Maersk Line posts record $2.8 billion ’10 profit

Maersk Line posts record $2.8 billion Æ10 profit    Maersk Line on Wednesday announced record operating profits of $2.8 billion, a massive $4.8 billion swing from the $2 billion the line lost in 2009.
   Perhaps crystallizing just how successful the Danish line, and market leader, was last year, it made nearly $2 billion more in 2010 than it did in 2008, when Maersk took home around $600 million in profit, despite rate and volume levels lower than 2008.
   Revenue for the container line grew 30.7 percent in 2010 to $26 billion. Volume grew 5 percent to 14.6 million TEUs, while its average global freight rates rose 29 percent to $1,532 per TEU.
   The A.P. Moller – Maersk Group, parent company of the container line, saw profit spike to $5 billion, after losing $1 billion in 2009. Group revenue was up 15.5 percent to $56.1 billion.
   Unit costs for the line fell 4 percent and bunker consumption 10 percent — helped not just by slow steaming, but also due to better maneuvering and loading of vessels, Maersk said.

Andersen

   ‘It is our best results ever and we are very pleased with that,’ Group Chief Executive Nils Andersen said Wednesday in a conference call to discuss the results. ‘What is also positive is that even though the rates and volumes were lower in 2010 than in 2008, we had a better result. A $2 billion improvement, gained from internal improvement in the container shipping business.’
   Andersen said the company has stripped out $3 billion in cost in recent years.
   ‘It’s made us more competitive,’ he said. ‘It makes us confident that results are not just coming from events on the outside.’
   On Monday Maersk announced it was ordering 10 18,000-TEU vessels, with an option for up to 20 more such ships, an order that would cost close to $6 billion if all the vessels are delivered to Maersk.
   But Andersen stressed Wednesday the company is in a strong cash position.
   ‘We still have strong cash flow,’ he said. ‘Our debt is down to 12.4 percent, which is slightly more than one year’s cash flow from operations. That allows us to be quite aggressive on the investment side. We believe we have exciting businesses to invest in. Over time, we will try to get a good balance between earnings and capex (capital expenditure) levels. That means we will keep a good cash flow and liquidity position.’
   When asked how substantial the company’s capital expenditure program will be this year, Andersen said a lot depends on how many vessels end up being ordered.
   ‘It’s too early to say exactly what the capex will be in 2011,’ he said. ‘If we order 30 ships, it obviously will be a high level. If we only take 10, it will be much lower.’
   At the end of 2010, the company has $12.4 billion in interest-bearing debt, while operating cash flow for 2010 was $10.1 billion. The group has $66.8 billion in assets and equity of $34.4 billion.
   Andersen stressed on numerous occasions that Maersk would focus on opportunities in what he termed ‘growth markets’ — he said 40 percent of the company’s turnover comes from these markets and that a platform has been built in regions such as South America and Africa to grow substantially.
   Meanwhile, Andersen admitted Maersk Line lost some market share in 2010, a fact he attributed to the carrier’s relatively small order book coming out of the economic crisis, compared to some of its rivals. The massive ship order placed earlier this week can be seen as a way to redress that issue.
   The new ships are a ‘major step forward in terms of competitiveness, but also in CO2 emissions,’ he said. ‘Irrespective of whatever regulations on fuel consumption and CO2 emissions arise, this should place us in a good position.’
   He said Maersk expects supply to marginally outstrip demand in 2010, but that by 2013 (when the first 18,000-TEU ships are due to be delivered), the company expects the reverse to be the case.
   When asked about whether a shortage of containers might be a problem in 2011 as it was last year, Andersen said he thinks not.
   ‘There was a lack of ordering in 2009, but also carriers were unprepared for the turnaround’ in early 2010, he said. ‘Carriers had boxes in places they didn’t need them. We, for instance, had a lot of boxes in Europe. A shortage of boxes should not be a problem in general in 2011.’
   As for the group’s other logistics-oriented businesses, operating profit for terminal operator APM Terminals spiked to $911 million, a 63.6 percent increase over 2009. APMT revenue rose 0.2 percent to $4.3 billion, while the volume handled by APMT facilities rose 2 percent. The company said the increase would be 7 percent if the effect of six APMT divested facilities are considered.
   Andersen said the percentage of non-Maersk Line container business handled by APMT rose from 41 percent in 2009 to 44 percent in 2010.
   Maersk’s logistics and forwarding division, Damco, saw operating profits rise from $22 million in 2009 to $75 million on a 21.1 percent increase in revenue, to $2.7 billion.
   As for the effect of Middle East political protests, Andersen said the company is not worried about its long-term prospects. The group maintains a sizable presence throughout the Middle East in its container shipping, logistics, terminal, and oil and gas businesses.
   ‘We’re not in general worried about the situation in the Middle East,’ he said. ‘There may be temporary disruptions in certain locations, but we don’t consider it a risk to our operations in Qatar or elsewhere.’
   Andersen was reticent to draw too many conclusions about 2011, but said he expects group and container line profits to be smaller than in 2010.
   ‘It’s too early to answer,’ Andersen said. ‘We’ll have more specific guidance for 2011 after the first quarter once annual contract negotiations are concluded. We expect rates to be below 2010 levels, but exactly where, we’re not giving a statement on that. We don’t expect return to 2009 figures or anything close to that.’ ‘ Eric Johnson