The loss recorded by Maersk Line for the third quarter of 2016 has not come as a surprise, however that does not detract from its seriousness.
The container shipping operations of Maersk Group recorded an underlying loss of US$122m for the third quarter of 2016, a contrast to the $243m profit seen over the same period last year.
Revenue fell by 11% to $5,359m, whilst EBITDA (Earnings Before Interest, Depreciation and Amortisation) fell by 58% to $325m. This was despite an 11% increase in the numbers of containers carried at 2.27m FEUs (forty foot equivalent units), a number that reflected some benefit from the collapse of Hanjin. Of course, the reason for the loss was the continuing low freight rates. According to Maersk, average freight rates fell 16% measured on a year-on-year basis, with all major trades affected. However, measured on a quarter-on-quarter basis, rates rose by 5.5%. Soren Skou, Group CEO of A.P. Møller Mærsk A/S, has been quoted in the Financial Times newspaper as commenting that he was “seeing positive developments in pricing”. Nonetheless, underlying dynamics of the market remain grim, with Maersk describing a container market growing over the period by 1-2% whilst the global container shipping fleet expanded by 3%.
The good news for Maersk is that its price competitiveness remains high with the company claiming an operational cost base of $2,000/FEO, a number that has continued to fall despite higher bunker fuel prices.
Some of the other logistics related businesses at Maersk also suffered, with APM Terminals reporting a year-on-year fall in profit of 25%, $131m for the quarter. The company described its terminals in Latin America, north-west Europe and Africa as “commercially challenged as a consequence of liner network changes and continued underlying market conditions”.
Damco, Maersk’s freight forwarder, saw profits edge down by $3m to $15m in what it described as “lower freight rates and freight forwarding margins, despite cost savings and improved processes and operational efficiencies”.
Overall A.P. Moller Maersk Group’s profit fell by $438m, whilst revenue was down 15% to $9,177m. For the nine months of the year-to-date underlying profit has fallen by 75% so the outlook for the full year is not too bright. However, looking at the details of the numbers, Maersk’s hope probably lies in its cost competitiveness and consequent ability to grab market share as much as any rise in short term freight rates.
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Source: Transport Intelligence, November 4, 2016
Author: Thomas Cullen