Maersk’s results reflect a tough year

Despite a “very difficult year” for container shipping, with both “very low” rates and volumes in the beginning of 2012, A.P. Moller-Maersk delivered a reasonable result for the financial year 2012.

Profit before tax increased by 20%, however stripping out various positive exceptional items, underlying profits increased just 2% and EBIT (Earnings Before Interest and Tax) fell by 20% to US$8.09bn. The Group saw revenue up 6% in terms of Danish Kronor, but down 2% in US dollar terms at US$59,036m.

2012 was a year of two-halves for Maersk Line, with losses in the first half of the year, but a profit in the second. Revenue was up by US$2bn compared to last year at US$27.12bn. Volumes were up by 5% in the first half, but fell by 8% in the second. Essentially, Maersk Line began to concentrate on better margins and higher rates as the year went on and consequently lost market share. In addition, the company is continuing to increase its container prices in areas such as reefers. Meanwhile, the company’s profits were helped by lower costs such as bunker fuel costs, which fell by 7% as a result of slow-steaming.

In the face of such weak demand, Maersk Line is introducing new ‘Triple E’ ships on the Europe-Asia route and trying to compensate by giving back charter tonnage. Maersk CEO, Nils Smedegaard Andersen said that he expected no growth in Asia-Europe trades, but “opportunities” in US traffic and emerging markets.

The APM Terminals business saw a 1.9m TEU increase in throughput to 35.4m TEU over the year. This resulted in an underlying increase in profits of 8%.

Damco increased revenue by 19%, but a large part of this was through acquisitions. Volumes in sea freight increased 6% and airfreight by 91%. However, the company stated that “the worsening market conditions as well as implementation costs related to new business caused downward pressure on Damco’s unit margin profitability.” Consequently, EBIT fell by US$5m to $93m as compared to the previous year.

Although the headline numbers are not terrible, Maersk Line suffered through 2012 and is likely to continue to do so in 2013. Fortunately for the Group as a whole, APM Terminals is robust and a number of its other businesses are also pulling their weight. However, the poor profitability at Damco is concerning despite its continuing growth.