Q2: Maersk Group posts better-than-expected profit • New business unit to deliver USD500m by 2016

Danish conglomerate, AP Moller-Maersk, upgraded its full-year earnings forecast as it posted better-than-expected second-quarter profit, helped by lower costs in its shipping unit.
Second-quarter net profit was US$856 million, clearly higher than analysts’ expectations of $545.79 million.
In the year-earlier period, net profit was $965 million.
Revenue was slightly lower than expected at $14.2 billion, down from $15.4 billion in the year-earlier period.
“We delivered a good operational result for the second quarter, thanks to improved performance in most of our businesses,” Group Chief Executive Officer Nils Andersen said.

He went on: “Maersk Line has made strong and consistent progress and is now an industry leader in terms of profitability. APM Terminals continues to deliver good results, and Maersk Drilling had its best quarter ever based on strong operational performance. Oil production was relatively low, but it has bottomed out now and will return to growth in the second half of the year.
“On group level, we seek to further advance performance and growth by establishing a fifth core business unit with a target of $0.5 billion by 2016.”
Increased profit was achieved across all businesses except Maersk Oil and Damco as well as Maersk Tankers, which was negatively impacted by impairments and provisions of $280 million related to VLCCs (Very Large Crude Carriers).
Significant improvements were seen in Maersk Line and Maersk Drilling, whereas Maersk Oil’s profit was reduced due to declining entitlement production and lower oil price while maintaining substantial exploration costs in order to expand the oil production portfolio.
Maersk Line made a profit of $439 million and a Return On Invested Capital (ROIC) of 8.5 per cent.

The significant improvement in the financial performance was achieved through lower costs.
Volumes increased 2.1 per cent, average freight rate decreased 13.1 per cent and total cost per 40-foot equivalent (FFE) unit decreased by 12.7 per cent.
The cost decrease was mainly driven by vessel network efficiencies and lower bunker price.
Maersk Line’s total fleet capacity decreased by 0.9 percent.
Cash flow from operating activities was $790 million and cash flow used for capital expenditure was $311 million, leaving a free cash flow of $479 million.
APM Terminals made a profit of $179 million.
ROIC was 12.8 per cent.

The volumes were at the same level as last year, with most terminals in Europe and North America recording decreased volumes, offset by continued positive developments in high growth markets.
Cash flow from operating activities was $241 million and cash flow used for capital expenditure was $212 million ($63 million).
The shipping and oil company said that the outlook for container transportation remains challenging, with demand expected to remain weak.
Like other shipping lines, Maersk has been hit by weak freight demand at the same time as the industry continues to struggle with overcapacity on the busiest shipping routes. Deliveries of new container ships are expected to amount to 9.5 per cent of its fleet and Maersk expects demand growth to remain modest this year.
“Global demand for seaborne containers is expected to increase by two to three percent in 2013, lower on the Asia-Europe trades but supported by higher growth for imports to emerging economies,” the company said.
Maersk Line said that it now expects its full-year 2013 net profit to drop to around $3.3 billion from $4 billion in 2012. Excluding impairment losses and divestment gains, it expects a profit of around $3.5 billion, up from last year’s $2.9 billion.
The company previously forecast this year’s figure to be in line with 2012.

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