Maersk foresees better prospects for 2017

maersk Q1

Maersk’s full year annual results and report confirm that it has been a hard twelve months for the shipping and logistics giant. The good news is that the Group as a whole is profitable on an underlying basis, with profits before impairments being US$711m which, admittedly is still a 77% fall compared to last year. However, in terms of both profits before tax and operational profits the company fell into the red by $843m and $226m (Earnings Before Interest and Tax) respectively. Revenue was down 12% at $35,464m.

The main damage was done at Maersk Line. It saw a ‘reported loss’ of $376m for the year whilst revenue at $20.7bn was flat. This was despite a 12% increase in the volume of containers handled. Indeed, demand is so strong that utilisation has jumped to 70% in ‘roundtrip’ terms. Maersk believed that the market grew by 4% in 2016, implying an impressive grab for market-share even before its acquisitions. Of course, the problem has been continued low freight rates which have savaged margins.

Other parts of the group also suffered with APM Terminals seeing profits fall to $438m from $654m in 2015, with underlying volumes up 3.4%. In contrast the freight forwarder Damco saw results markedly higher, with reported profits up by more than half to $31m for the year 2016.

The soon to be split-off half of the group, Maersk Energy, generally did better than Transport & Logistics, with both Maersk Oil and Maersk Drilling increasing profits for the year.

Maersk hopes that the worst is over for the shipping business. It asserts revenue growth in the last quarter of 2016 was up year-on-year by 2.4% and the period’s loss was less than previous quarters. This has led the company to suggest that the market overall has reached a tipping point with underlying demand continuing to increase by 4% but the supply of new container shipping capacity slowing to an annual rate of just 2% a year. This contrasts with an expansion of 7-8% in the third and fourth quarters of 2015. If true, the combination of higher volumes and utilisation may indicate a strong recovery for Maersk Line next year.

Source: Transport Intelligence, January 9, 2017

Author: Thomas Cullen

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