The Maersk Group, one of the largest ocean freight carriers in the world, said profits and revenue were negatively impacted by low average container freight rates and depressed oil prices and in the first quarter ended March 31.
Maersk reported profits for the period fell 86 percent to $224 million from $1.57 billion in the year-ago period. Revenue decreased 19 percent to $8.54 billion from $10.55 billion in the first quarter of 2015, predominantly due to a 37 percent drop in oil prices and 26 percent lower average container freight rates. This was partly offset by 7 percent higher container volumes and 15 percent higher oil entitlement production, Maersk said Wednesday.
“While market conditions remain challenging, we continue to adjust our cost base to the new conditions and maintain a good operational performance across our businesses,” said Nils S. Andersen, chief executive officer of the Copenhagen-based company. “We maintain our focus on strengthening the group’s position in the market and have completed acquisitions within APM Terminals and Maersk Oil, and in Maersk Line we have defended our market leading position.”
Maersk, a major carrier for apparel and textiles around the world, noted that it achieved a profit in six out of eight of its business unit.
The Maersk Line improved utilization, lowered unit costs 16 percent year on year and maintained its market leading position, delivering a profit of $37 million. Revenue in the unit fell 20 percent to $5 billion from $6 billion in the year-ago period.
This was driven by a 26 percent decline in average freight rates to $1,857 per 40-foot equivalent unit, from $2,493 FFE a year earlier, only partially offset by a 7 percent increase in volume. Maersk said the freight rate decline was attributable to lower bunker prices and deteriorating market conditions. Container freight rates declined across all trades, especially Maersk Line’s key trade routers to and from Europe, as well as Latin America and North America.
Maersk Line’s strategy remains an accelerated cost focus in line with the cost leadership strategy.
Maersk Group’s guidance for the rest of 2016 continued to forecast an under-lying profit significantly below last year’s $3.1 billion.
The Maersk Line unit reiterated the expectation of an underlying profit significantly below last year’s $1.3 billion, as a consequence of substantially lower freight rates going into 2016. Global demand for seaborne container transportation is still expected to increase 1 to 3 percent and Maersk Line said it aims to grow at least with the market to defend its market leading position.
The company also operates Maersk Oil, Maersk Drilling, APM Terminals and APM Shipping Services units.