Maersk Posts Record Profit Despite Pressure in Shipping Rates
Maersk Line has reported a profit of $2.3bn for 2014 a 50% increase over the previous year, and expects a higher result in 2015, though the shipping rates remain under pressure.
But 2015 is expected to yield less impressive results due to falling oil prices. The Chief Executive Officer Nils Smedegaard Andersen says shipping rates remain under pressure but maintains the business is "doing very well at the moment."
He said that he was satisfied with the 2014 results. “Despite challenging market conditions we saw good progress in underlying performance across the Group,” he said.
Maersk Line maintained its lead on the rest of the industry and APM Terminals delivered significant improvements. Maersk Drilling executed on fleet renewal program according to plan, while Maersk Oil increased entitlement production in line with expectations, he added.
Underlying profit of A.P. Moeller-Maersk A/S increased by 33% to $4.5 billion ($3.4 billion) and the return on invested capital (ROIC) was 11.0% (8.2%).
The reported result was positively impacted by a $2.8 billion gain from the sale of the majority share of Dansk Supermarked Group and other divestment gains of $600 million ($145 million) partly offset by net impairments of $3.0 billion ($220 million), including $1.7 billion on Brazilian oil assets. Another major divestment is in the works: the group plans to sell its 20.05% stake in Danske Bank A/S for $5.5 billion and return the money raised to shareholders.
APM Terminals made $900m, up from $770m, and Maersk Tankers logged earnings of $132, against a loss of $317m a year ago.
The tanker arm benefited from improving VLCC and LR2 rates, as well as a reversal of provisions for onerous contracts worth $87m and cost savings.
Offshore shipping division Maersk Supply Service posted earnings of $201m against $187m, while salvage and towage operation Svitzer made a loss of $270, compared to a profit of $156m in 2013.
Maersk Line has no plans to increasing vessel speed as network and fleet adjustments required a sustained low bunker price level, which was not reflected in the market's forward curve.
Fleet capacity increased to 2.9m teu at the end of 2014 compared to 2.6m teu at the start mainly due to the delivery of 11 triple E vessels with 18,000 teu in capacity. Five more Triple-E vessels to be deployed on the Asia – Europe trade are to be delivered in the first half of 2015.
“To minimize the impact of the low and volatile freight rate environment, Maersk Line continued to absorb capacity by active capacity management in the form of idling, slow steaming and blanked sailings,” the company said.
Looking ahead Maersk Line is expecting to better its 2014 underlying result of $2.2bn in 2015.
“Maersk Line aims to improve its competitiveness through unit cost reductions and implementation of the new 2M alliance,” it said. With global container shipping volumes forecast to grow at 3% - 5% in 2015 Maersk Line is aiming to grow in line with the market.
