Bearing in-mind how low freight rates have fallen in container shipping, Maersk Line’s return to profit over the past quarter is quite impressive.
For the container shipping business, revenue was largely flat year-on-year for the first quarter of 2013 at US$6,313m, however the business returned to profit with EBITDA (Earnings Before Interest, Depreciation and Amortisation) at $631m and operating profit at $204m, all moving back into positive territory from last year’s loss.
Over the past 12 months, Maersk stated that the global shipping fleet has expanded by 5%, yet the outlook for demand will remain “subdued”. Through aggressive capacity measures such as ‘super-slow steaming’ Maersk was able to drive down its cost per ‘Forty-foot Equivalent’ Unit by 7.1%. A key part of this was a major fall in the amount spent on fuel, both as a result of greater efficiency as well as lower oil prices.
However, the financial picture was complicated by the fact that freight rates rose by 4.7% compared to Q1 2012 at US$2,770. Nevertheless, volumes fell by 4% over this quarter, whilst the direction of freight rates has resumed its downward trajectory with a fall of 2.7% since the end of 2012.
Other segments of the AP Moller-Maersk Group also reported a mixed quarter. The freight forwarder Damco saw a rise in revenue but a fall in profits, with EBIT (Earnings Before Interest and Tax) down from $13m in Q1 2012 to $9m in Q1 2013. Similarly, APM Terminals saw revenue and profits fall over the quarter, with EBIT down $115m to $178m.
In the wider AP Moller-Maersk Group, even the oil business saw lower profits due to the lower oil price. Overall, group revenue was down 2%, but EBITDA was up 17%.The picture of the global economy described by Maersk is uninspiring. However, the ability to drive down costs in container shipping, due in great part to lower oil costs, does suggest that, despite the weak market, many container shipping lines might be able to hold off financial distress for sometime.
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)