A.P. Moller-Maersk A/S reported a $2.68 billion quarterly loss as the shipping giant continues to fight a vicious industry down-cycle, but executives said demand was recovering and the worst may be over.
Fall in revenues plague Maersk:
The Danish conglomerate, which owns Maersk Line, the world’s biggest container operator, said its fourth quarter results were hurt by $2.6 billion in asset impairments. Revenue fell 2.6% to $8.89 billion.
The company also said it would slice its annual dividend by half. Maersk shares closed down 5% in Copenhagen.
The result came as the group is trying to reshape itself into a global supply-chain major like United Parcel Service Inc. and FedEx Corp. by integrating its transport and logistics units and spinning off its oil business.
Increase in impairment bookings:
The company booked impairments of $1.5 billion at its oil drilling unit and $1.1 billion at its supply-service business. Maersk took impairments of $2.5 billion on its oil assets in the same quarter a year earlier, when it reported a loss of $2.51 billion.
New chairman to takeover:
On Wednesday, the company said Chairman Michael Pram Rasmussen, 62 years old, will step down on March 28 after 14 years at the helm of the board. He will be replaced by Jim Hagemann Snabe, 51, a former executive at tech giants SAP and International Business Machines Corp.
“IT plays an increasingly important role in the Maersk Group and in this area his competencies are among the very strongest,” the company said.
People with knowledge of the matter said Mr. Snabe’s priority is to help Chief Executive Soren Skou break up the company into two divisions focused on transport and energy. The company said last year it would split the business along those lines.
“It’s probably the last year that Maersk will report earnings as a group,” one of the people said.
Container ships move 95% of manufactured goods—from designer dresses to heavy machinery. But during the past two years, freight rates have tumbled amid a capacity glut that prompted price wars among operators.
Monthly average rates during the past year stood at $770 a container on the benchmark Asia-to-Europe trade loop, according to London-based Braemar ACM Ship broking, well below the $1,500 level considered sustainable over the long term by ship-owners.
Mr. Skou said in an interview that the industry has hit bottom and a recovery will become apparent next year.
“Things are looking a lot better now than they did a year ago,” Mr. Skou said. “We are starting this year from a strong position.”
Scrapping helps increase of revenue:
Maersk Line’s chief financial officer, Jakob Stausholm, said demand was up 4% in the fourth quarter from the year before, while high scrapping levels helped rein in overcapacity.
Jonathan Roach, a container analyst at Braemar ACM, said overall container-fleet capacity growth was 1.2% in 2016, compared with 8.0% in 2015, and last year was a record for ship recycling, with 3.5% of the global fleet scrapped.
Maersk Line moves about 19% of all seaborne container cargo and is seen as a barometer of global trade. It lost $155 million in the fourth quarter but revenue rose 2.4% on year, the first improvement since the fourth quarter of 2014.
For 2017, the Maersk group expects an underlying profit above last year’s $711 million, while Maersk Line forecasts a profit improvement of more than $1 billion from 2016. Maersk Line lost $376 million last year.
Mr. Skou said Maersk is increasingly handling functions previously executed by third-party firms, such as loading containers on ships, clearing customs and arranging trucks to move the cargo to end users.
“UPS and FedEx move boxes on airplanes, we move containers on ships. They have distribution centres, we have port terminals. So we are very similar in some respects,” he said.
Maersk plans to move more ships in and out of APM Terminals, its own global ports operator, and move more cargo inland through DAMCO, its supply-management division handling airfreight, trucks, and warehouses around the world.
Late last year, Maersk announced the acquisition of the German shipping line Hamburg Süd, boosting its presence on North-South shipping routes, increasing market share and cutting the average age of its fleet.
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Source: WSJ
