Weak freight rates and low oil prices environment affected the expectations of Danish giant Maersk Group for last quarter results. The company reported a 43% drop in net profit and early this Wednesday; Maersk shares fell about 9%.
The Danish group reported a net profit loss of $326 million compared to last year when the company accomplished a net profit of $755 million. Additionally, the revenue fell 9% to $9,18 billion, staying below the expectations of $9,39 billion.
“Maersk Line continues to face challenging market conditions and as a testimony to the situation the container industry saw its first major bankruptcy in 30 years,” the company said, referring to Hanjin’s bankruptcy.
Despite Maersk’s efforts to improve operations and reduce costs within their business units, the group’s underlying profit also fell from $622 million in 2015 to $426 million. Maersk Line, the biggest container operator reported an underlying loss of $122 million from an underlying profit last year of $243 million.
However, not all were bad news. APM Terminals recorded 7.0% higher volumes and Maersk Line showed a significant volume growth of 11% with a strategy focused on maintaining unit cost below 2000 USD per FFE (Forty-Foot Equivalent).
Maersk Group CEO Søren Skou commented briefly on the situation of each Maersk’s business unit:
“The Maersk Group delivered an underlying profit of USD 426m in the third quarter of 2016. The result is unsatisfactory, but driven by low prices. We generally perform strongly on cost and volume across businesses. Maersk Line for the second quarter in a row reported a loss due to continued low freight rates, down 16% y-o-y. Freight rates were however up 5.5% q-o-q, for the first time since Q3 2014. Maersk Line performed strongly on volume and unit cost. APM Terminals delivered a result below last year, as we continued to be challenged by low volume growth on a like–for-like basis. For the second quarter in a row Maersk Oil delivered a positive result driven by strong cost performance and production efficiency. Also, Maersk Drilling delivered strong profits, driven by termination fees and good cost performance. The implementation of the new strategic direction and the restructuring of the Group is progressing, and we look forward to sharing further details at the Capital Markets Day on 13th of December,” says Skou.
The Group expects a result significantly below last year (USD 3.1bn) and specifies an expected underlying result below USD 1.0bn, according to the press release.
Photo: Arnold Maersk. Pixabay