Revenue was $48.5 billion in 2009 compared to $61.2 billion in 2008.
'It's a lot of money to lose,' said Nils S. Andersen, group chief executive officer, attributing the loss to an 'extraordinary year with historically low rates and low demand.'
He noted the Danish company had limited its loss by saving about $2 billion, in addition to savings related to lower bunker prices. Those savings will strengthen the company's competitiveness, said Andersen who said 'we expect to return to modest profits in 2010.”
The loss for the publicly traded A.P. Moller A/S, was actually slightly larger, $1.3 billion in 2009, compared to a profit of $3.3 billion in 2008. That's because it does not reflect the profits of other minority owners in some of the group's profitable ventures such as its supermarket chain and some of the APM Terminal business.
Maersk said its container business segment lost $2.1 billion in 2009 compared to a profit of $583 million in 2008. Profits in other segments, such as APM Terminals, its tanker and other shipping businesses, oil and gas business and retail stores, could not offset the container losses.
Market volume was down 13 percent in 2009 compared to 2008, but Andersen said the industry was hurt 'first and foremost by a decline in rates.'
Maersk container volumes were down only 1 percent, while the company said its average rates were down 28 percent.
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| Andersen |
'The container industry as such had a significant volume decline. But really what made the most negative effect for the industry was our willingness and capacity to take rates down below cash operating cost and do it very fast, and that resulted in a very poor rate situation, that is the main reason why we lost the amount of money we lost,' he said.
The company was helped by a 34 percent drop in average bunker prices, but Andersen said what was most important was the company success in reducing bunker consumption 12 percent through efforts such as slow steaming. The company's container segment was able to save $1.6 billion in costs.
By trade lane, Maersk saw volume declines in the transpacific, transatlantic, Africa and Latin America trade lanes, but increases in the Asia/Europe, Oceania and intra-Asia lanes. But Andersen noted that increases in some cases were on the backhaul, where rates are lower. For example, in Asia/Europe, head-haul volumes were down 2 percent, but volumes were up 25 percent on the backhaul.
Intra-Asia volumes were up a whopping 35 percent for the company in 2009, but rates were down 19 percent.
Talking about the outlook for the container shipping industry generally in 2010, Andersen said Maersk was estimating there would be a 7 percent to 10 percent increase in capacity in 2010 compared to a 6 percent increase in 2009.
He noted that in 2009 capacity was effectively reduced 5 percent because of slow steaming, and Maersk expects that trend to continue in 2010, with another 2 percent decrease in capacity resulting from the further spread of slow steaming in 2010.
'This is not something we expect to return to the market because the container lines are still very loss-making, most of them, and the rates we are seeing now cannot really sustain an increased cost level, and slow steaming saves significant amounts of bunker oil, so we do not expect that to change in the future,' he said.
Where demand for container transport fell 13 percent in 2009, Maersk is estimating a 3 percent to 5 percent increase in demand.
The company said volume and freight rates are expected to rise this year, but with the caveat, 'if the level of vessels taken out of service is sustained.' Last year Maersk noted that 12 percent of the fleet was laid up in 2009.
Maersk said it expected rates would be higher this year but still not lead to an acceptable return in 2010.
'We assume both the customers and lines have learned from the very bad situation that we ended up with in 2009, and we think this will put some discipline in to the liners. And we expect the customers will have understanding that an industry losing $20 billion to $30 billion in a year cannot be expected to uphold satisfactory service going forward,' Andersen said.
'We don't see our liner business as a commodity business. We believe there is space for a liner company that gives superior service and is focused on consumer business,' he said.
Nevertheless, he said it was important for Maersk to keep costs under control, and the company flattened its organization by taking out a layer of regional management two years ago, and was working on improving its informational technology systems and processes.
In other shipping segments Maersk reported that its APM Terminals division had a 7 percent decline in volume in 2009, compared to a 12 percent decline for the container terminal industry in general.
APM Terminals continued to attract amounts of business in addition to its sister companies, Maersk Line and Safmarine. Outsiders accounted for 41 percent of APM Terminals business in 2009 compared to 38 percent in 2008.
Revenues at APM Terminals were $3 billion in 2009 compared to $3.1 billion. Segment profits were up, $442 million compared to $302 million in 2008. The company said it focused on cost reductions during the year.
The company's tankers, offshore and other shipping activities saw segment profit fall to $275 million in 2009 from $1.1 billion in 2008. Revenue was $5.5 billion in 2009 compared to $5.4 billion in 2008.
'Falling demand for oil, rising oil stocks and substantial growth in the global fleet meant that Maersk Tankers was negatively affected by low activity and declining ship values,' the company said. This year, the tanker markets have benefited from the cold winter and declining oil stocks. But the company said, 'rates remain unsatisfactory, and the addition of new tonnage combined with weak demand for crude oil and refined products is expected to cause challenging market conditions.' ' Chris Dupin
