Maersk’s Q1 results disappoint

The AP Moller/Maersk group’s first quarter results disappointed group CEO, Nils S Andersen. And part of the finger of blame was laid on the shipping sector. “Earnings in shipping were weak due to the continued loss-making rates in the container and tanker markets,” Andersen said. “However, our efforts to increase container rates are paying off and we will continue our initiatives to improve rates throughout the year.” The group delivered a profit of US$1.2-billion (R9.84-bn), the same as last year’s Q1, said the Q1 interim report. But, excluding divestment gains and one-off tax income from the settlement of an Algerian tax dispute, the group recorded a zero profit. Cash flow from operating activities was US$1.2bn, down on last year’s US$2.3bn. The free cash flow was US$0.3bn, again down on last year’s US$1.0bn. In the shipping sector, Maersk Line lost US$599 million, a big drop on the US$424-m profit in the 2011 Q1. This, added the report, was Maersk increasing volume by 18%, but the average freight rate declining by 9% versus Q1 last year. The line announced a general rate increase (GRI) on the Asia- Europe trades effective from March this year. It was almost fully accepted, and supported by a 9% reduction in capacity. Most of this capacity withdrawal came from a reduction of the average speed. The line’s boast was the introduction of the Daily Maersk service. This, it said, “has changed the industry standard”, leading other liners to consolidate their services in three alliances. And 85% of the volume on the Asia-North Europe trades is now handled by Maersk Line or the three alliances. In its outlook for 2012, Maersk Line expects a negative-to-neutral result, based on the assumption that the rate restoration that has taken place since March will continue. Global demand for seaborne containers is expected to increase by 4%-6% in 2012, with lower increases on the Asia-Europe trades but higher increases on the North-South trades - which Maersk Line in SA confirmed to FTW includes those connecting SA with South East Asia, the Middle East, Europe and the Americas.