Maersk Q2 Figures Reveal Higher Revenues and Underlying Profits
16th August 2017
Maersk has released its second-quarter update. Extracts from the release are quoted below:
In Q2, the revenue of A. P. Moller – Maersk grew by 8.4% to USD 9.6bn year on year, mainly due to higher freight rates in Maersk Line. The underlying profit in Q2 improved from USD 134m to USD 389m with Maersk Line contributing with an underlying profit of USD 327m. As a result of post-tax impairments of USD 732m related to Maersk Tankers and APM Terminals, the reported result was a loss of USD 264m.
The performance of A.P. Moller – Maersk in Q2 was mainly driven by a profitable Maersk Line due to continued recovery in the container market and focus on restoration of profitability. Full-year guidance is reiterated for 2017, despite an expected negative financial impact of USD 200-300m in Q3 from the recent cyber-attack.
“Maersk Line is again profitable delivering in line with guidance, with revenue growing by USD 1bn year-on-year in the second quarter. The profit was USD 490m higher than the same quarter last year, based on higher rates,” says Søren Skou, CEO of A.P. Moller – Maersk.
Transport & Logistics reported a consolidated revenue of USD 7.7bn, which was an increase of 15% compared to same quarter last year, and an underlying profit of USD 442m which was improved significantly, in large part driven by higher container freight rates. Energy delivered an underlying profit of USD 182m in Q2, with Maersk Oil as the main contributor.
“Focus for the oil and gas related businesses in Energy remain on optimising performance and exploring new business models to strengthen resilience under the current market conditions,” Søren Skou emphasizes.
In the end of June, A.P. Moller – Maersk was hit by the malware “Not Petya” where system shutdowns resulted in significant business impact especially within the container business. Søren Skou elaborates:
“In the last week of the quarter we were hit by a cyber-attack, which mainly impacted Maersk Line, APM Terminals and Damco. Business volumes were negatively affected for a couple of weeks in July and as a consequence, our Q3 results will be impacted. We expect the cyber-attack will impact results negatively by USD 200-300m.”
TRANSPORT & LOGISTICS
Transport & Logistics is progressing towards operating as one integrated division, and delivering the expected synergies estimated to create a ROIC improvement of two percentage points by the end of 2019. Maersk Line’s volume growth of approximately 7-8% (equity weighted) at APM Terminals and the stronger results reported by Maersk Container Industry are examples of those synergies.
The announced acquisition of Hamburg Süd is progressing as planned. The transaction remains subject to regulatory approval, with an expected closing in Q4 2017. The announced agreement to divest Mercosul Line will facilitate the authority approval process in Brazil.
Maersk Line reported a profit of USD 339m (loss of USD 151m) with a positive ROIC of 6.7% (negative 3.0%). The underlying result was a profit of USD 327m (loss of USD 139m). Market fundamentals continued to improve in Q2 as demand growth of 4% outgrew nominal supply growth of 1.4%. The improvement in market fundamentals in past quarters has started to reflect in the freight rate, which increased 22% compared to Q2 2016 and 7.6% compared to Q1 2017. Freight rates increased by 36% on East-West trades and 17% on North-South trades. Transported volumes increased by 1.7% compared to Q2 2016. Volume grew on headhaul by 5.2%, however, offset by a decrease on backhaul by 5.6% as backhaul cargo was less attractive on some trades.
APM Terminals reported a loss of USD 100m (profit of USD 112m). The result was impacted by impairments of USD 250m (USD 8m) in a few commercially challenged terminals, partially offset by divestment gain of USD 34m. The underlying profit of USD 98m (USD 109m) was negatively impacted by exchange rates and lower rates.
GUIDANCE FOR 2017
A.P. Moller – Maersk’s expectation of an underlying profit above 2016 (USD 711m) is unchanged despite expected negative impact from the June cyber-attack. Gross capital expenditure for 2017 is still expected to be USD 5.5-6.5bn (USD 5.0bn).
The guidance for 2017 excludes the acquisition of Hamburg Süd.
Transport & Logistics reiterates the expectation of an underlying profit above USD 1bn, despite expected negative result impact from the June cyber-attack estimated at a level of USD 200-300m, of which the majority relates to lost revenue in July. The vast majority of the impact of the cyber- attack was in Maersk Line.
Maersk Line reiterates the expectation of an improvement in excess of USD 1bn in underlying profit compared to 2016 (loss of USD 384m) mainly due to improvements in freight rates and partly increasing volumes. Global demand for seaborne container transportation is still expected to increase 2-4%, but in the upper end of the range.