UPDATE: Maersk Pours Cold Water On Global Shipping Recovery
May 16 2012 - 10:26AM
Dow Jones News
A.P. Moller-Maersk A/S (MAERSK-B.KO) Wednesday poured some cold
water on the prospects for the global shipping industry in the
second half of the year with an earnings outlook that fell well
short of investors' expectations despite a surprise improvement in
the Danish energy and transport group's first-quarter net
profit.
The less bullish-than-expected outlook from the world's biggest
operator of container ships triggered a 6% drop in its stock price,
wiping $1.4 billion off its market capitalization on the Copenhagen
bourse.
The group's net profit attributable to shareholders rose 1.2% to
DKK6.15 billion ($1.05 billion) overshooting market expectations
mainly due to a one-time gain of DKK5.05 billion from the
settlement of a tax dispute relating to Maersk's Algeria oil
production. Revenue increased 2.7% to DKK81.25 billion, helped by a
higher oil price which benefited Maersk's oil and gas unit.
However, the bullish tone to Maersk executives' comments about
the group's outlook after Maersk Line pushed through large rate
increases in the first quarter contrasted with their forecast for
only a modest improvement in the shipping unit's performance this
year, well short of analysts' expectations.
Considering Maersk Line has 16% of the global container-shipping
market with much of its 630-strong fleet plying routes between
Europe and Asia, Maersk's cautious outlook gels with growing
worries about the impact of the euro-zone's enduring sovereign debt
crisis, and Greece's possible exit from the currency area, and a
hard landing for the Chinese economy on global trade.
Peter Sand, chief analyst at international shipping association
Bimco, said renewed macro-economic uncertainty in Europe following
Greece's inconclusive elections 10 days ago and fresh indications
that Chinese growth could be slowing are putting some downward
pressure on freight rates.
"The long-term perspective (for higher rates) is unchanged, but
the short-term expectation of a recovery have been pushed a little
further ahead than it was a month ago," Sand said.
Maersk said Wednesday it expects global demand for seaborne
containers to increase 4%-6% during 2012, but the rate of demand
growth will be lower at its key Asia-Europe trade lane, which
contributes about 40% of Maersk Line's revenue. Bimco forecasts
capacity will rise by 11% this year in its latest industry
survey.
Maersk said Wednesday that container demand may rise only 4-6%
this year against an earlier forecast that industry , hence the
squeeze on the rates shippers can charge customers.
Maersk said Wednesday it won't be able to match last year's net
profit of DKK18.08 billion this year. Analysts were expecting a
full-year net profit of DKK24 billion.
"Today's results were not easy to interpret, but the market had
clearly expected a more substantial increase in the full-year
guidance, and in that sense the share price reaction is fully
understandable," said Jacob Pedersen, an analyst at Denmark's
Sydbank.
Maersk Chief Executive Nils Smedegaard Andersen said Maersk Line
is now more likely to break even this year than remain in the red
as he had expected before the rate increases. "So far, it looks
like the rate increases are being well absorbed by the market,"
Smedegaard Andersen said in an interview.
Still, Maersk Line swung dramatically into the red in the
quarter. The unit, made a first-quarter loss of DKK3.4 billion,
compared with a year-earlier profit of DKK2.32 billion.
The performance and outlook at Maersk Line was "a major
disappointment," said Jyske Bank analyst Martin Munk.
Maersk shares were down 5.8% at DKK38,000 around 1345 GMT
valuing the group at DKK167.03 billion.
-By Flemming Emil Hansen and Jens Hansegaard, Copenhagen Bureau,
Dow Jones Newswires; +45 33 12 44 88;
flemming.hansen@dowjones.com
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