Container ship MV Maersk Mc-Kinney Moller is led by pilot ships as it makes its maiden port of call at a PSA International port terminal in Singapore September 27, 2013. REUTERS/Edgar Su/File Photo
© Reuters

Profits at AP Møller-Maersk plunged in the second quarter, giving fresh impetus to an impending strategic review that could lead to a break-up of the Danish conglomerate.

Maersk’s quarterly net profit dropped 89 per cent to $118m compared with a year earlier.

However, shares in Maersk rose as much as 7 per cent in early trading on Friday as investors hailed the group’s ability to cut costs dramatically to counter the weak business conditions. The earnings before interest and tax figure of $656m was also higher than analysts had been expecting.

Maersk Line, the world’s largest container shipping group, underlined the parlous state of global trade by slipping from a $507m profit a year ago to a $151m loss.

“Clearly that is not a satisfactory result for a company of our size. Equally clearly the reason is lower prices in every market we are in — freight rates, oil prices, terminals, tankers,” Soren Skou, Maersk’s chief executive, told the Financial Times.

Maersk stunned investors earlier this summer by firing Nils Andersen as chief executive and ordering Mr Skou to look into a possible break-up of the venerable conglomerate, which has interests in container shipping, oil, ports, drilling rigs and various supply services.

Mr Skou remained tight-lipped about the review with a progress report due by the end of next month.

“The strategic review was decided by the board in recognition that we do have quite low growth and are challenged in many of the industries we are invested in,” Mr Skou added. “For a conglomerate we have a relatively unique situation where we have weak markets in everything we are in.”

A rare highlight of the second quarter was the ability of Maersk Oil to eke out a profit after the business reduced its operating expenses by a quarter over the past year. After reporting a net profit of $131m, in line with last year, Maersk Oil upgraded its guidance for the full year from break even to a positive result. It has pushed down its break-even level to an oil price of $40-$45 per barrel, Mr Skou said.

The rest of the results were “a lot of lowlights”, in Mr Skou’s words. Its APM Terminals business, which manages ports across the world, downgraded its forecast for 2016 to a result significantly below last year’s. Maersk Line stuck to its similar expectation of a far worse result than last year.

But Mr Skou said there were glimmers of hope in the container shipping industry. Spot rates for freight have been increasing since March, while consolidation among smaller players in the industry is gathering pace.

Mr Skou said that despite the loss he expected Maersk to hit its goal in the second quarter of having a profit margin 5 percentage points above that of its average rival, indicating the lossmaking state of much of the industry. It cut its cost per container in the past year from $2,250 to $1,900.

Maersk’s new chief executive, who has been with the Danish conglomerate for more than 30 years, told the Financial Times in his first interview last month that boosting revenues after a decade of stagnation would be one of his main priorities. Revenues in the second quarter fell 16 per cent to $8.9bn.

Get alerts on AP Moller-Maersk AS when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article