AP Moller-Maersk has stunned the shipping industry by reporting a first quarter 2011 profit of US$1.2 billion, a massive increase of 82 percent compared to the equivalent period in 2010.
Revenue for the period increased by 10 percent to US$14.5 billion (from US$13.2 billion), primarily due to higher container freight rates, container volumes and oil prices according to the company. Maersk said the profit increase was driven by better operational performance in most business units. The group's ROIC increased to 11.7 percent from 7.6 percent.
"We have had a good start to the year and are very satisfied with the results," said AP Moller-Maersk Group CEO Nils S Andersen. "Our businesses have performed very well, even as tanker rates have remained low and container rates have been decreasing during the period. In the past six months we have made significant investments in ships, terminals, drilling rigs and oil fields. These reflect our continued strong confidence in the long term future of our markets and not least our ability to continue to compete successfully."
Container activities made a profit of US$438 million (US$169 million) and a ROIC of 10.2 percent (3.9 percent). The number of containers carried increased by five percent to 1.84 million FFE, while the average freight rate of US$2,908 per FFE was two percent higher than the same period last year.
Maersk Oil made a profit of US$512 million (US$450 million) and a ROIC of 44.1 percent (35.2 percent), positively affected by a 38 percent higher average oil price at US$105 per barrel, partly offset by tax rate increase in the UK. The group's share of oil and gas production declined by 13 percent to 30 million barrels, primarily due to higher oil prices as well as reduced investments and costs in Qatar. Exploration costs of US$141 million were at the same level as last year.
The result for terminal activities was a profit of US$139 million (US$114 million). container throughput increased by eight percent to 7.8 million TEU and ROIC increased from 8.8 percent to 11.6 percent, primarily through efficiency gains and cost reductions.
Tankers, offshore and other shipping activities made a profit of US$213 million (US$115 million) and a ROIC of 5.9 percent (3.1 percent). The group has announced it is seeking to divest Maersk LNG.
The group still expects a result lower than the 2010 result, as stated in the annual report for 2010, including the US$0.7 billion gain from the divestment of Netto Foodstores, UK.
The group expects the global demand for seaborne containers to grow by six to eight percent in 2011. The global supply of new tonnage is expected to match or grow more than the freight volume especially on the Asia to Europe trade. Maersk expects freight rates to remain under pressure short term, but see a stronger market in the second half year, while increased bunker and time charter costs are expected to continue to impact margins negatively. The group's container activities expect a satisfactory result, but below the 2010 result.
Maersk Oil expects a result below the 2010 result, based on a higher level of exploration activities, a share of oil and gas production of around 120 million barrels which is 13 percent below 2010, and an oil price of US$100 per barrel.
The outlook for terminal activities, and tankers, offshore and other shipping activities, as well as retail activity and other businesses, is expected to be above 2010.
Maersk said that the outlook for 2011 is subject to considerable uncertainty, not least due to developments in the global economy and global trade conditions. The oil price has been affected by political unrest in North Africa and the Middle East and the outcome can have material impact on the Group's result.
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