Wednesday, August 18, 2010

Worlds Largest Container Shipping Line Reveals Profits

AP Moeller Maersk Announce Figures to 30th June
Shipping News Feature

DENMARK – Following on from our report on Norden A/S profits for the first six months comes news that a much bigger fellow countryman and player in the freight market, container shipping giant AP Moeller Maersk, are another company more than happy with the turnaround in their fortunes. Yesterday sensible management, hard bargaining, a trade upswing and an industry wide realisation that low rates led down the path of disaster helped the group to raise their profit forecast considerably.

Industry analysts had predicted the turnaround, but not on the scale which Maersk were able to reveal. It should be remembered that this was a group who made money every year for over fifty years but a glance at our March story will remind readers how gloomy things were for the previous financial year as Maersk, valued at around $36 billion, lost over half a billion dollars in the first six months of 2009, a figure which they have managed to turn around to a $2.5 billion net profit in the first half of this year.

Maersk are of course the largest container shipping line on the planet and have been helped by a number of factors beyond their control, particularly currency exchange rates and the price of oil (a high price boosts their oil and gas activity figures), but credit should be given for the overall management which has tended toward diversification within the freight industry more of late. As with Norden the tanker sector was the poorest performer but even there they turned a big loss into a $15 million net profit and elsewhere all sections of the company improved even further.

The deal concluded in July by CEO Nils Andersen in selling the Norfolkline RoRo ferry business to DFDS whilst snapping up a large slice of DFDS shares for Maersk, was seen as a bright move by many, plus the company’s sale of Sigma Enterprises, who part owned the Yantian container terminal, boosted their situation. Maersk intend to continue their programme of disposal of non shipping interests, pricipally Netto Foodstores, whilst reducing costs and presumably persuading rivals that it is in everybody’s interest to maintain container shipping rates. It should also be remembered that, like many others, Maersk still have spare capacity in the form of vessels ‘mothballed’ due to the trade downturn despite their disposal of unwanted ships.

Mr Andersen said of the current period:

“The first half of 2010 has been very satisfactory for the Group, and we expect a full year profit in excess of USD 4 billion. The container market has improved beyond our expectations, and our own efforts to improve competitiveness are paying off. However, we still view the development in the global economy as uncertain, and this may affect us from the last quarter of 2010,”

What lies behind the recent turnaround of both Maersk and Norden is the combination of a rise in trade across the markets, both TEU and FEU numbers are up, Maersk quoting an 11% increase in overall container volumes against the equivalent period last year, plus an increase in freight rates of over 30% on average.

As most agree with Mr Andersen that trade volumes will be variable given the still unsteady situation of many currencies, Maersk will hope that their rivals show the same determination that they themselves have to maintain tariffs which are relatively high compared to a year or so ago.

Photo:- Nils Smedegaard Andersen, Group CEO AP Moeller Maersk