A.P. Moller-Maersk’s shipping profits down 15.5% in 2005
Denmark’s A.P. Moller-Maersk said today that the integration of P&O Nedlloyd negatively impacted its net income for its container shipping and related activities in 2005, dropping 15.5 percent to $1.3 billion, compared to $1.5 billion in 2004.
A.P. Moller-Maersk’s container shipping and related activities include the world’s largest containership operator Maersk Line, Safmarine Container Lines, Maersk Logistics and APM Terminals.
The group estimates that the total direct costs relating to P&O Nedlloyd’s integration is approximately $500 million (before tax), of which $298 million was absorbed into the 2005 results.
Revenue from shipping activities increased 36.2 percent to $21.5 billion from $15.8 billion in 2004.
A.P. Moller-Maersk does not disclose financial results for its individual container lines, but said, “the volumes transported by Maersk Sealand increased by approximately 6 percent which, due partly to scarcity of capacity, was less than the general increase in the market. Average freight rates increased by approximately 10 percent.”
For Safmarine, the group reported: “Both rates and volumes were well over those for 2004. Safmarine’s other activities also experienced a reasonable development in 2005. The overall result was above the previous good result for 2004.”
“International transport grew by almost 9 percent in 2005 compared with 12.5 percent the previous year. Inventory reductions during the summer half put a damper on growth, and the last months of the year saw a decline in rates in the main east/west trades,” A.P. Moller-Maersk said in a statement.
“Demand for container capacity was high throughout the year, with good growth in the central container markets. After several years when growth in demand exceeded delivery of new tonnage, the increase reached equilibrium again towards the end of 2005. Recent year’s imbalance, with high growth in demand and relatively low addition of tonnage, has resulted in a comparatively large order book for new vessels, with delivery spread over the period until 2009.
“The effect of this was dampened by high and increasing fuel prices as well as a general continual upward pressure on other costs. Newbuilding prices and time charter rates for chartered container vessels peaked in the middle of 2005 and then showed a downward tendency. The pressure on many port facilities and domestic transport capacity continued to increase, but gave fewer problems in 2005 than the year before, mainly due to productivity initiatives and better distribution of cargo volumes to ports with available capacity.
“The trade from Asia to North America showed good growth, as expected, and the overall volumes were well over the 2004 level. From Asia to Europe growth in the market continued to be strong. Towards the end of the year freight rates were, however, declining. Intervention by the EU regarding the textile quotas for China resulted in temporary bottleneck problems for shippers and importers, but had generally only limited influence on the development of the market.
“For the service between Europe and North America the market grew well compared with 2004.
“In the reefer cargo segment Maersk Sealand achieved an increase slightly above the overall growth in the market. Freight rates generally developed positively with increases in most trades. The market for beef from South America was affected negatively by foot-and-mouth disease in Brazil late in the year,” A.P. Moller-Maersk said.
The decline in profits from container shipping and related activities compares with the group’s 27-percent drop in net profit to $3.4 billion, from $4.7 billion in the previous year. Group revenue increased 32 percent to $34.8 billion from $26.5 billion in 2004.
Profit from A.P. Moller-Maersk’s oil and gas extraction activities — the group’s second-largest profit contributor — was up 4.6 percent to $1.2 billion. Net profit from tankers and offshore shipping activities rose 20 percent to $642 million.
Maersk Logistics’ “volumes handled amounted to just under 20 percent above 2004. The result was at the same level as for 2004.”
The group’s port arm APM Terminals increased its operations by 17 percent to have a worldwide capacity of 24.1 million TEUs. It’s financial performance in 2005 “was above that for 2004, but heavy investment in new terminals implies that the overall result for APM Terminals will be marginal for the next few years,” A.P. Moller-Maersk said.
The group expects further reductions to its shipping related profits for 2006. “For the container business, the first months of 2006 have been characterized by a considerable decline in rates in a number of trades. The overall level of unit costs is expected to remain unchanged, although increasing fuel prices and increased depreciation following the acquisition of P&O Nedlloyd have a negative effect,” A.P. Moller-Maersk said.
“For the container services, a result considerably below that for 2005 is expected, both before and after P&O Nedlloyd integration expenses.”