Maersk group 2018 profit down 38pc, but revenues rise 26pc

DANISH shipping giant AP Moller Maersk group's annual profit declined 38

22 February 2019 - 19:00

DANISH shipping giant AP Moller Maersk group's annual profit declined 38.2 per cent year on year to US$220 million, drawn on revenues of $39 billion, up 26 per cent.

The group also posted a fourth quarter profit loss of $34 million, down from a $32 million profit the year before. But quarterly revenue increased 21.4 per cent to $10.2 billion.

Maersk said the revenue improvement was driven by higher freight rates, greater efficiency in its operations, and synergies from the 2017 acquisition of Germany's Hamburg Sud.

Group CEO Soren Skou said the 'disappointing' 1-3 per cent growth projection for 2019 was due to 'uncertainties related to global macro outlook', including trade tensions, the downturn in China and Europe, IMO 2020 and potential fallout from Brexit.

'Two months into the year and there is a lot of uncertainty out there,' said Mr Skou.

Total ocean carryings jumped 21.6 per cent to 26.6 million TEU, but excluding Hamburg Sud's figures, the increase was a below-market par 2.5 per cent, which it attributed to a 'focus on profitability' in the second half of the year, when it suspended one of its Asia-North Europe loops.

Average freight rates increased by 5.1 per cent to $1,879 per FEU, although excluding Hamburg Sud, rates only inched up 1.9 per cent, or $34 per FEU.

At the same time, bunker costs jumped 32 per cent on 2017, adding $1.2 billion to costs, which Maersk said had 'not been fully compensated' by BAF surcharges.

Revenue earned from ocean grew 29 per cent to $28.4 billion, which included almost $1 billion of demurrage and detention receipts, as Maersk Line 'toughened up' on its collection policy, and also benefited from a 'windfall' of terminal congestion at the Los Angeles and Long Beach terminals.

Chief operating officer Soren Toft confirmed that Maersk's capacity would remain flat, at around four million TEU, although he said that this might rise by a few percentage points when the impact of the 2M new slow-steaming network changes is taken into account, and allowance is made for short-term charters to cover for ships that are temporarily taken out of commission for scrubber retrofits.

Maersk reiterated that it was not intending to order new ships until 'at least 2020', and had started leasing more containers instead of purchasing, thus reducing its capex liability.

Chief commercial officer Vincent Clerc said rates had ended 2018 'in much better shape' than the previous year, up seven per cent, which he said had resulted in 'a better climate' for the annual Asia-Europe rate negotiations.

Similarly, he expected that the new transpacific contracts, renewing from May, would also benefit from the more robust spot market.

However, Mr Clerc cautioned that around 50 per cent of Maersk Line business was now short-term and fixed on a monthly basis and, as a consequence, could be subject to rate volatility.

Maersk's Logistics & Services division, which includes its newly-created supply chain management sector, saw revenue increase two per cent to $6.1 billion, but was weighed down by $20 million of restructuring costs for an EBITDA of $98 million and an 'unsatisfactory' 1.6 per cent margin.

Mr Skou said Damco, which was 'carved out from the rest' as a standalone forwarder on January 1, had 'one mission - to become profitable'.

Terminals & Towage, which includes APM Terminals, saw containers handled at its facilities jump by 11.8 per cent year on year, to 11.4 million TEU. As a consequence, divisional revenue grew by 8.4 per cent on the previous year, to $3.77 billion, for a 22 per cent increase in EBITDA to $778 million and a margin of 20.6 per cent.

Maersk attributed this robust performance to a 'strong collaboration between gateway terminals and Maersk Line and Hamburg Sud', which saw terminal liftings jump 17 per cent to 4.1 million TEU.


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