Earnings were buoyed by a 50 percent increase in Maersk Line profit.
The A.P. Moller-Maersk Group had a record $5.2 billion profit in 2014, 38 percent more than the $3.8 billion it earned in 2013. Results were boosted by strong performance from Maersk Line, the world’s largest container carrier, according to the latest financial statements from the group.
Maersk Line benefited from both lower fuel cost and its strategy of driving down costs, primarily by deploying larger ships. Maersk Line had profits climb 50 percent to $2.2 billion from $1.5 billion the prior year, despite a decline in freight rates.
The A.P. Moller-Maersk Group said revenue rose to $47.6 billion in 2014 compared with $47.4 billion in 2013.
In line with plans to focus the conglomerate on the shipping and oil and gas businesses, the group announced Wednesday it will sell its 20 percent stake in Danske Bank. Proceeds of about $5.5 billion will be distributed to shareholders as a cash dividend. Earlier in the year, Maersk sold 81 percent of a supermarket chain it owned and the company plans to sell the other 19 percent by 2019.
Maersk said in 2014, all of three of its shipping and logistics businesses had greater profits, while profits were down in its two oil units. Underlying profit on a continuing basis for Maersk Line was $2.2 billion; for APM Terminals, $849 million; and for APM Shipping Services, $185 million.
The large increase in profits for the year came despite a sharp drop in profit in the fourth quarter, when the conglomerate earned just $189 million in 2014 compared with $936 million in the fourth quarter of 2013. The company attributed this to various write offs and impairments, including a $102 million impairment at APM Terminals related to its investment in Global Ports due to slower than expected growth in Russia. APM Terminals purchased a 37.5 percent stake in the Russian terminal company in 2012.
Speaking to securities analysts in a conference call, Nils Andersen, CEO of A.P. Moller Maersk, also said the company’s towing and salvage company Svitzer made a $357 million impairment to reflect cost pressures due to active and expensive unions in Australia and increasing competition.
Excluding the one-offs, group profit was over $1 billion in the fourth quarter of 2014 compared with $610 million in in the fourth quarter of 2013.
Maersk Line. Andersen said Maersk’s 2M vessel sharing agreement with MSC, which commenced Jan. 1, is going well.
“It’s too early to declare victory, but so far the customers have received the new network very well,” he said.
One analyst asked Andersen whether the 2M partnership would have an adverse effect on Maersk’s ability to bring down unit costs, saying that while Maersk had the highest schedule reliability in 2014, MSC’s was below average
Andersen replied, “We will continue to work hard to continue to be the most reliable carrier and having a partner is maybe gives us some additional work but we will continue our efforts in that direction.”
He said investments in Maersk Line over the next five years will be about $3 billion per year on ships, containers and other assets.
Maersk Line said it transported 9.4 million FEUs of freight in 2014 compared with 8.8 million FEUs in 2013.
Andersen said in the fourth quarter the company saw good volume growth on North-South and intra-regional trades, while the East-West trades were stable.
Maersk expects seaborne container transport to grow 3-5 percent this year and the company aims to grow with the market. Andersen indicated the company may have grown faster than the market in the fourth quarter, as it received delivery of EEE ships and chartered ships in advance of the start-up of its SeaLand intra-Americas service.
Average freight rates for Maersk fell to $2,630 per FEU in 2014, compared with $2,674 per FEU in 2013.
The company saw fuel costs fall for a second year in a row to an average of $562 per ton in 2014 from $595 per ton in 2013 and $661 per ton in 2012.
Declining fuel costs, larger ships and other optimization efforts meant Maersk’s unit cost fell to $2,584 per FFE in 2014, including VSA income, compared with $2,731 in 2013 and $3,108 in 2011.
Maersk now consumes 0.9 ton of fuel per FFE transported compared with 1.8 tons per FFE in 2007.
The company said that despite falling fuel prices it has “no plans of increasing vessel speed as network and fleet adjustments require a sustained low bunker price level which is not reflected in the market forward curve.”
“Our conclusion is that it makes no sense to speed up the network,” said Andersen. He added that Maersk did not believe that speeding up ships would be an advantage to any other company.
Asked if lower bunker rates will be reflected in lower container freight rates, Andersen said there will probably be some reduction in 2015, but also noted that rates reflect supply and demand and that there are few idle contianerships, “so maybe the situation will be that we can reduce rates less than the oil price drop.”
Anderson believes the container shipping industry in 2015 will make “a big effort to keep part of the bunker saving” and that it will be successful because the market is not very oversupplied.
Maersk Line saw its capacity increase to 2.9 million TEUs at the end of 2014, mainly due to delivery of 11 Triple-E ships. The company plans to add five more Triple-E ships this year, and it added chartered tonnage for its start-up in the intra-America trade, SeaLand.
APM Terminals. APM Terminals had profits of $900 million on revenues of $4.5 billion in 2014, compared with profits of $770 million on revenues of $4.3 billion in 2013.
The company handled 38.3 million TEUs in 2014, compared with 36.3 million TEUs in 2013.
“We continue to be quite bullish on opportunities in this exciting area,” said Andersen. In the fourth quarter the company began operations at its Maasvlakte II terminal in Rotterdam.
DAMCO. Andersen said Damco, the forwarding arm of AP Moller Maersk, continued to struggle in the fourth quarter and that the company is ”waiting for cost reductions to take effect in 2015.” Damco had a loss of $293 million in 2014, compared with a loss of $111 million in 2013.
