Maersk calls 2019 a year of ‘considerable uncertainties’

The company says freight rates are higher as it begins contract negotiations with North American shippers.

Maersk calls 2019 a year of ‘considerable uncertainties’

The company says freight rates are higher as it begins contract negotiations with North American shippers.

Maersk calls 2019 a year of ‘considerable uncertainties’

The company says freight rates are higher as it begins contract negotiations with North American shippers.

 
   A.P. Møller – Maersk released its annual report for 2018 Thursday, highlighting what chief executive Søren Skou called its transformation from “being a conglomerate with operating eight different divisions with a big corporate layer on top to now being organized as one company with one front-line organization for our ocean and logistic services businesses. That means one sales force, one customer service function, one delivery organization.”
   The company reported revenue of $39 billion for 2018, up from $31 billion in 2017, a 26 percent increase. A large part of that growth was due to Hamburg Süd, which Maersk acquired in late 2017. Without Hamburg Süd, revenue growth would have been just 8.3 percent.
   By segment, in 2018 Maersks:
   • Ocean segment business had $28.4 billion of revenue, up from $22 billion in 2017. EBITDA for the ocean business alone was $3 billion in 2018, up from $2.78 billion in 2017.
   • Logistics and services had revenue of $6.1 billion, up from $5.8 billion in 2017. EBITDA for the logistics and services business was $98 million compared to $139 million in 2017.

   • Terminals and towage had $3.8 billion in revenue, up from $3.5 billion in 2018. EDITDA for the terminals and towage sector was $778 million, up from $639 million in 2017.
   •   The company’s container manufacturing and other segment had revenue of $2.5 billion in 2018 compared with $1.7 billion in 2017. EBITDA fell to $59 million from $173 million in 2017.
    Maersk said overall earnings before interests, tax, depreciation and amortization (EBITDA) was $3.8 billion in 2018, an 8 percent increase over 2017. The EBITDA figure also reflects $128 million in restructuring and integration cost.
   Maersk said it expects EBITDA in 2019 of around $5 billion when including the effects from an accounting rule change (IFRS 16) and around $4 billion when excluding the effects from IFRS 16.

   Bloomberg said that $4 billion estimate was below the $4.77 billion average estimate of analysts it had surveyed.
   Maersk B shares traded lower after the results were released, closing at 8,418 Danish krone on the Copenhagen Stock Exchange, down 10 percent. In the past year, Maersk shares have traded between 7,520 and 10,725 krone.
   The company cautioned that there were “considerable uncertainties” about its guidance for 2019 “due to the current risk of further restrictions on global trade and other factors impacting container freight rates, bunker prices and foreign rate of exchange.”
   Skou said the company has successfully integrated the operations of Hamburg Süd and “come far on our digitization journey.” He said in its ocean business, “customer transactions with us are now digitized. … Around 90 percent of all prices are now issued by our website and almost 100 percent of all bookings are received in electronic form.”
   Skou said that the company is seeing declining global economic growth and weakness in both China and Europe. Skou said the company expects demand for container transport to be 1 percent to 3 percent in 2019 compared to 3.7 percent to 3.8 percent in 2018.

   He noted there is much uncertainty about what will happen to oil prices, which have increased since the beginning of the year. On top of that, he said shipping companies will be required under an International Maritime Organization agreement to start using low sulfur fuel on Jan. 1, 2020, unless their ships are equipped with scrubbers.
   Maersk said cargo volumes in the fourth quarter of 2018 were equal to about 6.7 million TEUs, about 11 percent higher than in the fourth quarter of 2017, but it said that was because of the acquisition of Hamburg Süd.
   “Volumes excluding Hamburg Süd decreased by 1.1 percent in Q4 2018 compared to Q4 2017, which was lower than the estimated market growth of around 4 percent, mainly due to backhaul declining 3.5 percent.
   For the full year 2018, Maersk carried about 26.6 million TEUs, a 21.6 percent increase over 2017. Maersk said if Hamburg Süd was excluded, volumes were up just 2.5 percent compared to 2017, “mainly due to focus on profitability” in the second half of 2018.
   Maersk said average freight rates in the fourth quarter of 2018 were 9.3 percent higher than in the fourth quarter of 2017, while bunker prices increased 35 percent.

   The increase in freight rates mean “we have ended the year in much better shape than we ended the previous year. That obviously means a better environment to start the year and a better environment to negotiate contracts,” said Vincent Clerc, the chief commercial officer of Maersk. “We are about halfway through the contracting season — basically Asian and European customers and I would say the rates we are contracting at are also in line with a better climate to negotiate those.We have the entire North American portfolio to go through because they are effective from May 1.”
   He added that half of Maersk’s business is short-term business, which is negotiated monthly or weekly.
   “That’s were a lot of the risk even after the contacting season is done,” he said. “It is an extremely volatile part of the business.”
   The company said integration of Hamburg Süd into Maersk “delivered synergies of $420 million in 2018.”
   The company’s profit for the year was $3.2 billion compared to a loss of $1.2 billion the prior year. But that profit came from discontinued operations of $3.4 billion. The company had a loss of $148 million from continuing operations. The company said it had an underlying profit in 2018 from continuing operations of $220 million, 38 percent less than in 2018.

   In the fourth quarter of 2018, Maersk said it had revenue of $10.2 billion, a 21 percent increase over the fourth quarter of 2017. EBITDA in the quarter was $1.1 billion, up 32 percent. The profit for the period was $73 million, an 81 percent decrease, and the company had a loss from continuing operations of 34 million, but underlying profit of $120 million from continuing operations.
The company provided an update on its exit from the oil and gas industry: Maersk Oil was sold to the French oil company Total S.A. in March 2018, with an accounting gain of $2.6 billion. Besides cash proceeds of $2 billion, Maersk said around 70 million shares in Total, with a value of close to $4 billion, have been sold since through Wednesday and that it retains around 28 million shares in Total worth about $1.6 billion.
    Another of Maersk’s energy companies, Maersk Drilling, is due to be spun off in April if the company’s shareholders OK that plan at their annual meeting April 2. As a result, existing Maersk shareholders also will become shareholders in Maersk Drilling.
    The company said it is looking for “structural solutions” for yet another oil-related business, Maersk Supply Service, which provides vessels used in offshore drilling.

We’ve been understanding during this negotiation process, but we cannot withstand another year in which our most important foreign market continues to slip away and soybean prices are 20 to 25%, or even more, below pre-tariff levels.

The Port of New York & New Jersey is called by 42 liner services that directly connect it to regions outside North America, 11 of which call Asia, according to BlueWater Reporting's Port Dashboard tool.

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Maersk calls 2019 a year of ‘considerable uncertainties’

The company says freight rates are higher as it begins contract negotiations with North American shippers.

Feb 21, 2019 on Dec 27, 2018AmericanShipper.com

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Maersk calls 2019 a year of ‘considerable uncertainties’

The company says freight rates are higher as it begins contract negotiations with North American shippers.

Feb 21, 2019 on Dec 27, 2018AmericanShipper.com