Maersk alters course with freight and energy split

COPENHAGEN: Rocked by low freight and oil prices, Denmark’s A.P. Moller-Maersk A/S will split itself up and focus on transport and logistics while seeking a way out of energy in a keenly anticipated revamp aimed at reviving its fortunes.

The 112-year-old conglomerate will focus on its core businesses, comprising Maersk Line, APM Terminals, Damco, Svitzer and Maersk Container Industry, while seeking “solutions” for its smaller energy operations.

The weak market has hit the big lines which have invested heavily in “megaships”, largely to operate the main Asia to Europe trade route. Industry sources have questioned whether there is enough work for the biggest container vessels on the high seas at the moment, putting more pressure on profits.

“Separating our transport and logistics businesses and our oil and oil related businesses ... will enable both to focus on their respective markets. Both face very different underlying fundamentals and competitive environments,” chairman Michael Pram Rasmussen said in a statement yesterday.

Maersk said it would look for solutions for its oil and oil-related businesses, which are to be split from the main company either individually or in combination “in the form of joint-ventures, mergers or listing”.

The company gave no details on how far this process had already progressed or whether it was already talking to any possible partners, but said it would be done within 24 months.

Maersk Drilling boss Claus V. Hemmingsen will lead Maersk’s energy division through the change and serve as vice CEO of the group, beginning on Oct 1.

“Maersk Oil ... is a small player, so there are many players big enough to take (it) in. Drilling is relatively large, but its competitors are under extreme financial pressure, so it’s less likely to find an sale opportunity there,” Morten Imsgard, an analyst at Denmark’s Sydbank, said.

Maersk will hope that by splitting up it can shed any conglomerate discount by allowing markets to value its businesses individually.

The group, controlled by the Maersk family, was founded in 1904 by A.P. Moller and was turned into a conglomerate operating in 130 countries by his son, Maersk McKinney Moller, who had an active role in the company until he died in 2012 aged 98.

Sydbank estimates the new transport and logistic division could be worth 174229 billion crowns ($26-$35 billion), while the energy division could be valued at 74-153 billion crowns ($11-$23 billion).

Driven by the container shipping downturn and a slump in oil prices, A.P. Mollermaersk group’s chief executive Nils Smedegaard Andersen left in June and Soren Skou, head of Maersk Line, was named group chief executive.

The company has also appointed a new group chief financial officer, Jakob Stausholm, effective Dec 1.

Maersk Line, the world’s biggest container shipping company, and its competitors are suffering from record low freight rates as growth in global trade has failed to keep pace with a big expansion in shipping fleets.

Meanwhile, Maersk’s oil business is struggling with a 60% drop in crude prices since mid-2014 and in August, the group posted a second-quarter net profit of $101 million, well below the $196 million expected by analysts.