Maersk Q3 2016 financial results low due to liner and port operations

The Maersk Group has published its Q3 2016 results today.

According to the press release, in the third quarter of the current year the Group delivered revenue of USD 9,177 mln (-9.2% y-o-y) and profit of USD 438 mln (-43.7% y-o-y). The negative results were significantly impacted by market conditions, particularly low container freight rates and a low oil price environment. The Group’s operating expenses decreased by USD 573 mln (-7.3%) mainly due to lower bunker prices and cost saving initiatives.

“The result is unsatisfactory, but driven by low prices. We generally perform strongly on cost and volume across businesses,” says Maersk Group CEO Søren Skou.

The low profit was predominantly driven by a loss in Maersk Line and lower results in APM Shipping Services and APM Terminals, whereas Maersk Oil and Maersk Drilling reported increases in profits.

In Q3 2016 Maersk Line reported revenue of USD 5.4 bln (-11% y-o-y) and a loss of USD 116 mln (against a profit of USD 264 mln in Q3 2015). This was driven by a 16% decline in average freight rates to 1,811 USD/FFE (as compared to last year’s 2,163 USD/FFE) mainly attributable to decreasing bunker prices of 25%. This was partially offset by the line’s 11% increase in volumes to 2,698k FFE (2,427k FFE in Q3 2015). However, the growth in volumes was due to more backhaul cargo at lower rates than headhaul. With an increase in fleet capacity of 3.8%, the increase in volumes represented an improvement of network utilisation.

APM Terminals in Q3 2016 delivered a profit of USD 131 mln (-25% y-o-y). But comparing with Q2 2016 the result is 17% higher, due to stronger performance in key gateway terminals and cost saving initiatives. However, profits remain under pressure in commercially challenged terminals in Latin America, North-West Europe and Africa as a consequence of liner network changes and continued weak underlying market conditions. Projects under implementation along with Grup Marítim TCB from beginning of March had a combined loss of USD 5 mln, resulting from start-up costs.

Damco delivered a profit of USD 15 mln (-25% y-o-y) and revenue of USD 635 mln (-12% y-o-y), impacted by lower freight rates and rate of exchange movements. Margins in supply chain management improved, while freight forwarding margins remained under pressure.

The Group forecasts a result for 2016 significantly below last year, when it was USD 3.1 bln. This year the profit is expected below USD 1.0 bln. Both Maersk Line and APM Terminals expect an underlying result significantly below last year (Maersk Line 2015 – USD 1.3 bln and APM Terminals – USD 626 mln).

In June 2016 the Group initiated a strategic review to evaluate the strategic and structural options with the objective to generate growth, increase agilities, unlock synergies, and maximise shareholder value. As a consequence the Group’s portfolio will be reorganised into two separate divisions: Transport & Logistics and Energy. The Transport & Logistics division consists of Maersk Line, APM Terminals, Damco, Svitzer and Maersk Container Industry. The Energy division consists of Maersk Oil, Maersk Drilling, Maersk Supply Service and Maersk Tankers.

Julia Louppova:
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