Improved Box Line Performance Props up Maersk Results

REVENUES at Maersk’s Transport and Logistics division rose 14% in the third quarter on the back of improved freight rates, taking the group’s container division to a profit of $290m.

News ID: 77182

Date: 08 November 2017 - 09:36

According to MANA, Group revenue increased by $973m to $8bn with a $771m increase in Maersk Line, mainly due to higher freight rates. AP Moller-Maersk reported an underlying profit from continuing operations of $248m, up from a loss of $42m in the corresponding quarter last year, as profits from Transport and Logistics were offset by a loss of $15m in its Energy division.

The underlying profit was positively affected by the increased freight rates in Maersk Line compared to the third quarter of 2016, although there was a 2.5% decrease in volumes as well as increasing unit cost due to the cyber attack and a 26% higher bunker price.

At a group level, however, a $1.8bn impairment at Maersk Drilling following its classification as a discontinued operation, and impairments of $374m at APM Terminals, led to a net loss of $1.5bn. For continuing operations, the loss was $120m.

Transport & Logistics reported a revenue growth of 14% to $8bn. Performance was challenged by the June cyber attack, of which the financial impact is in the range of $250-$300m. The cyber attack primarily impacted July and August and the vast majority of the blow is related to Maersk Line, which reported an underlying profit of $211m and a return on invested capital of 4.3%.

“The revenue increased in Transport & Logistics by 14% and was mainly driven by higher revenue in Maersk Line,” said chief executive Søren Skou. “Market fundamentals stayed positive, with global container volume growth at 5% in the third quarter compared to the same period last year and an increase in nominal supply of 3%. However, contingency initiatives related to recovery after the cyber attack resulted in a negative development in Maersk Line volumes of 2.5% and increase in unit cost of 3.9% at fixed bunker prices.”

Maersk Line reported a profit of $220m compared to a loss of $116m last year.

Market demand growth remained at 5% compared to the same period last year while nominal supply grew 3%, Maersk said. The development in market fundamentals was reflected in freight rates, which increased 14% compared to the third quarter of 2016, but declined slightly from the second quarter of 2017.

Maersk’s average freight rate was up from $1,811 per feu in the third quarter of last year to 2,063 per feu this year. But unit costs also rose, from $1,991 per feu last year to $2,135 per feu this year.

Maersk said its acquisition of German carrier Hamburg Süd was progressing as planned, with expected closing by the end of this year. Maersk Line has a binding offer to divest Mercosul Line and has received unrestricted approval from the Brazilian regulators to acquire Hamburg Süd.

Meanwhile, APM Terminals reported an underlying profit of $110m, up from a loss of $126m last year, but was “negatively impacted by the challenging market conditions” with overcapacity in the industry leading to pressure on profit and margins, and additional costs related to the cyber attack.

The reported loss of $267m and negative return on invested capital of 13.3% was affected by impairments of $374m related to terminals in markets with challenging commercial conditions, Maersk said.

Maersk added that its orderbook of seven 20,600 teu second-generation Triple-E vessels, and 13 smaller ships, represented 7.4% of its current fleet and that it had no current plans for new orders.