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Maersk’s container line to post loss as freight rates fall

A.P. Moeller-Maersk A/S said its container shipping line, the world’s biggest, will lose money this year, lowering a previous forecast of a “modest” profit as freight rates plunged. Maersk Line posted a third-quarter net loss of 1.58 billion kroner ($293 million) compared with profit of 5.9 billion kroner a year earlier, the Copenhagen-based company said today. Its parent, which also owns the Nordic region’s second-largest oil company, reported profit that missed analyst estimates. Freight rates are falling because the container shipping industry has added too many ships in anticipation of an economic recovery. Maersk Line, which transports about 16 percent of the world’s manufactured goods by sea, said today that higher global container demand has not been able to offset oversupply.

“The loss in the container business is bigger than expected and the oil and gas unit has a smaller profit than expected,” Janne Vincent Kjaer, an analyst at Jyske Bank A/S, said in a note. “Maersk Line faces large challenges with falling freight rates and higher bunker fuel costs.” Kjaer, based in Silkeborg, Denmark, kept a “buy” recommendation on Maersk’s stock. Maersk fell as much as 3.7 percent in Copenhagen trading. The shares were down 3.2 percent at 33,800 kroner as of 12:16 p.m. extending their loss for this year to 33 percent.

‘Significant Losses’

Maersk Line transported the equivalent of 2.1 million 40- foot containers in the three-month period, a 16 percent increase. Rates were 12 percent lower on average, including fuel surcharges, it said. The company had lowered its forecast in August for the container unit to a “modest” full-year net profit compared with a May prediction of a “satisfactory” profit. The global container industry will have “quite significant losses” this year, while Maersk Line will have a relatively lower loss than peers, Chief Executive Officer Nils Smedegaard Andersen said today in a television interview with Bloomberg’s Francine Lacqua. “Everybody was gearing up for the peak season in the third quarter and the peak season didn’t occur,” Andersen said, adding that shipping lines added too many vessels. “We’re destroying the price levels for ourselves.”

Missed Estimate

The global container fleet expanded by 224 vessels with a combined capacity of 1.6 million 20-foot containers in the first nine months of the year, Maersk said. The parent company said that third-quarter net income plunged 82 percent to 1.64 billion kroner. That missed the 2.55 billion-krone average estimate of 10 analysts surveyed by Bloomberg. Sales fell 0.6 percent to 80.8 billion kroner. The company forecast full-year net income before minority interests of $3.1 billion to $3.5 billion, including gains from the sale of its U.K. supermarket unit. Maersk’s oil and gas unit was the company’s biggest profit contributor in the third quarter. The division reported a 28 percent decline in net income to 1.79 billion kroner as exploration costs rose and production in maturing North Sea fields declined.


Source: businessweek.com

Publication date: 11/10/2011


 


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