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Maersk regrets profit cuts

COPENHAGEN: The AP Moller-Maersk group has adjusted its 2015 profit forecast from US$4.0 billion to US$3.4 billion as a result of falling freight rates and overcapacity.

Maersk Line is expecting a US$600 million fall in profits to US$1.6 billion by the end of the year.

"It is regrettable that we have to adjust our expectations for the 2015 result. All of our business units delivered a positive result in the third quarter, despite difficult conditions across our industries," said group CEO Nils Andersen.

maersk-mc-kinney-moller-triple-eThe group's preliminary Q3 result was US$778 million compared to US$1,5 billion in 2014 with an underlying result (net profit) of US$662 million (US$1.3 billion).

For the first nine months of 2015, Maersk expects a preliminary result of US$3.4 billion (US$5 billion) with an underlying result of US$3.08 billion compared to US$3.7 billion year-on-year.

The company said it achieved an average freight rate of US$2,163 per 40ft-equivalent (FFE) compared to US$2,679 in Q3 2014 while carrying 2.43 million FFE – slightly down from 2.40 million FFE in the comparable period.

Andersen said the container shipping market is now worse than expected: "Maersk Line has over the years taken steps to ensure a cost effective and resilient operation, but the current deterioration in the container shipping market is impacting also our business."

Confirming the Maersk advisory, Drewry Maritime Research said the biggest risk to competition within the industry comes from the sustained low freight rates that produce extremely thin profit margins and are forcing carriers out of markets.

Drewry noted that some lines no longer want to be "global carriers" and over 20 have exited various trades since 2010: "Most of these were either providers of one or two ships on a joint service or merely slot charterers - therefore doing little to net capacity deployed - but the rise in trade exits has intensified this year as more carriers have decided to get out with no prospect of higher freight rates on the horizon," it added.

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