Maersk profit tumbles amid shipping, oil market slump

Danish oil and shipping conglomerate A.P. Moller-Maersk on Wednesday reported a plunge in first quarter profit, weighed down by low freight rates and oil prices, but cheering investors with significant cost cuts.

Maersk profit tumbles amid shipping, oil market slump
Maersk containers at La Guaira port in Venezuela. Photo: Marco Bello/Scanpix
“While market conditions remain challenging, we continue to adjust our cost base to the new conditions and maintain a good operational performance across our businesses,” Niels Andersen, the chief executive of Maersk which runs the world's biggest container shipping line, said in a statement.
Net profit fell 86 percent to $214 million (€186 million) as revenue declined 19 percent to $8.54 billion from the same period a year ago.
The fall in revenue was “predominantly due to a 37 percent lower oil price and 26 percent lower average container freight rates,” according to the group.
However, shares in the company rose as profit came in above expectations. Analysts polled by Bloomberg had predicted a net profit of just $38 million in the period.
“Management has had to slash costs over a long period and they have succeeded with that for another quarter,” Alm. Brand analyst Michael Friis Jorgensen told Danish news agency Ritzau.
Everything “that is not controlled by global container and oil prices they deliver on”, he added.
Cost cuts helped Maersk Oil lower its break-even oil price to $40 to $45 per barrel from a previous level of $45 to $55.
Stripping out exploration costs, its operating expenses fell 21 percent.
Shipping unit Maersk Line, seen as an international trade bellwether, saw a 95 percent drop in net operating profit after tax to $37 million.
“Container freight rates declined across all trades, especially Maersk Line's key trades to and from Europe as well as Latin America and North America,” the company said.
Shares in Maersk were 5.1 percent higher in late morning trading on the Copenhagen bourse, where the main index was flat.

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Maersk profits up as global supply chain disrupted

Danish shipping giant, AP Møller-Maersk, said Tuesday that profits were up sixfold in the third quarter as the coronavirus pandemic and global supply chain problems caused container prices to soar. 

Maersk headquarters in Copenhagen. The Danish shipping company posted hefty profits in the third quarter of 2021.
Maersk headquarters in Copenhagen. The Danish shipping company posted hefty profits in the third quarter of 2021. Photo: Niels Christian Vilmann/Ritzau Scanpix

“Maersk delivered record earnings” in the third quarter, chief executive Soren Skou said.

“In the ongoing exceptional market situation, with high demand in the US and global disruptions to the supply chains, we continued to increase capacity and expand our offerings to keep cargo moving for our customers.” 

Maersk said that its bottom-line net profit amounted to $5.438 billion in the period from July to September, compared with $947 million a year earlier.

Underlying, or operating, profit increased nearly fivefold to $5.859 billion and revenues jumped by 67 percent to $16.612 billion.

“Results in Q3 were driven by high freight rates in an exceptional market situation,” the group said.

Looking ahead, Maersk said it is sticking to its full year forecast for operating profit of 18-19 billion dollars. 

However, the ocean shipping division “is now expected to grow below” projected global container demand of between seven and nine percent this year, “subject to high uncertainties related to the current congestion and network disruption,” Maersk said.

“The current trading conditions are still subject to a higher-than-normal uncertainty due to the temporary nature of current demand patterns, disruptions in the supply chains,” it cautioned.

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