Maersk Line Profit Drops as Rates to Ship Containers Fall to Historic Lows

Feb. 27 (Bloomberg) — A.P. Møller-Maersk A/S’s container- shipping line, the world’s largest, said fourth-quarter profit fell 6.6 percent as spending reductions weren’t able to counter a decline in freight rates.

Net income at Maersk Line dropped to $313 million from $335 million a year earlier, the Copenhagen-based company said today in a statement. Earnings before interest and taxes at parent company A.P. Møller-Maersk fell 5.9 percent to 9.46 billion kroner ($1.73 billion), missing the 10.6 billion-krone average of eight analyst estimates compiled by Bloomberg.

Maersk Line, which transports about 15 percent of the world’s containers, is battling industry overcapacity after a boom in ship orders collided with the global financial crisis, triggering the worst slump in prices for carrying cargo since containerization became global in the 1970s. The company said today that overcapacity will depress freight rates in 2014 and that Maersk Line’s profit will about match last year’s level.

The quarter was “disappointing,” Robin Byde, an analyst at Cantor Fitzgerald Europe in London, said in a report. “Despite the diversification of recent years, Maersk’s earnings in 2014 seem set to be even more dependent on recovery at Maersk Line.”

Maersk fell as much as 4.7 percent, the steepest intraday drop since July 23, 2012, and was trading down 2.1 percent at 64,700 kroner at 10:02 a.m. in Copenhagen. That pared the stock’s gain this year to 9.9 percent.

Volume Increases

Freight volume increased 8 percent in the quarter while rates declined 6 percent. Unit costs fell 9 percent in the period, helped by lower fuel consumption and better utilization of the fleet, Maersk Line said.

Full-year group Ebit fell 7.5 percent to 41.2 billion kroner. Profit was less than the 43.1 billion-krone average of 10 analyst estimates. Revenue declined 7.2 percent to 266.2 billion kroner. A.P. Møller-Maersk’s other businesses include oil and gas production and drilling and port operations.

A.P. Møller-Maersk forecast that 2014 net income including minority interests will rise “significantly” from the $3.8 billion reported for 2013, helped by the sale of a stake in its supermarket business. Profit this year, excluding impairment losses and divestment gains, will be “in line with the result for 2013,” the company said.

– Christian Wienberg, Copyright 2014 Bloomberg.

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