COPENHAGEN: Danish shipping and oil group AP Moller-Maersk said it would return to a "modest" profit in 2010 after weak global trade knocked freight rates and dragged it to a deeper loss than expected for 2009.
Chief executive Nils Smedegaard Andersen said the container shipping business would remain in the red this year though other operations - from oil and gas to offshore services, port terminals and supermarkets - would continue to perform well.
"We hope that 2009 will be an exception," Andersen said. "Priority No. 1 is to return to profit. We are not guaranteeing that we will be back in the black in 2010, but at the moment it is our strong ambition and expectation to deliver a profit this year.
"We do not expect the container line to be back in profits in 2010," he said. "Rates have improved but they are still not at a level where they can give acceptable profitability."
Net losses at the company, which owns the world's biggest container shipping company, Maersk Line, amounted to 5.49 billion Danish crowns, or US$1.01 billion (US$1 = RM3.37), in 2009 after a profit of 17.53 billion in 2008.
The result was weaker than the average estimate of a net loss of 5.11 billion crowns in a Reuters poll of 13 analysts, whose estimates ranged from losses of 1.56 billion to 7.37 billion crowns.
The result was in line with the company's own guidance for a loss of around US$1 billion.
"The main factors driving (results) down of course were low rates in containers and in tankers as well as a significant drop in the oil price - these were really the negatives of last year," Andersen said.
Despite the loss, Andersen said that the group could be satisfied with its achievement of reducing costs by about US$2 billion in 2009 which left it with cashflow from operations of US$4.7 billion, which he called "pretty strong".
Maersk would continue to focus on costs and efficiency this year, though the cost-reduction effect would be lower than in 2009, he said.
Shipping markets were hit hard last year by the global economic downturn, which reduced freight volumes and rates.
Freight rates for the group's container activities were 28 per cent lower than in 2008, Maersk said in a statement.
Andersen said that the most negative effect in 2009 came from the shipping industry's "willingness and capacity to take rates down below cash operating levels".
Looking ahead to the current year, the company said: "Overall, the AP Moller-Maersk Group is expected to post a modest profit. Cash flow from operating activities is expected to be well above the 2009 level."
Asked to quantify "modest", Andersen said:
"We are talking black but probably small numbers.
"The 2010 guidance is very disappointing, with management expecting a modest positive result," Jyske Bank said in a note, comparing that with market consensus of a 2010 profit of 9.1 billion crowns.
The container shipping division incurred an operating loss of 10.06 billion crowns, while Maersk's oil and gas business made an operating profit of 25.33 billion crowns.
The container shipping loss was bigger than analysts' average forecast of a loss of 9.22 billion crowns, and the oil and gas profit below their average estimate of 26.11 billion in the Reuters poll. -
Source: Business Times
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