Oil prices boost A.P. Moller – Maersk results

Oil prices boost A.P. Moller – Maersk results A.P. Moller – Maersk Group said improved results from its oil business helped it turn in a $3.6 billion profit through the first three quarters of 2008, a substantial rise over the same period in 2007, when it made $2.6 billion.
   Revenue for the first nine months of the year was $47.2 billion compared to $37 billion in the same 2007 period. The company reports its results in both dollars and Danish kroner, but it said its dollar results were most relevant “since this is functional currency of 70 percent of our business activities.”
      The company did not separately report third quarter results, but its profit appeared to be about $1.15 billion for the quarter, when the first six months profit was subtracted from the nine-month results — about a 10.8 percent increase.
   The company said the increase in revenue was due to significantly increased oil prices, a higher share of oil production as well as improved freight rates and volumes in its container business.
   The group’s container shipping business, which includes Maersk Line and Safmarine, had a profit of $92 million for the first nine months of the year, compared to a loss of $57 million in the same 2007 period. A.P. Moller – Maersk noted that result reflected one-time gains from items such as ship sales that amounted to $348 million for the quarter as well as a charge against earning of $192 million from its restructuring program called streamLine.
   Excluding those one-time charges and gains, the company’s container activities lost $64 million for the first nine months. Still that was a sharp decrease from the comparable period in 2007, when the container business lost $202 million.
   Container volume for Maersk Line and subsidiary Safmarine grew 5 percent through the first three quarters of 2008, to 10.6 million TEUs.
   Volume between Far East and Europe, which is flat for the first nine months of the year, fell 3 percent in the third quarter.
In the transpacific, volume was up just 1 percent for the first nine months, and up 16 percent in the third quarter. But the company noted this growth was against a background of dramatic 30 percent reduction in capacity from 2007.
   The company saw volume increases in other trades: Africa, up 15 percent; Latin America, 4 percent; transatlantic, 19 percent; and Safmarine’s business, up 20 percent.
   “The average freight rates for Maersk Line and Safmarine increased 11 percent compared to the corresponding period of 2007, due to compensation for higher fuel costs,” Maersk said. “The deployment of new tonnage and the downturn in the global container shipping market led to a considerable decline in base rates in the third quarter, especially in the trades from Asia to Europe.”

Andersen

   The company said its total unit costs rose 13 percent in the quarter, largely because of a 71 percent increase in fuel costs. Slow steaming and other initiatives have reduced oil consumption, said Nils Andersen, the company’s chief executive officer, but the higher price still had “considerable negative impact.”
   While most carriers have been negatively affected by oil prices, Maersk said its oil and gas activities act as a significant hedge against rising operating costs for its vessels.
   Andersen said Maersk had no plans to lay up containerships as some carrier have, but he added there was “no psychological barrier” to doing so if necessary.
   Capacity utilization was unchanged from 2007, “affected positively by the trades between Asia and North America and the Oceania and Latin America trades, but negatively by lower capacity utilization in the trades between Asia and Europe,” the company said.
   Volume through the group’s terminal operating business, APM Terminals, rose 10 percent through the first three quarters, to 25 million TEUs. Much of the growth came outside of North America, where APM’s volume increased only 1 percent.
   For the full year, the company said it expects to earn $4 billion to $4.3 billion compared to $4.3 billion to $4.6 billion as was previously projected. But Andersen said the outlook was unclear because uncertainty in the world economy and financial markets.
   Still, he said, “We feel we stand on relatively strong feet in these difficult times.”
   Andersen said returning Maersk Line to profitability is the company’s top priority. “Current market conditions are challenging and we realize we have a long way to go before we have a n adequate return investments into Maersk Line, but it is fair to say the quarter just past has gone reasonably well in spite of difficult circumstances.” ' Eric Johnson and Chris Dupin