Maersk warns of rough times ahead despite profit rise

Shipping giant A.P Moller-Maersk posted a rise in net profits today (Friday), thanks to higher freight rates and cost-reduction schemes.

The company posted a rise in its fourth quarter earnings from the forecasted profit of 4.51 billion Danish kroner to 5.54 billion kroner. Overall, full-year net profit for the Maersk Group, the world’s largest container shipping company by revenue, rose 42 percent to 21.7 billion kroner from 15.2 kroner a year earlier.

Despite these positive results, the company expects its performance to be under pressure in 2013, due to lower production volumes in its oil business and reduced ownership of Danish oil assets, in addition to a glut in industry capacity and modest growth prospects.

In a conference call, the company predicted only “modest” (four to five percent) growth in global container demand for the coming year, as the trade outlook for westbound shipments from Asia to Europe is “bleak.” The company warned that “without significant capacity adjustments, the container shipping market is most likely to see a continued downward pressure on freight rates” this year.

In 2012, freight rates recovered some of the ground lost in 2011, but lost steam in the fourth quarter as oversupply and sluggish growth in the world's largest consumer markets diminished world trade.

“We are satisfied with our result for the year. After a difficult start, Maersk Line improved its performance and the Group achieved a result above last year’s, both in terms of net result and in underlying performance”, said Group CEO Nils Andersen in response to the 2012 financial results.

(Source: Wall Street Journal)