Maersk warns of turbulent 2012 as profits sink 33pc

PUBLISHED : Tuesday, 28 February, 2012, 12:00am
UPDATED : Tuesday, 28 February, 2012, 12:00am

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AP Moller-Maersk, one of the world's biggest shipping and terminals groups, faces a mixed and challenging year as uncertain global economic prospects coupled with overcapacity in the container shipping sector weigh on the company, the company said.

Maersk sounded the cautious note in its annual report while disclosing that its net profit fell 33 per cent to US$3.4 billion last year, from US$5 billion in 2010. Total revenue rose 7 per cent to US$60.2 billion, up from US$56 billion a year earlier.

Its container shipping division, Maersk Line, reported a US$537 million loss, compared with a US$2.6 billion profit in 2010.

'The negative result was primarily due to the low rates on the Asia-Europe trades,' the company said.

Maersk said that freight rates had started the year at a reasonable level, but fell as large amounts of new tonnage were delivered.

'Overall freight rates were 8 per cent lower than in 2010 and this, combined with 35 per cent higher bunker prices, reduced margins considerably,' it said.

Norwegian ship broker R S Platou said global container freight rates had crashed by an average of 25 per cent last year, although the decline was almost 60 per cent on Asia-Europe trades.

Maersk said its container shipping operation would remain in the red this year as a result of the continued oversupply of vessels.

'Global demand for seaborne containers is expected to increase by 4 per cent to 6 per cent in 2012, lower on the Asia-Europe trades, but supported by higher growth in the north-south trades,' Maersk said.

By comparison, container ships totalling 48.4 million deadweight tonnes (dwt), equivalent to 24.5 per cent of the existing fleet, are due to be delivered over the next three years, including 17.2 million dwt this year, according to Clarkson, the British ship-broking house.

Maersk Line said last week that rates for cargo on westbound routes from Asia to Europe and the Mediterranean would rise by US$400 per teu (20-foot equivalent unit) from April 1.

This was the second time in less than a month the carrier said it would raise rates on westbound services after it announced a general rate increase of US$775 per teu on Asia to Europe services from March 1.

The carrier said it would also cut capacity by 9 per cent on Asia-Europe services from April after merging four services with French liner company CMA CGM.

One Hong Kong-based shipping analyst questioned whether Maersk Line would post a loss this year after increasing rates and cutting capacity.

'Certainly [I expect] losses in the first quarter, but the size of the price increases say profit in the second quarter to me,' the analyst said. He speculated that Maersk was warning of a further loss this year to gain 'leverage to make more price increases' in the coming months.

Maersk Oil, meanwhile, posted a US$2 billion profit last year, up from US$1.66 billion in 2010.