Logistics group takes a beating

DANISH shipping and oil group AP Moller-maersk struck a cautious tone on the recovery in freight rates yesterday, knocking its shares despite a forecast-beating increase in Q1 profit driven by its oil and gas business.

Shares in the group, whose Maersk Line is the world’s biggest container shipping company and a barometer of world trade, fell more than 7% in early dealing.

The shipping industry was hit hard during the economic downturn as weak demand and excess capacity knocked rates to loss-making levels. But recent increases have partly restored rates and raised hopes of a recovery.

AP MollerMaersk said it now expected this years’s result to be “slightly lower” than last year, a modest upgrade from previous guidance.

But analysts were hoping for a stronger sign that the company expected a continuing improvement in freight rates.

“It is a very weak [container] upgrade,” Alm Brand analyst Jesper Christensen said.

“If they had wanted to walk the line and really base the outlook on current freight rates, they would have given an outlook for a profit [in that business] for this year.”

AP Moller-maersk said it expected a “negative up to neutral result” this year for its container shipping arm.

That compared with previous guidance for a loss at the business in the current year.

“We, of course, hope that we will come into positive territory [in Maersk Line], but that would require further rate increases,” chief executive Nils Smedegaard Andersen said.

Average freight rates fell by 9% in the first quarter from the corresponding period a year earlier and by 1% from the fourth quarter of last year. But Maersk Line announced a general rate rise on AsiaEurope routes effective from March that was almost fully accepted, Maersk said.

“We can see there have been further rate rises after the end of the quarter,” Andersen said.

“That was also necessary. We actually expect that rates will at least hold up at the current level, but hopefully will improve during the course of the current year.”

Net profits rose to 6.67-billion krone (R9.4bn) in January-march from 6.35-bn krone in the first quarter last year, against analysts’ expectation of a drop.

The group, whose fleet had a global container shipping market share of 15.5% last year, said Maersk Line had maintained its share in Q1.

The container shipping division swung to a first-quarter net loss of 3.40-bn krone from a profit of 2.32-bn krone in the corresponding quarter last year, falling below analysts’ estimate of a 2.26-bn krone net loss.

But profits from the oil and gas business rose above expectations, aided by oil prices.

It had previously forecast “significantly lower” results for Maersk Oil.

A one-off tax income from the settlement of an Algerian tax dispute and a gain from a partial divestment of interests in Brazil also had a positive effect on the first-quarter result, the company said. — Reuters

We, of course, hope that we will come into positive territory in Maersk Line