Maersk ups shipping forecast as container profit jumps
Monday, 19 August 2013 00:00
Q2 net profit $ 856 m versus forecasted $ 667 m
Sees 2013 group profit of $ 3.3 b
Raises Maersk Line 2013 profit forecast
COPENHAGEN (Reuters): A.P. Moller-Maersk, operator of the world’s biggest container shipping fleet, raised its annual profit forecast for the business on Friday, helped by tighter cost controls and lower fuel prices.
Maersk shares jumped 6% to their highest in one and a half years as investors welcomed a near-doubling of second-quarter earnings at container arm Maersk Line, which generates nearly half of group revenue and is helping counter weakness in the company’s oil business.
“The biggest swing factor in Maersk’s result is always Maersk Line, and the unit’s result today nearly knocks you off your chair,” said Sydbank analyst Jacob Pedersen. “The earnings potential of the shipping unit has surprised many investors today and the share jump certainly does not make the investment any less interesting,” Pedersen said.
The Danish company’s second-quarter group net profit fell 11% to $ 856 million, against a forecast for a 30% drop to $ 667 million in a Reuters poll of analysts. While advising caution in calling an end to a shipping sector slump that has weighed heavily on the industry since the 2008 financial crisis, Chief Executive Nils Smedegaard Andersen predicted a measure of stability.
“It is currently our expectation that we can maintain freight rates at the level we have reached now for the rest of the year,” Smedegaard said on a conference call.
Demand for containers has grown as the global economy strengthens gradually but, until recently, container price increases were limited by an influx of new and bigger vessels.
Container rates were under pressure both in the first and second quarters. Maersk pushed up rates on the Asia to Europe route, the world’s busiest, by 174% on 28 June, matching similar increases by rivals such as Germany’s Hapag-Lloyd and China’s Cosco Container Lines. Maersk trimmed its forecast for growth in demand for global seaborne containers this year to 2-3% from previously 2-4%.
Push on costs
Maersk Line, whose vessels make up around 15% of the world’s container shipping capacity, made a second-quarter net profit of $ 439 million, significantly exceeding an average analyst forecast of $ 99 million.
“The very strong cost control program at Maersk Line is helping the company to a large profit and guidance increase,” said Alm Brand Markets analyst Jesper Christensen.
A 15% decline in the average bunker fuel price per ton and lower bunker consumption in the quarter for Maersk Line helped offset a 13% decline in the average container freight rate compared with the same quarter last year.
Total costs for a 40-foot equivalent container unit were cut by nearly 13% in the period, mainly driven by vessel network efficiencies, the company said. Results for the container shipping unit are now seen significantly above those in 2012, against a previous forecast for the results to exceed last year’s $ 461 million, Maersk said.
Maersk raised its forecast for group net profit excluding impairment losses and divestment gains to around $ 3.5 billion from a previous forecast of $ 2.9 billion. It kept its forecast for net profit unchanged at $ 3.3 billion, below last year’s $ 4.0 billion.