Maersk to List Drilling Unit in Copenhagen Next Year -- Update
August 17 2018 - 5:10AM
Dow Jones News
By Dominic Chopping
A.P. Moeller-Maersk A/S (MAERSK-B.KO) will seek a separate
listing of its drilling unit next year, generating cash proceeds of
around $1.2 billion, as the Danish freight carrier continues to
reshape itself into a global supply chain player.
Maersk Drilling--which operates a fleet of drilling rigs--was
put on the block two years ago when Maersk set out a strategic plan
to transform itself from a sprawling shipping and energy
conglomerate into an integrated container logistics firm.
The company had set a deadline to sell or list Maersk Drilling
by the end of this year, but Friday said a listing in Copenhagen
next year would offer the best prospects for its shareholders,
"offering them the possibility to participate in the value-creation
opportunity of a globally leading pure play offshore drilling
company with long-term development prospects."
Ahead of the 2019 listing, the company has secured debt
financing of $1.5 billion from a consortium of international banks
to ensure a strong capital structure after a listing.
The unit reported revenue growth of 4.9% to $366 million in the
second quarter, while earnings before interest, tax, depreciation
and amortization rose 2.3% to $159 million.
Maersk has already sold Maersk Oil to Total S.A. (TOT) in a
cash-plus-shares deal while Maersk Tankers was sold to its
controlling shareholder. It retains 78.3 million shares in Total,
worth around $5 billion, and the company said that following the
demerger of Maersk Drilling a material part of these remaining
Total shares will be distributed to Maersk's shareholders in cash
dividends, share buy-backs or as a distribution of the Total shares
directly.
When Maersk Drilling is listed, its shares will be distributed
to Maersk's shareholders, it added.
The pursuit of a solution for its remaining non-core business,
offshore support vessel operator Maersk Supply, will continue, but
the company said that due to challenging markets the timing for
finding a solution is difficult to predict.
Net cash proceeds to Maersk from the separation of Maersk Oil,
Maersk Tankers and now Maersk Drilling is around $5 billion, the
company said.
Maersk is currently battling lower freight rates and higher fuel
costs and said in its second-quarter report Friday that it must
continue to cut costs.
It said last week that its earnings would be weaker than
expected this year, citing escalating trade tensions as well as
higher costs and lower rates, but in its report Friday it said cost
cuts and higher freight rates ahead will help improve
profitability.
Maersk, which moves about 18% of all containers world-wide and
is considered a barometer of global trade, said last week that it
expected its core profit this year to come in at $3.5 billion to
$4.2 billion compared with previous guidance of between $4 billion
and $5 billion.
The company said its profit will be hit by a 28% increase in its
fuel bill and a 1.2% decline in average freight rates.
With its previous 2018 guidance, Maersk was expecting an
underlying annual profit above the $365 million booked last year.
Without citing any numbers, it now forecasts "a positive underlying
profit."
The shipping firm Friday said second-quarter net profit was $18
million, from a $269 million loss in the same period last year. As
previously announced, revenue rose to $9.51 billion from $7.69
billion.
Amid continued pressure on freight rates and a significant
increase in fuel prices and adverse changes in foreign exchange
rates, the company said it would continue to make network changes
and reduce capacity on trades not yielding the desired
profitability.
It also pledged to halt all new vessel orders until at least
2020 and to increasingly lease new dry containers as opposed to
buying them.
Write to Dominic Chopping at dominic.chopping@wsj.com; Twitter:
@domchopping @WSJNordics
(END) Dow Jones Newswires
August 17, 2018 04:55 ET (08:55 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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