Maersk’s container shipping business boosts earnings
The container shipping and related activities of A.P. Moller-Maersk became the Danish group’s largest profit-making unit in the first half of the year, as they earned a net income of DKK3.8 billion ($621 million), 165 percent more than the DKK1.4 billion earned in the same period of 2003.
The profit boost from container shipping and related activities was in contrast with the group’s modest 7-percent rise in net result to DKK9.9 billion ($1.6 billion) for the first half.
Profit from A.P. Moller-Maersk’s oil and gas extraction activities — the group’s second-largest profit contributor — was down 7 percent to DKK3.4 billion ($550 million) in the first half, when compared to the same period of 2003. Net profit from tankers and offshore shipping activities fell 16 percent to DKK1.1 billion ($182 million). The net result of the group’s retail arm jumped 87 percent to DKK823 million ($133 million).
Container shipping and related activities, which include Maersk Sealand, Maersk Logistics and APM Terminals, doubled their operating income before financial items to DKK4.4 billion ($706 million), up from DKK2.1 billion a year earlier. This represented an operating margin of 10 percent on revenue in the latest six-month period, as compared to 5 percent in the first half of 2003.
Revenue from the container shipping and related activities unit rose 4 percent in local currency to DKK44.8 billion ($7.2 billion) from DKK43.1 billion.
“With the growth in the world trade, the total transported volumes increased compared to the same period last year,” A.P. Moller-Maersk said in a statement. Average freight rates in dollars were higher, but a 10 percent depreciation of the U.S. dollar against the Danish currency offset this effect when translated into Danish crowns.
A.P. Moller-Maersk reported a general increase in the utilization of the world’s container fleet, as demand for vessel capacity exceeded the growth in the world fleet. “This also led to increased scarcity of container tonnage with an increase in charter market rates for container vessels and consequently higher expenses for the shipping lines,” it added.
This increase in vessel charter costs and continuously high fuel prices “contributed to moderate the effect of the increasing freight rates,” the Danish group said.
A.P. Moller-Maersk traditionally does not disclose Maersk Sealand's results. However, it said the net result of Maersk Sealand’s container services was “significantly above that of the first half year in 2003.”
In the first half, Safmarine Container Lines, another A.P. Moller-Maersk subsidiary, also achieved a result that was “significantly above” that of the corresponding period in 2003, due to increased freight volumes and higher freight rates, the group reported.
Maersk Logistics' activities grew and A.P. Moller-Maersk described this unit’s result as being “above that of the first half year in 2003.”
Commenting on its port arm APM Terminals, A.P. Moller-Maersk said the unit has continued its expansion through the establishment of new container terminals and further development of existing facilities. In the first half year, final approval was obtained from the authorities regarding development of a new terminal in Portsmouth, Va.
In India, APM Terminals and a local partner will develop and operate a new container terminal in Mumbai.
The result for APM Terminals was, in the first half year 2003, positively affected by value adjustment of certain investments by DKK335 million ($57 million). Disregarding this effect, APM Terminals’ first-half result was “above” that of the corresponding period last year.
Like other major container shipping companies, Maersk Sealand appears to be headed for record profits this year.
A.P. Moller-Maersk said container shipping activities and rates are still above last year’s levels. The Danish group predicted its container shipping activities will obtain a result this year “significantly above that of 2003.”