Article / 16 August 2017 at 13:07 GMT

Maersk says container shipping fundamentals strongest since 2010

Consulting editor / TradingFloor
Norway
  • Q2 underlying profit $389 million vs $134 million year ago
  • Impairment charges knock Q2 net result to loss of $264 million
  • Q2 freight rates up 22% y/y
  • June cyber-attack to cost the group $200-300 million in Q3
  • Container shipping fundamentals strongest since 2010: CEO
  • Group maintains full-year 2017 guidance despite cyber-attack costs
  • Group sees 2017 container shipping transport growth in upper end of 2-4% range
Maersk ship
 Maersk is seen as a barometer of global trade. Photo: Maersk website


By John Acher

The world's biggest container shipping company, A.P. Møller-Maersk of Denmark, reported a rebound in second-quarter underlying earnings on the back of higher freight rates and said the fundamentals of its main business are stronger than they have been since 2010.

Underlying  profit nearly tripled, rising to $389 million in the second quarter from $134 million in the same quarter last year. After-tax impairment charges on assets at the group's Maersk Tankers and APM Terminals units , however, knocked the second-quarter net result to a loss of $264 million from a year-ago profit of $118 million.

A 22% year-on-year increase in freight rates and 4% demand growth in the second quarter boosted revenues at the group's main business, Maersk Line, by about $1 billion. Rates in the May-June quarter were up 7.6% from the first quarter.

"The big story in our view in this quarter is that Maersk Line is profitable,” chief executive Søren Skou told a webcast news conference.

Maersk, which serves as a barometer of world trade, repeated its forecast for global demand for seaborne container transport to grow 2-4% this year, but said it now expects the growth to be in 
the upper end of that range.

Strongest in years

Market fundamentals improved in the second quarter as demand growth outpaced nominal supply growth of 1.4%, the company said.

"We believe that what we see now are probably the strongest fundamentals for container shipping that we have seen in a while, and certainly since the financial crisis and 2010," Skou said.

Idling of shipping capacity has declined, rates have kept up, and no new orders of large ships have been seen since the third quarter of 2015, he said.

The shipping and oil group also stood by its guidance for a full-year 2017 underlying profit above last year's $711 million, despite the negative impact from a cyber-attack in June that would dent third-quarter results.

Cyber-attack woes

The June 27 cyber-attack, which hit about 7,000 companies globally, was a virus that came through software used for tax returns in Ukraine, and it made the group's data unavailable for a while, the group said.

Business volumes were reduced for a couple of weeks in July, and the cyber-attack will lead to a $200-300 million negative impact on third-quarter results, Skou said.

The acquisition of the German shipping line Hamburg Süd is progressing as planned, subject to regulatory approval, and is expected to close in the fourth quarter, the company said.

Shares in A.P. Møller-Maersk traded up 1.8% at 13,310 Danish crowns by 1302 GMT after earlier jumping as much as 4.6%.

Maersk ship
 "Shiver me containers, Cap'n."  Photo: Maersk website


John Acher is a consulting editor at TradingFloor

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