101 million in April to June, amid significantly lower container freight rates. It maintained a forecast for underlying profit this year to be significantly below last year’s $3.1 billion.
Although Skou called the results unsatisfactory, Maersk shares were 3.2 percent higher by 1150 GMT as investors focused on its progress in reducing costs and the fact that the oil business performed better than expected.
“Cost reductions and operational optimizations…made a significant contribution to mitigating the impact of the negative market conditions,” Skou said in a statement.
Lower costs were mainly the result of 40 percent lower fuel prices, improved fleet utilisation and greater efficiencies.
MAERSK LINE MAKES LOSS
Maersk Line, the group’s biggest business unit, reported a loss of $151 million while expectations had been for a loss of $67 million.
“Maersk Line has reduced costs by 15 percent but it has not been enough to match a drop of 24 percent in freight rates,” Skou said.
Maersk Line has decided to stop services to and from 10 ports in China to help to reduce costs.
Maersk is not alone in struggling with the industry downturn. German container shipping group Hapag-Lloyd said on Wednesday it made a first-half operating loss of 39.7 million euros ($44.2 million) as disappointing freight rates hurt its business.
Around 150 container vessels are expected to be scrapped in 2016, but that will not be enough for an industry battling over- capacity, low demand and falling rates, consultancy firm Drewry said in July.
Container shippers’ poor results have sparked consolidation.
“We believe consolidation is positive for the industry and we do think there is a change that the industry will significantly consolidate over the next decade,” Skou said.
He underscored that Maersk Lines will protect its market share which is estimated to be around 15 percent.
Market speculation has focused on DSV as a potential buyer of Maersk’s Damco logistics unit. Maersk could also pursue a takeover itself as peers including Hapag Lloyd and CMA-CGM have already acquired rivals to boost their market positions in core areas including Asia and South America. (Additional reporting by Teis Jensen; Editing by Alexander Smith and Keith Weir)
(Bloomberg) — Iran’s oil production has defied years of US sanctions to return to almost full capacity — a tide of supply that looks increasingly vulnerable as tensions with Israel...
(Bloomberg) — Climate-friendly hydrogen was one of the most-hyped sectors in green energy. Now the reality of its high cost is taking its toll. In recent months, some of the...
(Bloomberg) — Canada is working with Nordic countries to create a new Arctic security coalition that would exclude Russia and offer a place to coordinate on defense, intelligence and cyber...
October 3, 2024
Total Views: 620
Why Join the gCaptain Club?
Access exclusive insights, engage in vibrant discussions, and gain perspectives from our CEO.
This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.