Bloomberg News

Maersk Shares Drop as Container Unit May Just Break Even

May 16, 2012

A.P. Moeller-Maersk A/S (MAERSKB) fell the most in more than two years in Copenhagen trading after saying its container line, the world’s largest, will at best break even this year, falling short of analyst estimates for a profit.

Maersk shares declined as much as 8.7 percent, the biggest intraday drop since September 2009. The stock was down 5.8 percent at 38,000 kroner at 3:33 p.m. in the Danish capital.

The container division will report a “negative up to neutral” net result in 2012 as freight-rate increases will stick, Copenhagen-based Maersk said today. That compares with a Feb. 27 forecast of a “negative” net result.

“We suspect the increased uncertainty over the world economy may have made Maersk a bit cautious in their guidance,” Frode Moerkedal, an analyst at RS Platou in Oslo, said in a note to clients.

Global rates had dropped as the industry added ships in anticipation of an economic recovery, causing overcapacity. Container lines ended a price war in February after almost a year and began cutting capacity and raising rates to restore profitability. Maersk said today its first-quarter result was hurt by a 9 percent drop in freight rates and 31 percent higher fuel prices.

Higher Rates?

“Right now container rates are at a level where we’re at break-even,” Chief Executive Officer Nils Smedegaard Andersen said in a phone interview. “Rates obviously need to go higher if we’re to be at break-even for the full year as we had a loss in the first quarter. But I do think that this could happen.”

Maersk’s container division had a net loss of 3.4 billion kroner ($581 million) in the first three months of the year, compared with profit of 2.3 billion kroner a year earlier. Analysts surveyed by SME Direkt had predicted a loss of 2.37 billion kroner.

The division maintained its global market share of about 16 percent in the quarter, the company said. Maersk won’t attempt to boost its share as it wants to avoid another price war, Andersen said.

“We’re saying that we’re not planning to grow at the moment and that’s a pretty strong signal from the market leader,” the CEO said.

Parent company Maersk’s first-quarter net income rose to 6.15 billion kroner from 6.08 billion kroner a year earlier. That compared with an average estimate of 1.49 billion kroner in a Bloomberg survey of seven analysts. The company, Denmark’s biggest, said the result was helped by the settlement of an Algerian tax dispute, which added about $900 million in profit to its oil division.

To contact the reporter on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net

To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net


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