The Danish shipping conglomerate reported a loss of about $1.9 billion for 2016.
A.P. Moller-Maersk, the Danish conglomerate that includes transportation and logistics companies such as Maersk Line, APM Terminals and Damco, as well as several companies involved in the oil and gas industry, reported a loss of about $1.9 billion for 2016 compared with a profit of $925 million for 2015.
Revenues for the year totaled $35.5 billion, down from $40.3 billion for 2015.
In the fourth quarter alone, the company recorded a loss of $2.7 billion compared with a loss of $2.5 billion for the fourth quarter of 2015. Revenues reached $8.8 billion, down from $9.1 billion for the fourth quarter of 2015.
The company’s board of directors recommended halving the annual dividend to 150 Danish kroner (U.S. $21.65) due to the weak financial performance and in order to defend the investment grade rating of the conglomerate, Maersk Line CEO
Søren Skou said.
The conglomerate said its results for the year were negatively impacted by post-tax impairments of $2.8 billion to its oil and gas drilling and supply service businesses, which are among those it plans to exit.
“2016 was a difficult year financially, with headwinds in all of our markets,” the conglomerate said. “However, it was also a year when we decided to substantially transform A.P. Moller – Maersk for the future. We have set a new course that over the next few years will lead A.P. Moller – Maersk to become a focused container shipping, logistics and ports company with the aim of growing revenue again.”
Underlying profit for 2016 stood at $711 million compared to $3.1 billion for 2015.
In 2017, A.P. Moller-Maersk said it expects an improvement in underlying profit and that its transport and logistics division anticipates an underlying profit above $1 billion. The transport and logistics division includes the companies it plans to retain – Maersk Line, APM Terminals, Damco, Switzer and Maersk Container Industries as opposed to the energy businesses it plans to dispose.
The conglomerate said that is has started to integrate those five transportation and logistics companies, and in 2017, it expects synergies among them will result in savings of $150 million.
Maersk Line
In 2016, Maersk Line, the world’s largest ocean carrier, recorded a loss of $376 million compared with a profit of $1.3 billion for 2015.
The company attributed the loss to “poor market conditions leading to sustained lower freight rates partly offset by higher volumes and lower unit costs related to lower bunker price, higher utilization and cost efficiencies.”
During the fourth quarter, Maersk Line announced it had agreed to acquire Germany’s Hamburg Süd, the world’s seventh largest container shipping line and a leader in the North-South trades. Maersk said today that a final agreement on the deal is expected early in the second quarter of this year and is expected to be completed by the end 2017. In the wake of Maersk Line’s announcement that it will acquire Hamburg Süd, the two companies just said this week they reached a slot purchase agreement for Hamburg Süd’s volumes on 16 strings.
Maersk Line reported a loss of $146 million for the fourth quarter of 2016 compared with a loss of $182 million for the fourth quarter of 2015. Revenues totaled $5.3 billion, slightly up from the $5.2 billion for the fourth quarter of 2015.
In a call with investment analysts, Skou contended the container business is at an “inflection point.”
He said global container demand has improved since the fourth quarter of 2014. While there is an overhang of capacity, he said growth in the container fleet has slowed because of strong scrapping of container ships, and that his company believes this trend will continue for several quarters.
Skou also said that Maersk is continuing a strategy of trying to grow faster than the overall market, pointing out how the ocean carrier’s volumes for the full year and the fourth quarter were up 9 percent and 12 percent year-over-year, respectively.
Maersk’s strong volumes and low cost of moving containers bodes well for the future, Skou explained.
However, the company also said that average freight rates for the fourth quarter of 2016 were 7.1 percent lower year-over-year. Rates were 1.2 percent lower on East-West lanes, 12.5 percent lower on North-South trades and 13.9 percent lower on intra-regional routes.
APM Terminals
APM Terminals reported a profit of $438 million for 2016, down from $654 million for 2015.
“Lower profit in commercially challenged terminals in Latin America, North-West Europe and Africa as a consequence of liner network changes and weak underlying markets was only partly offset by cost saving initiatives,” Maersk said.
Damco
The forwarder and logistics company Damco reported a profit of $31 million for 2016 compared with $19 million for 2015.
