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Maersk Group profit collapses

Soren Skou Maersk Group CEOCOPENHAGEN: August 12, 2016. Second quarter (Q2) revenue for the Maersk Group fell 16 percent year-on-year to US$8.86 billion. As a result, net profit collapsed 89 percent to US$118 million from US$1.09 billion in the same period last year.

For the first six months of 2016, the group produced revenue of US$17.4 billion, down from US$21.1 billion in 2015, and a net profit of US$342 million compared to US$2.7 billion last year.

Despite reducing costs to "an all-time low" of under US$2,000 per forty-foot equivalent (FFE), newly-appointed CEO Soren Skou (right) described the results as "unsatisfactory" – and cited low growth and falling freight rates.

Maersk Line reported a 19 percent drop in Q2 revenue to US$5.1 billion due to a 24 percent fall in average freight rates to US$1,716 FFE. The result was a loss of US$151 million compared to a profit of US507 million in the same period last year. Container volume for Q2 rose 6.9 percent to 2.65 million FFE while fleet capacity increased 2.2 percent.

APM Terminals made a profit of US$112 million compared to US$161 million last year while logistics provider Damco, part of APM Shipping Services, reported a profit of US$10 million – up from US$7 million in Q2 2015 – on revenue of US$619 million, down 5.5 percent.

With the exception of Maersk Oil that is expected to produce a positive return on investment, Maersk Group said its other divisions would report an underlying performance below last year results.

"Our financial position remains strong with a liquidity reserve of US$11.5 billion. The group's expectation for 2016 of an underlying result significantly below last year is unchanged," said Skou. "To ensure the future strength, profitability and development of new growth opportunities of the company, the board of directors have initiated a strategic review of the company and will report on progress of the review before the end of Q3, 2016," he added.

Maersk has also acknowledged that in order to maintain and grow its businesses in a low interest environment it has to accept the potential of making investments "that at present do not on a standalone basis fully comply" with a 10 percent return on invested capital target.

Standard & Poor's has put the Maersk Group's rating of BBB+ on CreditWatch negative versus a previous negative outlook. The rating from Moody's remains Baa1 with a stable outlook.

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