Maersk Quarterly Profit Triples on Rising Freight Rates, Falling Costs
August 19 2020 - 11:19AM
Dow Jones News
By Costas Paris and Dominic Chopping
Taking container ships out of service is proving profitable for
A.P. Moeller-Maersk A/S.
The parent of Maersk Line, the world's largest boxship operator
by capacity, more than tripled its net profit in the second quarter
as higher freight rates and lower fuel costs offset lower shipping
volumes that came as a result of the global coronavirus
pandemic.
"We took out 20% of capacity and that saved us costs and boosted
utilization rates," Maersk Chief Executive Søren Skou said in an
interview. "We managed our network like UPS and FedEx, adjusting
capacity to demand."
Maersk reinstated its earnings guidance on the upbeat report and
now expects to see operating earnings of between $6 billion and $7
billion, higher than original guidance of around $5.5 billion.
Organic volume growth in its ocean unit is expected to be in line
with or slightly lower than the average market growth.
"We are benefiting from the U.S. consumer and the stimulus
packages, with more money spent on goods like home improvements now
that people spent less on services like travel, restaurants and
entertainment," Mr. Skou said.
Maersk is the latest in a string of carriers to report strong
earnings in the June quarter, defying earlier projections that
ocean carriers would pile up red ink in the face of falling
shipping demand in the wake of coronavirus lockdowns.
Carriers have responded by idling ships and canceling dozens of
sailings on major trade routes, however, which has helped push
freight rates on some major trade lanes to historically high
levels.
Maersk returned about 10% of its container capacity to ship
charterers, and with fuel costs down 25% from a year ago the
carrier saved $250 million in the second quarter. Average freight
rates in the second quarter were 4.5% ahead of last year's second
quarter.
The container freight prices appear to be rising this month as a
peak shipping season once forecast to be weak now appears to be
picking up steam. Average weekly freight rates from Asia to the
U.S. West Coast surged in the past week to $3,071 per container,
more than double the rate in mid-May and 110% higher than the same
period last year, according to the Freightos Baltic Index.
Maersk, which moves 17% of all containers world-wide, according
to maritime data provider Alphaliner, made $427 million in the
quarter, up from $141 million a year earlier, beating a $281
million average analysts' forecast from FactSet.
Revenue in the second quarter fell 6.5% to $9 billion, while
earnings before interest, tax, depreciation and amortization of
$1.7 billion beat Maersk's own guidance of slightly above $1.5
billion.
Global container trade declined by around 10% in the second
quarter and Maersk said that although demand is expected to
gradually improve sequentially in the third quarter, it will
significantly decline in 2020 as a whole compared with 2019.
Maersk shares were trading up 4.3% in Copenhagen at 9,700 Danish
kroner.
Write to Costas Paris at costas.paris@wsj.com and Dominic
Chopping at dominic.chopping@wsj.com
(END) Dow Jones Newswires
August 19, 2020 11:04 ET (15:04 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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