Woes in container shipping markets wiped out underlying first-quarter profits for Denmark’s AP Møller-Maersk in the latest sign of the gravity of the problems facing the economically vital sector.
The operator of the world’s largest container ship fleet reported net profits up 1 per cent at $1.18bn on revenue down 1 per cent to $14.3bn compared with the same quarter of 2011. But the profits were entirely the result of a $900m exceptional gain following settlement of a tax dispute in Algeria and $324m in investment gains in the quarter, against $60m in the same quarter last year.
Maersk’s shares fell 6.1 per cent in Copenhagen, to DKr37,860.
The decline was caused by a sharp downturn in the fortunes of Maersk Line, the core container shipping operation, which posted a $599m net operating loss after tax on revenue up 7 per cent to $6.31bn, against a $424m profit by the same measure in last year’s first quarter.
The conglomerate, which produces oil and gas and operates tankers amid its wide range of activities, nevertheless marginally upgraded its full-year forecast. It said it expected full-year net profits “slightly lower” than 2011’s $3.4bn, against the “lower” than 2011 forecast it made in February. The group expects a full-year outcome for Maersk Line of “negative to neutral”, assuming that efforts undertaken since March to push up rates earned per container ship are successful.
Maersk Line’s losses largely reflected its strategy, abandoned partway through the quarter, of keeping significant shipping capacity in key markets and accepting the low rates that resulted. Nils Andersen, chief executive, told the Financial Times last November that the company had created “a little bit of panic” among rivals with its strategy, which it started following when it introduced a service of daily, rather than weekly, departures from key Asian ports to the main European hubs.
Rates earned per container shipped on the key Asia to Europe route – which accounted for 37 per cent of Maersk Line’s first-quarter volumes – were 21 per cent down on last year, while volumes rose 22 per cent. Rates fell 8 per cent on Latin American services on volumes up 23 per cent, while rates on trans-Pacific services fell 5 per cent on volumes up 21 per cent. In Africa, which accounted for 15 per cent of Maersk’s volumes, rates rose 2 per cent on volumes up 15 per cent.
The line had cut 9 per cent of the capacity it was offering on the Asia to Europe trades partway through the quarter, the company said. It had also introduced a “general rate increase” – an announcement of across-the-board price rises – that was “almost fully accepted”, it said.
Post-tax operating profits at Maersk Oil rose from $537m in the first quarter of 2011 to $1.3bn, thanks to the Algerian tax settlement. Revenues fell 17 per cent to $2.54bn.
Post-tax operating losses at Maersk Tankers, operator of the world’s largest fleet of oil product tankers, deepened to $28m from $4m on revenue up 4 per cent to $329m.