Maersk sees improved results, reduces container losses

Maersk sees improved results, reduces container losses The A.P. Moller – Maersk Group said it had first quarter net profit of 5.2 billion Danish kroner ($1.1 billion), compared to 2.2 billion kroner in the same period the prior year.
      The company’s container business saw results improve, but still recorded a loss, in part because of one-time reorganization costs that have resulted in a 15 percent staff reduction.
      First quarter revenue was 71.8 billion kroner ($14.4 billion) compared to 62.9 billion kroner in the first quarter of 2007.
      The company said revenue improved “mainly due to significantly higher oil prices as well as higher freight rates and volumes in the container trades.”
      For the full year, A.P. Moller ' Maersk is predicting a profit of
$3.6 billion to $4 billion compared to $3.4 billion in 2007. The company has said it might sell shares in “non-strategic assets” that could boost profit by another $800 million. Revenue is expected to climb to $60 billion for 2008 versus $51 billion in 2007.
      The net result for its container activities in the first quarter was a loss of $47 million. That included non-recurring costs of $58 million attributable to its streamLINE reorganization plan and one- time gains on ship sales and other factors totaling $141 million.
      As part of the reorganization, Maersk said it has shed about 3,000 jobs. Other elements of its streamLINE initiatives are continuing with a “focus on customer satisfaction, increased capacity utilization and cost efficiency.”
      The total cost of StreamLINE is expected to be about $250 million.
      The $47 million first quarter loss was better than the loss of
$198 million in the container business in the first quarter of 2007, when it also had gains on sale of ships and other items of $58 million.
      The company said improved results in container activities was partly due to 4 percent increase in volumes and a 5 percent increase in freight rates, excluding bunker adjustment factor.
      “Restoring Maersk Line profitability continue to be our top priority,” said Nils Andersen, chief executive officer of the A.P.    Moller – Maersk Group. “Although we feel the first quarter is positive because the result is better than last year, we still are not where we want to be.

Andersen

      “But we are through the StreamLINE process, at least in terms of defining the organization and making arrangements for who is staying and who is leaving. Now we will have more resources on actually delivering on our customer promises and winning in the market,” he said.
      Maersk and Safmarine carried the equivalent of 3.4 million TEUs in the first quarter. The company said Asia/Europe volumes grew 7 percent while Far East/North America volumes were 18 percent lower.   
On other trades, volumes grew on average by 11 percent.
      The company said average freight rates, including the bunker adjustment factor, were 13 percent above the corresponding 2007 period. Excluding the bunker adjustment factor the increase was only
5 percent.
      Andersen said the company has seen “good acceptance” of its new bunker adjustment factor in the transpacific.
      “We are also seeing improved rates, obviously not to the tune we would like, but the results on the transpacific should improve and hopefully for the industry, which is necessary since the industry has been losing money on transpacific for years. Rate improvements are a must-have,” he added.
      On the trades from Asia to Europe, which Maersk said are its most significant, “considerable rate increases have been realized compared to those in the first quarter of 2007. However, in 2008 tonnage supply has increased on these trades putting some pressure on the rates.”
      However, he said first quarter rates were still better than in the fourth quarter of 2007. “We are not unhappy with the trend,”   
Andersen said.
      In the Asia/Europe trade, Andersen said, “We don’t expect to see growth like we did last year, but we still continue to see nice growth rates.”
      Maersk said fuel prices were on average 65 percent above those of the same 2007 period and that the higher prices had a negative effect, which was significant despite efforts to reduce fuel consumption and to increase fuel surcharges.
      The company said total unit costs, including depreciation, were 8 percent above those of the corresponding period 2007, affected by higher fuel prices and the weaker dollar.
      During the quarter Maersk Line took delivery of nine container vessels and sold three, one of which chartered back for a longer period. Safmarine took delivery of one container vessel.
      APM Terminals’ revenue, measured in dollars, was 27 percent higher than the same 2007 period, and the company said net profit was higher. Activity as measured by the number of crane lifts, weighted by ownership share, increased by 10 percent.
      In North America, the company said volumes were about 2 percent lower and on the other markets about 13 percent higher than in the first quarter of 2007.
      Andersen said the company is focused on getting increased third party volumes, especially in the United States. He would not discuss a specific question about whether APM had won a new client for its Pier 400 terminal in Los Angeles, but said generally “we are making progress.”
      In other segments:
      ' Maersk Tankers “experienced a weak winter market,” with new tonnage entering the market and the mild winter resulting in generally lower rates for tankers compared to the corresponding period 2007. The company said the tanker net result was below that of the same period in 2007 both before and after gains on sale of ships.   
When offshore and other shipping activities were included, the result was somewhat above the year-earlier period.
      ' The company said its share of oil and gas production in the period was about 20 percent above the corresponding 2007 period, positively affected by a larger share of the production in Qatar and negatively affected by lower production in Denmark and in Great Britain. Average oil prices were 67 percent higher.
      ' The company’s Odense Steel Shipyard Group realized a loss, “however somewhat lower than that of the same period 2007.”
      A.P. Moller – Maersk said it has reduced its exposure to fuel costs.
      “Due to the fact that Maersk Line as mentioned has been able to recover a larger part of the increased fuel costs from customers, initiatives to reduce fuel consumption on the container trades, and the development in the price difference between crude oil and bunkers oil, the group’s sensitivity to oil prices has changed,” the company said.
      “Hence the result for the group for the remainder of 2008, all other things being equal, and before effect of oil hedge contracts will now be unaffected or slightly positively affected by an increase in oil prices,” it added. ' Chris Dupin