Wednesday, November 2, 2016

Shipping: "Maersk Shares Sink After Profit Hit by Weak Freight Rates, Oil Prices"

From the Wall Street Journal:

Danish shipping-and-oil giant posts 43% fall in third-quarter profit
Shares in A.P. Moeller-Maersk A/S fell as much as 9% on Wednesday after the Danish shipping-and-oil giant reported a 43% drop in third-quarter net profit amid sustained weak freight rates and persistently low oil prices.

Net profit dropped to $429 million from $755 million a year earlier, missing analysts’ forecast of $496 million. Revenue declined 9% to $9.18 billion, compared with expectations of $9.39 billion, according to FactSet estimates.

The results are the latest sign of how both of the company’s main business areas have been buffeted by industry pressures in recent years, prompting it to pursue a major transformation as it searches for growth.

Its energy unit has struggled against a backdrop of nearly two years of low crude-oil prices, while its container-shipping business is under pressure from tumbling freight rates amid a capacity glut that has prompted price wars between operators.

Such pressures led Maersk to announce in September that it would split its operations into two separate divisions focused on energy and transport in what is the biggest shake-up in the group’s 100-year plus history. The company said Wednesday that implementation of the plan is progressing and that it would provide further details at its capital markets day next month.
Maersk’s third-quarter earnings underscore the company’s struggle.

Group underlying profit, which strips out one-off items, dropped to $426 million from $662 million a year earlier, and would have been worst had it not been for a strong performance from its drilling operations. Maersk Line, the world’s biggest container operator in terms of capacity, swung to an underlying loss of $122 million, from an underlying profit of $243 million a year ago. Maersk Oil contributed an underlying profit of $146 million, up from $32 million a year earlier.

The company said average container freight rates were 16% lower year-over-year in the quarter, while the oil price was down 8%.

For the full year, Maersk is forecasting an underlying profit below $1 billion, compared with $3.1 billion last year, citing developments in the global economy as well as container freight rates and weak oil prices....MORE