A.P. Moller-Maersk, owner of the world’s biggest ocean container carrier reported a record $5 billion net profit in 2010 today, only a year after suffering the first ever loss in its 106 year history, amounting to $1 billion.
The Danish shipping and energy group pinned the dramatic turnaround on increased ocean freight rates and cargo volumes, lower unit costs and higher oil prices.
But it cautioned 2011 results would be lower than last year largely because the supply of container capacity likely will outpace demand.
The 2010 profit, which beat the previous record of $4.69 billion in 2004, was achieved on a 15.5 percent increase in revenue to $56.1 billion from $48.6 billion in 2009.
Container shipping, dominated by Maersk Line, swung to a net profit of $2.64 billion from a year-earlier loss of $2.13 billion on a 31 percent jump in revenue to $26 billion.
Chief Executive Nils Andersen said it was more relevant to compare the 2010 result with a profit of “only” $205 million in 2008, when market conditions were comparable to last year.
“Even if markets improved strongly in 2010, container rates and volumes were only at a par with 2008. This means that the significant profit improvements stem from our own efforts to become more competitive,” Andersen said.
Maersk cut unit costs, excluding bunker costs, by an additional four percent, reducing total costs by $800 million in 2010. Fuel consumption per unit was reduced by an additional 10 percent, partly due to slow steaming.
Average freight rates, including surcharges, increased by 29 percent to $3,064 per FEU from $2,370 in 2009.
Traffic grew five percent to 14.6 million TEUs from 13.8 million TEUs, trailing market growth of 13 percent.
Maersk said it lost market share in 2010 because it lacked capacity to meet to an unexpected pickup in demand and had focused on higher paying cargo at the expense of volume.
The carrier boosted market share in the fourth quarter of 2010 and aims to win back more lost business in 2011. “Not through rate dumping, but by delivering a superior product as regards reliability, availability and customer service,” Andersen said.
On Monday, Maersk signed a $1.9 billion order with Korea’s Daewoo Shipbuilding for 10 18,000 TEUs vessels, the world’s largest ships, for delivery in 2013 or 2015. It also secured options on 20 identical ships, potentially the world’s largest ever shipyard order worth $5.7 billion.
Maersk said it expects global demand for seaborne containers to grow by 6 to 8 percent in 2011, and that they expect a “satisfactory” result in 2011 from container shipping but below the 2010 figure.
Maersk Tankers lost $118 million on low freight rates and impairment charges of $111 million but this was an improvement on the $255 million loss in 2009. The Svitzer tug and harbor services unit increased profit to $130 million from $85 million and Damco, the logistics business, earned $44 million.