The A.P. Moller-Maersk Group, helped by strong performance from its Maersk Line container shipping business and APM Terminals business, reported a profit of $3.78 billion in 2013, down from $4 billion in 2012.
In 2014, the group said it “expects a result significantly above the 2013 result, impacted by the sale of the Dansk Supermarked Group announced last month.
Revenue was $26.2 billion in 2013, compared to $27.1 billion in 2012.
The group said if one time charges such as impairment losses and divestment gains were excluded, earnings were $4 billion in 2013, compared to $2.9 billion in 2012, about a 33-percent improvement. In 2012, the group benefited by $899 million from Maersk Oil’s settlement of an Algerian tax dispute and $410 million in divestment gains; this year the group had a divestment gain of $145 million, which reflected the sale of 24 tankers and share in APM Terminals.
A.P. Moller Maersk had a profit of $313 million in the fourth quarter of 2013, compared with a profit of $334 million in the fourth quarter of 2012. Revenue in the fourth quarter of 2013 was $6.45 billion, compared to $6.52 billion in the same 2012 period.
Nils Andersen, the company’s chief executive officer, said the improvement in the group’s underlying performance was broad based, with improvements by four of the company’s core segments: Maersk Line, APM Terminals, Maersk Drilling, and Services and other Shipping. However, its Maersk Oil division had lower revenue and profit. The company said the oil company hopes to ramp up production later this year.
A.P. Moller-Maersk is a public company, and more than half of the group’s stock is closely held by foundations and family funds. Its stock has traded between 39,960 and 67,350 Danish Krone (DKK) in the past year. The company announced plans to give shareholders four bonus shares, which would have an effect similar to a five to one stock split. So that would reduce the price of a share that sells for 66,000 DKK to 13,200 DKK or about $2,415, still quite high compared to most U.S. stocks. In the U.S., investors can purchase American Depositary Receipts equal to 1/500th of a share in Maersk. They closed at $24.11 on Wednesday.
The company spelled out the sensitivity of its business to changes — up or down — in oil prices, bunker prices and container freight rates and container volumes as follows:
- A $10 change per barrel of oil will increase or decrease the group’s profit by $200 million during the rest of this year.
- A $100 change per ton of bunker fuel will increase or decrease the group’s profit by $200 million.
- A $100-per-FFE change in the container freight rate will increase or decrease the group’s profit by $900 million.
- A change in container freight volume of 100,000 FFE will increase or decrease the group’s profit by $200 million.
Maersk Line had a profit of $1.5 billion in 2013, compared to $461 million in 2012. Revenue was $26.2 billion in 2013, compared to $27.1 billion in 2012.
While freight rates fell 7.2 percent to $2,674 per 40-foot equivalent unit (FFE), the company was able to increase the volume of cargo it handled by 4.1 percent to 8.8 million FFE.
Maersk Line has optimized its network, so that it was able to increase the volume it happens even though it reduced its weekly carrying capacity globally by 8 percent, year-over-year. The company said it was able to reduce unit costs by $323 per FFE, or 10.6 percent.
Cost reductions last year totaled $1.9 billion. Most of that ($1.4 billion) came from a reduction in bunker cost. That was achieved by a combination of reduced usage of bunker fuel; $600,000 was attributable to the lower cost of fuel.
While Maersk Line increased the amount of cargo it handled by more than 4 percent, the capacity of its fleet grew only 0.2 percent to 2.6 million TEU. It also reduced the number of ships in its fleet by 22 vessels to 574 vessels. It noted that it has placed no new building orders since February 2011.
Andersen said the company still intends to start operations of the P3 alliance in the middle of 2014.
He said both the 18,000 TEU “Triple E” ships that Maersk is introducing into the Asia-Europe trade and P3 will help continue to reduce bunker costs.
“We do have plans for reducing costs in 2014, we don’t see a brick wall or anything like that coming up,” said Andersen
Maersk Line expects to have results in line with this year’s profit of $1.5 billion. It said it expected global demand for seaborne container transport to increase by between 4 percent and 5 percent, and that Maersk Line aims to grow with the market.
“We don’t foresee that the rate situation in the container industry will be very good; there will still be overcapacity,” said Andersen. “Although we see some consolidation, we are not sure this will have an effect in 2014. We are concerned about the general rate situation in the industry, and we believe that if we can get in that rate environment and under a lot of pressure results similar to this year, it is actually an acceptable performance. Having said that, we can be positively surprised and competitors can change the way they act and then we will be super delighted to make more money. But we have, compared to the rest of the industry, a really strong 2013 and repeating that next year may not be as easy as it may appear.”
APM Terminals (APMT) had a reported profit of $770 million in 2013, compared to $701 million in 2012. Revenue was $4.3 billion in 2013, compared to $4.2 billion.
Last year, APMT secured new projects in Izmir, Turkey and Abidjan in the Ivory Coast and started up operations at a terminal in Santos. Global Ports, a company in which APMT owns a 30.75 percent share, completed the acquisition of National Container Co. in Russia, making it the largest container terminal operator in Russia.
The company said it expects APM terminals to have a higher profit in 2014.
“We see a big need for port infrastructure across the world in coming years,” said Andersen. “We see a lot of exciting openings and opportunities still.”
Damco, the group’s forwarding and logistics unit, had a loss of $111 million in 2013, compared to a $50-million profit in 2012.
Asked if he was losing patience with the performance of the company or if A.P. Moller Maersk was the right owner for Damco, Andersen said its performance in recent years has been “acceptable, also in industry context — it is not a leading forwarder, we are aware of that, but they have some excellent skills in third-party logistics, so we think it is a very interesting company with growth opportunities also in forwarding.
“We did take a decision a couple of years ago," he continued, "that we wanted to have one global platform, something that a lot of our competitors don’t have in that industry, to make it work on a truly global basis and in connection with that also restructure the business.”
He said, “The progress on the restructuring and IT systems have been very good, but it has taken a lot of effort … this is an industry where margins are wafer-thin, so if you lose focus on daily cost and markets for just a short time it costs you on the bottom line, so the job for 2014 will be to get the change program to the next level by the middle of the year and then refocusing on the market."