[140816.EN.SEA] Maersk Profit Down 87pc, Box Line Suffers US$139 Million Q2 Net Loss

DENMARK's Maersk Group, the world's largest shipping company, posted a 87 per cent second quarter decline in profit to US$134 million, drawn on revenues of $8.86 billion, which fell 15.8 per cent year on year.

"The result is unsatisfactory," said Maersk Group CEO Soren Skou. "Cost reductions and operational optimisations, however, made a significant contribution to mitigating the impact of the negative market conditions."

First half profit for the group fell 85.6 per cent to $348 million, drawn on revenues of $17.4 billion, which fell 17.4 per cent year on year.

Maersk Line, the group's principal holding, suffered a quarterly net loss of $139 million, based on revenues of $5.06 billion, which fell 19.1 per cent year on year.

Maersk Line's first half net loss came in at $107 million, based on revenues of $10.03 billion, which fell 19.8 per cent year on year.

Blamed was heaped on weak freight rates, which fell 24 per cent in the second quarter, cancelling out gains from low bunker prices and improved unit costs at Maersk Line.

While spot rates had been rising over the past few months, it would take some time before this is reflected in the liner results.

Low spot rates meant contract rates were also set on the transpacific and Asia-Europe at levels far lower than the previous year.

"In May, the transpacific contract rates were set much lower than last year and that wiped out the increase in spot rates. The contract levels will increase, but it is hard to predict when," he said.

Container volume carried by Maersk in the second quarter rose almost seven per cent to 2.6 million FEU, with bunker prices declining 42 per cent and unit costs improving to an all-time low of under $2,000 per FEU.

During the period Maersk Line's capacity grew by 2.2 per cent to 3.1 million TEU and for the first time it achieved am FEU unit cost below $2,000, assisted by a 42 per cent fall in the average price of bunker fuel to $194 per tonne.

"In a second quarter impacted by low growth and falling prices in nearly all our markets, the Maersk Group delivered an underlying profit of $134 million," said Mr Skou.

Mr Skou said for profitability to be restored to 2014 levels, when Maersk Line was making double-digit returns on invested capital, it would be "very helpful" to have some increase in the revenue per FEU.

"If it comes to price increases, that is helpful, but if not we will have to figure out other ways to generate more revenue per container," he said.

The liner result was far worse than expected by Drewry, which predicted a $57 million net loss, and by a poll of analysts by Reuters that predicted a $47 million loss.

Mr Skou said the group expected a "significantly" lower underlying profit in 2016 than the $3.1 billion profit it achieved in 2015.

Mr Skou said Maersk enjoyed strong volume growth in a number of intra-regional trades as well as on backhaul legs, and speculated that there might also have been some positive effect from the South Korean carriers Hyundai Merchant Marine and Hanjin Shipping being in restructure mode.

"Some customers might have wanted to move their business away from them, and that has benefited us of course," he said.

Source : HKSG.