Maersk Profit Rises on Container Volume Gain, Cost Drop
A.P. Moeller-Maersk A/S, operator of the world’s biggest container line, said third-quarter profit increased as it cut costs and boosted box volumes.
Earnings before interest, tax, depreciation and amortization advanced 2.8% to $3.20 billion, Copenhagen-based Maersk said in a statement.
Maersk Line, which moves almost one-sixth of the world’s containers, lifted volumes 3.7% as freight rates rose 0.9%, with unit costs falling by the same degree. The unit, battling industry overcapacity after a boom in ship orders coincided with the global slump, predicted a full-year profit higher than $2 billion, versus the previous forecast for one “significantly above” the $1.5 billion earned last year.
“I am very, very satisfied,” Group Chief Executive Officer Nils Smedegaard Andersen said in a posting on the company’s website. “We’ve seen an improvement with the result in a situation where rates have been under pressure and the oil price has been down compared to last year.”
“We believe they struggled with utilization as ship capacity growth was almost double the volume gains,” analysts at RS Platou Markets AS said in a note, adding the company ‘‘disappointed’’ in the quarter as the result of the shipping line was ‘‘essentially flat quarter on quarter.’’ Maersk lifted capacity in the quarter by 6.3%.
With Brent crude futures priced below $82 a barrel this week, down from almost $122 in June, Maersk’s oil unit saw earnings fall 4.6% to $915 million, outweighing the benefit of lower bunker fuel prices at the shipping line.
‘‘It’s very hard to predict what will be in four years, but it’s clear we now are a bit less bullish on the oil price than we were a couple of year ago,” Smedegaard Andersen said when ask if the company’s goal to lift earnings at the smaller oil drilling unit to $1 billion by 2018 had become harder. “If you assume the oil price will stay under pressure, then we will see an effect also on the drilling business.”
While there is a tendency for oil production costs to rise, oil prices will come down somewhat, the CEO said. The company on average sold a barrel oil for $102 in the quarter, 7.3% less than last year, and Maersk said longer-term contracts protect it somewhat from fluctuating market prices.
Container volumes are likely to rise by between 3% and 5% for the full year, compared with an earlier forecast of between 4% and 5%.
Maersk reiterated that group earnings will total $4.5 billion this year, excluding discontinued operations, impairment losses and divestment gains. Third-quarter profit was in line with the $3.22 billion estimate of six analysts surveyed by Bloomberg News. Capital expenditure this year will amount to $9 billion, compared with an earlier forecast for about $10 billion.
