Higher freight rates sees Maersk Line return to profit

8/17/2017

An improvement in global trade demand and container freight rates saw AP Moller-Maersk return to profit in the second quarter, but the Danish conglomerate said the Petya cyber-attack in June had cost it $200m-$300m.

In the second quarter AP Moller–Maersk’s revenue grew by 8.4% year-on-year to $9.6bn, mainly due to higher freight rates achieved by Maersk Line, the world’s largest carrier.

The group’s underlying profit in Q2 improved from $134m to $389m with Maersk Line contributing an underlying profit of $327m, compared to a loss of $139 a year earlier.

“Maersk Line is again profitable delivering in line with guidance, with revenue growing by $1bn year-on-year in the second quarter,” said CEO Søren Skou. “The profit was $490m higher than the same quarter last year, based on higher rates.”

But Skou warned the Petya cyber-attack had proved costly and would hit Q3 profits. “In the last week of the quarter we were hit by a cyber-attack, which mainly impacted Maersk Line, APM Terminals and Damco,” he added. “Business volumes were negatively affected for a couple of weeks in July and as a consequence, our Q3 results will be impacted.

“We expect that the cyber-attack will impact results negatively by $200-300m."

The company reported that its Transport & Logistics arm was progressing towards operating as an integrated division and predicted it would deliver expected synergies estimated to create a Return On Invested Capital (ROIC) improvement of two percentage points by the end of 2019.

“Maersk Line's volume growth of approximately 7-8% - equity weighted - at APM Terminals and the stronger results reported by Maersk Container Industry are examples of those synergies,” said the company’s Q2 interim report.

The conglomerate also said its acquisition of container line Hamburg Süd was progressing as planned but remained subject to regulatory approval “with an expected closing in Q4 2017”.

In Q2 Maersk Line saw market fundamentals continue to improve as demand growth of 4% outgrew nominal supply growth of 1.4%.

“The improvement in market fundamentals in past quarters has started to reflect in the freight rate, which increased 22% compared to Q2 2016 and 7.6% compared to Q1 2017,” said the report.

“Freight rates increased by 36% on East-West trades and 17% on North-South trades. Transported volumes increased by 1.7% compared to Q2 2016. Volume grew on headhaul by 5.2%, however, offset by a decrease on backhaul by 5.6% as backhaul cargo was less attractive on some trades.”

In Q2 the company’s forwarding division Damco reported a break-even result of $0m compared to a profit of $10m a year earlier after being “negatively impacted by increased product investments and lower ocean margins, positively offset mainly by supply chain management volumes, air freight volumes growth and productivity improvements”.