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Maersk remains confident despite profit drop

Time:2016-02-16 19:55 Source:World Cargo News Writer:admin Click:Times

2015 profit tumbled 84%, but Maersk Group CEO Nils Andersen said the company is in a good position and poised to take advantage of opportunities in a distressed market.

 

The headline from Maersk’s 2015 annual result announcement is a massive 84% fall in group profit to US$925M. Falling oil prices and freight rates hit the company’s two largest divisions hard, but most of the drop was actually attributable to a US$2.6 billion write off oil assets. Underlying profit was actually US$3.1bn, with Maersk Line profit falling from US$2.1 billion to US$1.28 billion.
 

 

 

Andersen was upbeat when he led the investor conference call on Maersk's Q4 and annual performance. The result, he said, was an “acceptable full year result in challenging times”. Maersk Group is taking confidence from its relatively strong position at what is clearly a low point in the oil and shipping industry cycles. 

 

 

 

 

“All the negative things aside and all of the surprises, let me also underline that all of our businesses delivered a profit in 2015 and we left the year with the same net interest bearing debt of US$7.7 billion, so the strength of the group is intact and our ambitions to take advantage of this downturn is also intact” said Andersen. 

 

 

 

 

With regard to Maersk Line, Andersen said freight rates have fallen further than anyone could have predicted, particularly in Q4. In this period Maersk Line’s underlying profit decreased to a loss of US$165M and its ROIC was -3.6%, despite volume of 2.4M FFE - virtually the same as Q4 2015. Rates were low when the quarter began, then declined a further 25%, reaching “historic lows”. 

 

 

 

 

In response Maersk has adjusted capacity management considerable. Total slots increased 0.5% in 2015 to 3.0M TEU as chartered capacity fell 7.7% and owned capacity rose 5.7%. In 2015 Maersk closed four services, cancelled around 110 sailings (50 in Q4) and had 32,733 TEU of capacity (four vessels) idle at the end of the year.

 

 

 

 

The situation is not expected to improve quickly. Andersen said Maersk is picking volume growth in the 1-3% range this year. It believes there is room for growth in the US, Europe and Indian markets, but the Brazil, Russia and West Africa trades are expected to see declines. Meanwhile global fleet capacity grew 8% last year, and 7% of the fleet is currently laid up. 

 

 

 

 

Everyone, stressed Andersen, is looking to cut costs, while at the same time trying to increase utilisation, as “ultisation is the biggest driver of unit cost”. Maersk’s Capex, however, is staying at around US$7 billion in 2016, and the line currently has some 27 new vessels on order.  

 

 

 

 

With free cash flow of US$6.6 billion last year and a liquidity reserve of US$12.4bn Maersk is in no grave financial danger. “We don’t see pressure on cash flow” stressed Andersen, “we are in an excellent position to invest during the downturn - and don’t forget that’s the way companies operating in cyclical businesses do make money. Having said that we will reduce investment in new capacity and look for acquired growth or second hand equipment.”

(Editer:admin)

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