Maersk Group sees Q3 profit almost halved as revenue falls

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Danish shipping and offshore energy conglomerate, Maersk Group delivered a profit of USD 778m (USD 1.5bn) for the third quarter of 2015, negatively impacted by the lower oil price and lower average container freight rates, down 51% and 19% respectively compared to the same period last year.

The return on invested capital (ROIC) was 7.6% (12.7%). The underlying profit was USD 662m (USD 1.3bn), according to the results, down by almost 50% when compared to last year.

“The Maersk Group delivered an underlying profit of USD 662m in the third quarter. The decline of nearly 50 percent compared to last year was primarily due to container freight rates deteriorating to a historically low level, especially in the later part of Q3, and profits in Maersk Oil being impacted by the lower oil price.

“The expected underlying result of around USD 3.4bn for 2015 reflects good performance in very challenging oil and container shipping markets, where the continuous actions taken in all our business units to reduce the cost base will enable us to maintain our ability to pursue the opportunities arising in our industries,” says Group CEO Nils S. Andersen.

The Group’s various business units performed as follows:

  • Maersk Line delivered a profit of USD 264m (USD 685m) and a ROIC of 5.2% (13.5%). The underlying profit was USD 243m (USD 659m).
  • Maersk Oil made a profit of USD 32m (USD 222m) with an underlying profit of USD 32m (USD 224m).
  • Maersk Drilling delivered a profit of USD 184m (USD 192m) generating a ROIC of 9.0% (10.7%), positively affected by fleet growth, cost savings and strong operational performance, but negatively affected by increased idle time
  • Maersk Supply Service reported a profit of USD 45m (USD 79m) and a ROIC of 10.4% (18.5%). The underlying profit was USD 44m (USD 79m)
  • Maersk Tankers made a profit of USD 59m (USD 84m) and a ROIC of 14.6% (19.1%). The underlying profit was USD 58m (USD 85m)
  • APM Terminals delivered a profit of USD 175m (USD 345m) and a ROIC of 11.6% (22.5%). The underlying profit was USD 175m (USD 201m)

According to Andersen, the current operating environment is characterized by slow growth, but the real concern to be taken into account should be the overcapacity in the shipping market and slower than expected market growth.

In this respect, Andersen said that Maersk was taking the right steps by reducing costs and stopping investments for the time being.

“Another thing is that we have strengthened our balance sheet, brought down our debt and we have finalized the divestments of non-core businesses. Therefore, today we have the money to go and invest in interesting assets in our core businesses,” he added.

Speaking of Maersk Line, the Group’s container shipping arm, which was hit the most by depressed freight rates, Andersen said that the company plans to defend its market position, which means that there will be periods when the company will take a bit of market share. However, Andersen stressed that the company would not order vessels that are not needed purely to meet the company’s growth ambition.

On the other hand, Andersen said that there has been a growth in the underlying volumes of containers transported by Maersk Line or handled at the Group’s terminal, reaching at least 30% growth, adding that over the past three years oil production and the number of rigs operated by the Group have also been increasing.