10-02-2017

Maersk Line lost US$376m in 2016 - parent company in the red for $1.9b

Maersk

DANISH shipping giant Maersk Line reported an annual loss of US$376 million for 2016, while parent Maersk Group reported a net loss of $1.94 billion compared with analysts' expectations of a $960 million profit.

While describing the results as "unsatisfactory", the Group and Maersk Line CEO Soren Skou is forecasting that the shipping line's 2017 profit will be a $1 billion improvement on the negative 2016 results. The shipping line registered a profit of $1.3 billion in 2015.

Global demand for seaborne container transportation during 2017 was expected to increase by 2 to 4 per cent, and the Danish carrier said in its results statement that rising freight rates would drive up Maersk Line's earnings this year, IHS Media reported.

"In the fourth quarter, the net addition of nominal capacity went down significantly - much less deliveries and record scrapping led to demand exceeding supply, and it looks like this will continue at least for another few quarters," Mr Skou said in an earnings call with reporters.

"We believe the industry is at an inflection point, and we see encouraging signs for 2017, and that is why we feel comfortable with improving the Maersk Line profits by $1 billion over the 2016 result."

He said another reason he was confident in achieving the high profit turnaround was because the Asia-Europe service contracts had closed and they were "significantly higher" than those achieved in 2016. Trans-Pacific service contract negotiations will only be concluded after May, and Mr Skou said he also expected those to close much higher than last year.

Revenue for 2016 of $20.7 billion was 13 per cent lower than that achieved in 2015, driven by an 18.7 per cent decline in average freight rates to $1,795 per TEU, Maersk said in its results statement. Not even a 9.4 per cent increase in container volume to 10.4 million TEU could offset the effect of poor rates that fell to record levels in the first quarter of 2016.

Container demand on the east-west trades was decent in 2016, driven by higher US imports supported by the US economic expansion and the strong US dollar. European imports developed more softly and in line with GDP growth in the region.

On those east-west trades, volumes grew 11.4 per cent year over year to 3.7 million TEU, whereas revenue fell almost 20 per cent. Maersk said Asia-North America revenue declined the most because of greater competition and increased backhaul cargo at lower rates.

On the north-south trades, transported volumes were up 7.6 percent, but revenue tumbled 19.3 per cent, and intra-regional volumes were up 10.5 per cent and revenue was down 12.3 per cent.

Maersk said separately Michael Pram Rasmussen, its chairman, would step down and be replaced by Jim Hagemann Snabe, who is also tipped to become chairman of Siemens, the German conglomerate.

Source: Schednet

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