Maersk container losses offset by tanker, oil profits

Maersk container losses offset by tanker, oil profits The A.P. Moller-Maersk Group lost money in the container shipping business in the first half of 2007, but those losses were offset by profits from the tanker and oil and gas sectors.
   The company reported net profit of $1.56 billion in the first six months of 2007 compared to $1.17 billion in the same period of.
   Revenues climbed to $23.4 billion from $20.3 billion in the first half of 2006.
   Moller-Maersk was able to turn that profit despite a $168 million loss in container shipping and related activities in the first half. The first-half loss in the container business was much smaller than the $607 million loss from the container business it had in the first half of 2006 or the overall loss of $568 million it incurred in container shipping for the full year 2006.
   The company reported its transpacific volumes were down 12 percent while its transatlantic business was flat. That was in contrast to volume increases in Asia to Europe (13 percent), Africa (12 percent), and Oceania (8 percent).
   Overall, Maersk said it moved 6 million TEUs of containers in the first six months of 2007, up 3 percent. In that time world container trade grew 9 percent.
   The company said its slower growth reflected a “focus on earnings rather than market share.”
   However, despite that focus, it said “average rates for Maersk Line were both before and after compensation for higher fuel costs at the level of that in the first half of 2006.”
   Looking forward to the second half of 2007 the company said: “Rates for the container services are expected to be slightly above those in the first half year and on average for 2007 approximately 4 percent above the level for the full year 2006.
   “Second half volumes for 2007 will be at about the same level as they were in the second half of 2006,” it added.
   Jess Soderberg, chief executive officer of A.P. Moller, repeated comments made around the time that the company released its 2006 results, that the company had not yet seen synergies from its merger with P&O Nedlloyd, though he said over time they would be realized.
   After problems following the merger, he said customer service was “back on track.” The company pointed to “considerable ongoing IT investments and the standardization of processes.”
   The company was able to turn an overall profit despite that $168 million loss in container shipping and related activities in the first half of 2007 because of earnings from other segments.
   The company had profit of $777 million from tankers, offshore and other shipping activities; $596 million from oil and gas activities; $178 million from its retail stores; and $210 million from other activities.
   The result for the group’s oil and gas activities, however, was lower than in the first half of 2006, when the company had profit of more than $1 billion.
   “This is primarily due to much higher depreciation, additional taxes in Algeria and increased exploration activities,” Soderberg said.
   On trade to the United States, Maersk said: “Consumption is still stable despite stagnant house prices and increasing interest rates. However in the first half 2007 American companies adjusted their inventories which resulted in lack of growth in imports to the USA.”
   The company said variable unit costs at Maersk Line were up 2 percent in the first half. It said that was partly due to increased container repositioning costs, the declining U.S. dollar exchange rate because many costs are in other currencies, and cost pressures in ports and from inland transportation.
   Maersk’s APM Terminals had revenue of nearly $1.2 billion in the first half, up from $949 million in the first half of 2006. Profit more than doubled to $51 million from $25 million.
   For the full year 2007, Maersk said it expected revenue of about $44.5 billion and profit to be about 20 percent more than the $2.7 billion it earned in 2006.
   However it noted “the expected result is still very sensitive to changes in freight rates and volumes, especially in Maersk Line.”