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Monday, 28 May 2012 00:00 - - {{hitsCtrl.values.hits}}
COPENHAGEN (Reuters): Danish shipping and oil group A.P. Moller-Maersk dampened hopes for a quick recovery in freight rates, nudging up its 2012 results forecast to a level that would still fall short of its performance last year.
The shipping industry was hit hard during the global economic downturn as weak demand and excess capacity knocked freight rates to loss-making levels. Recent increases have partly restored rates, raising hopes of a recovery.
A.P. Moller-Maersk, whose Maersk Line is the world’s biggest container shipping company and a barometre of world trade, said it expected 2012 results “slightly lower” than 2011, a modest improvement on previous guidance, but below analysts’ hopes.
“It is a very weak (container) upgrade,” Alm Brand analyst Jesper Christensen said.
“If they had wanted to walk the line and really base the outlook on current freight rates, they would have given an outlook for a profit (in that business) for 2012.”
The group said it expected a “negative up to neutral result” this year for its container shipping arm instead of previous guidance for a loss at that business.
“We of course hope that we will come into positive territory (in Maersk Line), but that would require further rate increases,” Chief Executive Nils Smedegaard Andersen told Reuters.
Average freight rates fell by 9 per cent in the first quarter from the corresponding period a year earlier and by 1 per cent from the fourth quarter of 2011, but Maersk Line announced a general rate rise on Asia-Europe routes effective from March that was almost fully accepted, Maersk said.
Freight rates were still at loss-making levels at the end of the first quarter, but recent increases meant most container shipping lines were probably now operating at breakeven levels, Andersen said.
“We can see that there have been further rate rises after the end of the quarter,” he told Reuters in an interview.
“That was also necessary. We actually expect that rates will at least hold up at the current level but hopefully will improve during the course of the year.”
Net profits rose to 6.67 billion Danish crowns ($1.15 billion) in January-March from 6.35 billion in the first quarter last year, against analysts’ average expectation of a drop to 2.73 billion in a Reuters poll.
Profits were boosted by divestment gains and one-off tax income of $902 million from the settlement of an Algerian tax dispute, Maersk said. Without those non-recurring items, the net result for the period was roughly break even, it added.
The group, whose fleet had a global container shipping market share of 15.5 per cent last year, said Maersk Line maintained its market share in the first quarter.
Andersen said Maersk Line would work to maintain its current market share but was no longer seeking to increase it.
The container shipping division swung to a first-quarter net loss of 3.40 billion crowns from a profit of 2.32 billion in the corresponding quarter last year, falling below analysts’ average estimate of a 2.26 billion crowns net loss.
But profit from the oil and gas business rose above expectations, helped by high oil prices, said Maersk, which gets most of its petroleum production from the North Sea and Qatar.
The group raised its guidance for the Maersk Oil business, saying it expected its 2012 result to be at the same level as in 2011.
It had previously forecast “significantly lower” results for Maersk Oil based on an expected drop in production.
