News / Maersk Line leaves rivals in its wake with Q1 profits, but the P3 launch is delayed

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Notwithstanding a delayed start to the P3 network– now not expected to be operational until autumn – Maersk Line has extended its lead over its struggling industry peer group with an EBIT margin of 9.1%: a stunning $454m net profit for the first three months of the year.

Presenting AP Møller-Maersk’s Q1 interim report this morning, group CEO Nils Andersen highlighted the “very strong progress” made by the ocean carrier, driven by a 9% quarter-on-quarter decrease in unit costs, which more than compensated for the a 5.1% decline in the average freight rate.

Even after discounting impairment reversals on three panamax ships Maersk Line’s profit after tax came out at $382m for the quarter, compared with $204m for the same period of 2013, on a volume increase of 7.3% to 4.4m teu.

Mr Andersen said rates had “developed slightly better than feared”, and were “a little more stable than previously thought”. There had been pockets of business that had exceeded expectations, such as the Europe to Asia backhaul trade, which was growing with increased Chinese consumer demand.

He explained that the delay to the start of the P3 co-operation was due to waiting for approval from regulatory authorities in China and the EU, expected by the middle of the year, and from a “number of smaller jurisdictions” where agreements were outstanding.

Mr Andersen said projected cost savings from the P3 had not been factored into the 2014 budget and that the outlook for Maersk Line was ahead of the $1.5bn net profit posted last year.

At group level, APMM delivered a profit for the first quarter of $1.2bn, versus $790m in 2013, and has revised its forecast for 2014 to “around $4bn”. This compares with $3.6bn earned last year.

Another sector success story was APM Terminals, which Mr Andersen said had “continued to develop in a positive direction”, achieving an impressive 30% quarter-on-quarter increase in profits to $215m.

Like-for-like volumes at APMT were 9% ahead of last year, at 9.4m teu, and the opening of the world’s most technically advanced terminal, Maasvlakte 11 at Rotterdam, in the fourth quarter last year would add further to this growth, said the CEO.

Meanwhile, the Services & Other Shipping sector increased its profit from $67m to $75m for the quarter – mainly due to a return to the black for its tanker division – but was hobbled by another disappointing result from its forwarding and logistics arm, Damco, which posted a $10m loss for the period.

However, Mr Andersen explained that Damco was “still in restructuring mode” and that an improvement could not be anticipated until the second half of the year – or even the fourth quarter. But he added that he did expect some improvement on the $111m loss recorded in 2013.