XPO overcomes weak market to post strong Q4 earnings
American road freight operator XPO today posted 6% year-on-year revenue growth for the fourth quarter ...
Maersk Line adjusted its mission statement from “grow with the market” to “growing at least with the market to defend its market-leading position” after posting a $499m net profit for the second quarter while quarter-on-quarter volumes grew above par at 3.7% to reach 5m teu.
Estimated market growth in the period was 1-2%, but in answer to a question following its second quarter results, Maersk Group chief executive Nils Andersen denied that the carrier had acted aggressively.
He argued that Maersk Line was obliged to “take back the market share” it had conceded in the first quarter when he said the carrier had been “very late joining the dynamic rate environment” – shorthand for a rate war – between Asia and Europe.
Despite the increase in its liftings, the carrier’s revenue declined by 9.2% year-on-year in the period to $6.3bn as average rates plunged by 14% to $1,242 per teu.
A 42% reduction in bunker costs down to an average $335 per tonne and the appreciation of the US dollar against most of the currencies where ship disbursements are paid were the main reasons for the positive result.
However, Mr Andersen admitted that other efficiency cost savings had stalled due, he said, to the line introducing “too much capacity”, especially in the Asia-Europe trades.
It remained too early to measure the cost advantages from the 2M alliance, he added but said capacity adjustments to Asia-Europe loops would be made, whether by blanking sailings or even laying up ships.
“We have overestimated the market growth on Asia-Europe,” admitted Mr Andersen.
Almost on cue, today MSC confirmed that the 2M AE9/Condor service will cease operation on 14 September, although it added that the service, which offers 9,500 teu weekly capacity will be “deployed as a seasonal service if there is sufficient demand”.
Mr Andersen was also asked whether Maersk Line’s good second quarter performance was mainly due to the existence of better paying contract cargo, but he refused to be drawn on the ratio of spot cargo compared to contract cargo carried by Maersk Line, or for how long existing contracts could remain in place in the current climate.
Despite the prediction of some analysts Maersk – having already achieved a net profit of $1.2bn for the first half of the year – has reiterated its outlook for the container line for the full-year at “a higher underlying result than for 2014” which came in at $2.2bn.
Elsewhere, APM Terminals delivered an underlying profit of $159m, compared to $260m in the same period in 2014, on a revenue decline of 8.6% to $1bn and a throughput drop of 6% to 9.2m teu.
Divestments in terminals and less import volumes in the oil producing countries, particularly in West Africa and Russia were the reasons given for the downturn at APMT and as a consequence Maersk has amended its guidance for the terminal operator the full year as a result to “significantly below the $849m of 2014”, compared to the previous “below that of 2014”.
Meanwhile, after many months of painful restructuring it appears that Maersk’s sickly forwarder, Damco, has at last turned the corner after making a $7m positive contribution to the group in the quarter.
Maersk said that Damco would now focus on “commercial efficiency to generate sustainable top-line growth”.
Notwithstanding the uncertainties surrounding oil and container prices Maersk said its expectation for the group’s full-year was “unchanged” at “around $4bn”.