Maersk Profit Weighed down by Freight and Oil Slumps
Danish shipping and oil conglomerate A.P. Moller-Maersk on Friday reported a near halving of profits as it was hit by weaker container freight rates and lower oil prices.
The decline "was primarily due to container freight rates deteriorating to a historically low level, especially in the later part of the third quarter, and profits in Maersk Oil being impacted by the lower oil price," chief executive Nils Andersen said in a statement.
The average container freight rates were down by 19 percent compared to the same period a year ago, while oil prices had plunged 51 percent, the group said.
Shipping unit Maersk Line, seen as an international trade bellwether as it controls around 15 percent of global sea freight, said on Wednesday it would cut 4,000 jobs by the end of 2017 and defer vessel investments.
It followed an announcement by Maersk's oil business last week that it would cut between 10 to 12 percent of its workforce due to slumping oil prices.
"It is a world of slow growth, no question about that, but the real concern we need to have is that we operate in (the) industry of shipping where there is a lot of capacity and the market is not growing as strongly as participants in the market expected," Andersen said.
In response to sluggish demand "we are reducing costs and we are also stopping our investments a little bit," he said.
But strengthening the group's balance sheet in previous years meant it still had "money to invest in distressed assets or interesting assets, within our core businesses," he added.
"It is clear that Maersk Line has found itself in the epicentre of the tremors in the container market," Sydbank analyst Jacob Pedersen told Danish news agency Ritzau.
The group's net profit fell to $755 million in the third quarter from $1.465 billion a year ago as revenue dipped 17 percent to $10.11 billion.
Shares in Maersk edged up 0.5 percent in mid-morning trading on the Copenhagen stock exchange, where the main index was 0.2 percent higher.
Source: Agence France Presse
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