A.P. Moeller-Maersk A/S (MAERSKB) said its container line, the world’s largest, will report a loss again this year, depressed by lower freight rates and slower market growth.
Maersk’s container division had a net loss of 2.88 billion kroner ($521 million) last year compared with a profit of 14.9 billion kroner a year earlier, the Copenhagen-based company said today in a statement. That exceeded an estimated loss of 2.28 billion kroner in a survey by SME Direkt. The container result for 2012 will be “negative” as overcapacity will continue to hurt the market, Maersk said today.
Global rates have dropped because the industry has added too many ships in anticipation of an economic recovery, causing overcapacity. Container demand growth will slow to as little as 4 percent this year compared with 7 percent in 2011, while expansion on Maersk’s most important lane, Asia to Europe, will be lower than the global average, the company said today. Maersk also predicted that earnings from its oil division will decline.
“We agree with Maersk on the challenges seen in the liner industry and while the recent rate increases will lift earnings somewhat, it does not seem to be sustainable,” Erik Nikolai Stavseth, an Oslo-based analyst at Arctic Securities, said in a note to clients today.
Maersk fell as much as 4.4 percent to 43,520 kroner in Copenhagen trading and was down 2.3 percent at 10:42 a.m. That pared the stock’s gain this year to 17 percent.
To help restore earnings, Maersk has said it will increase freight rates on Asia-Europe trade. The company said Feb. 17 that it will cut 9 percent of capacity on the route.
Maersk is “positive” that it will succeed in raising rates even as industry overcapacity adds “risk” to the ambition, Chief Financial Officer Trond Westlie said today on a conference call with analysts. The container unit may consider cutting capacity further, the CFO said in a Bloomberg television interview earlier today.
Maersk, which has a market share of about 16 percent, said the industry may increase capacity by about 10 percent in 2012 as shipping lines launch new ships they have already ordered.
Global freight rates dropped 25 percent last year on average, according to RS Platou Markets AS. Prices fell the most on Asia-to-Europe routes where the decline was almost 60 percent, the Oslo-based broker said in a Jan. 4 note.
Parent company Maersk’s 2011 net income fell to 15.2 billion kroner from 26.5 billion kroner a year earlier. That compared with an average estimate of 14.8 billion kroner in a Bloomberg survey of 13 analysts. Sales rose 2.3 percent to 323 billion kroner.
The company, Denmark’s biggest, was helped by the performance of its oil and gas unit. The division recorded net income of 11 billion kroner last year compared with 9.33 billion kroner a year earlier, helped by higher oil prices.
Maersk Oil’s (MAERSKB) earnings this year will be “significantly below” results in 2011, the company said today. The unit will have a reduced share of production in Qatar, and earnings will also slip on the maturation of fields in the North Sea, it said.
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