Maersk sees larger profit as volumes offset lower rates

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Christian Wienberg Copenhagen

First-quarter profit for AP Moeller-Maersk’s container-shipping line more than doubled, the Danish logistics company said yesterday, and it raised its full-year forecast as lower costs and higher volumes countered falling freight rates. The stock rose the most in more than four months.

Net income at Maersk Line rose to $454 million (R5 billion) in the three months to March from $204m a year earlier, the company said.

Earnings before interest and tax at parent company AP Moeller-Maersk rose to $2.24bn, beating the $2.09bn median estimate of analysts surveyed by SME Direkt.

Maersk Line, which transports about 15 percent of the world’s containers, has been battling industry overcapacity after a boom in ship orders collided with the global financial crisis, triggering the worst slump in prices for carrying cargo since containerisation became global in the 1970s.

The company said it expected its net income this year to be “above” last year’s result, compared with a previous forecast for profit “in line” with last year’s $1.5bn.

“The decline in unit costs seen in the first quarter would, isolated, support higher full-year results than the company guidance,” Frode Moerkedal, an analyst at RS Platou Markets in Oslo, said in a note. He repeated a recommendation to buy the stock.

Maersk shares rose as much as 4.2 percent in Copenhagen yesterday, the steepest intraday gain since January 7, and were up 3 percent at 10.16am Danish time for a market value of 293 billion kroner (R560bn).

Maersk, which also owns a port operator and an oil division, said it expected underlying profit, which excludes discontinued operations, impairment losses and divestment gains, would be about $4bn this year, up from a previous estimate of $3.6bn.

The higher expectations were “driven by improved operational performance and utilisation”, the company said. Freight volumes increased 7.3 percent in the quarter, while rates declined 5.1 percent. Unit costs fell by 9 percent, the company said.

Moerkedal wrote: “The unit cost decline reflects a high load factor given that volumes increased more than expected. Load factors may and will fluctuate and it could be difficult to cut unit costs at the same pace in coming quarters.”

Maersk Line also said yesterday that plans to form a vessel sharing agreement with its two biggest competitors, Mediterranean Shipping Company and CMA CGM, had been delayed, pending competition authority approval. The so-called P3 network, which includes 255 vessels on 29 loops, would start operating “in the autumn of 2014” compared with a previous estimate of a start in the second quarter, the company said.


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