A.P. Moller-Maersk Plunges into Red

A.P. Moller-Maersk reported its first full year net loss of $1.02 billion in 2009 as its core container shipping business plunged $2.1 billion into the red from a $583 million profit in the previous year.

The Copenhagen-based group, which booked a $3.46 billion profit in 2008, said it would return to a "modest" profit in 2010.

But container shipping, led by Maersk Line, the world's biggest ocean carrier, will remain in the red despite rising cargo volume and higher ocean freight rates.

"The loss is significant, but 2009 was an extraordinary year with historically low rates and low demand," said A.P. Moller-Maersk chief executive Nils Andersen.

"We managed to limit the loss by saving around $2 billion and we will continue to strengthen our competitiveness even further," Andersen said.

Group revenue shrunk 21 percent to $48.5 billion from $61.2 billion in 2008, mainly due to a 29 percent slump in container shipping revenue to $19.2 billion.

The number of containers transported by Maersk Line and Safmarine, a subsidiary focusing on the South African liner trades, fell to 13.8 million 20-foot equivalent units from 14 million TEUs in 2008, a one percent decline compared with a 13 percent drop in the global market.

Maersk said it compensated for falling volume by focusing more on carrying cargo on back haul routes for which rates are generally lower.

Average freight rates tumbled 28 percent to $2,370 per 40-foot container from $3,284 in the previous year.

Rates rose in the second half of 2009 after falling well below break even in the first six months but "need to rise further if the container shipping business is once again to become profitable."

Maersk said cargo volume is expected to increase by between three and five percent in 2010 and freight rates also are likely to rise "but are not expected to lead to an acceptable return.”

The carrier had idled 19 ships of 77,500 TEUs, or 4 percent of total capacity, by the end of 2009.

Ten older vessels of 39,800 TEUs were scrapped and the chartered fleet was reduced by 3 percent to 738,800 TEUs, equivalent to 36 percent of the total fleet.

Maersk Line booked an impairment charge of $147 million in the fourth quarter after terminating the lease of seven container ships.

The container shipping unit achieved $1.6 billion of cost savings through restructuring, reducing fuel consumption, optimizing networks and renegotiating supplier contracts.