Monday, August 24, 2009

Maersk Rises as Chief Says World Trade Is Improving

A.P. Moeller-Maersk A/S, owner of the world’s largest container line, rose as much as 7 percent in Copenhagen as its chief executive officer said world trade is improving and some container rate increases are “sticking.”

The Copenhagen-based company posted a net loss of 3.67 billion kroner ($700 million) in the first half, compared with net income of 11.6 billion kroner a year earlier, it said today in a statement. That was in line with the 3.7 billion-krone median estimated loss of a Bloomberg survey of five analysts. Sales fell 14 percent to 127.4 billion kroner.

“We’ve been through a crisis of historic dimensions,” Chief Executive Officer Nils Smedegaard Andersen said in a telephone interview. “But we’ve improved our underlying business by $1.5 billion through reduced costs and better use of assets, which will strengthen us after the crisis.”

The container market will decline more than 10 percent this year as consumers rein in spending during the recession, the first year of contraction since the 1970 birth of containerization, according to a June forecast by London-based Drewry Shipping Consultants Ltd. Maersk said today that volumes dropped 7 percent in the first six months of the year.

Still, Andersen said, the world economy has seen the bottom and “trade is definitely picking up.” The company has been raising some shipping rates, he said.

Shares Rise

Maersk rose as much as 2,300 kroner to 35,300 kroner in Copenhagen trading, the biggest intraday jump since June 10 and was up 6.1 percent as of 3:31 p.m.

Rate increases and the improved world trade “were not at all reflected in the share price before,” said Jacob Pedersen, an analyst at Sydbank A/S, who has an “overweight” recommendation on Maersk shares. “It’s the first step to get to a point where the container business is profitable again.”

Second-half results “are expected to be at the same level as the first half year,” Maersk said in the statement. That means the company, Denmark’s largest, may post its first full- year loss in at least six decades.

Maersk Line, which operates 470 vessels and owns 1.9 million containers, lost $958 million in the first half compared with a profit of $268 million a year earlier.

Overall rates fell 30 percent in the period, the company said, adding that it expected “modest” rate increases starting in the third quarter. Maersk said the container division maintained its 15 percent market share.

Rate Increases

CEO Andersen said it’s hard to predict when Maersk Line would be profitable again. The shipping line has been announcing rate increases on various routes since the beginning of the year.

“The rate increases we’ve given out are sticking,” Andersen said. “Rates bottomed out later and deeper than we expected, with the lowest levels in May-June. Since then they’ve increased gradually. They are not enough to make the industry profitable, but these are steps in the right direction.”

Maersk’s oil and gas business, the biggest profit contributor in the past three years, recorded a 57 percent drop in first-half net income to 2.8 billion kroner.

The company’s tankers unit had a first-half loss of $155 million from a $194 million profit a year earlier.

“Oil prices are fine but production is limited by OPEC quotas,” Andersen said. “There is less oil to transport and therefore tanker rates are at a record low.”

Source: Bloomberg

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