Maersk Line swung to a $204 million operating profit in the first quarter from a $599 million loss a year earlier, its fourth successive quarter in the black, driven by cost savings, higher freight rates and a lower fuel bill that more than compensated for flat container volumes.
The world’s largest ocean carrier said it expects full-year earnings will exceed the $461 million profit in 2012, mainly on cost cutting, even as it downgraded its forecast for global container demand growth to between 2 percent and 4 percent from the 4 to 5 percent it projected three months ago.
“Maersk Line is much more competitive and has gained strength to deal with the challenging shipping markets,” said Nils Andersen, CEO of the Danish carrier’s parent A.P. Moller-Maersk.
Revenue stalled at $6.3 billion as a 4.7 percent increase in average freight rates to $2,770 per 40 foot container balanced a 4 percent decline in traffic to 4.2 million 20-foot-equivalent units.
Maersk’s unit cost per 40-foot container shrank by 7.1 percent to $2,871, mainly driven by more efficient deployment of vessels across its route network.
The fuel bill declined by 26 percent to $1.4 billion, due to a 19 percent drop in the fleet’s fuel consumption as ships reduced their sailing speeds and a 9 percent decrease in the average bunker price.
The improved result boosted the return on capital to 4 percent from a negative 12.7 percent in the first three months of 2012. “However, profitability levels remain unsatisfactory,” Andersen said.
Maersk idled 28 ships totaling 163,000 20-foot-equivalent container units during the quarter, equivalent to a quarter of the total idle capacity of the world fleet.
Maersk will not join the price war on the Asia-Europe trade, but it is also not prepared to give up last year’s “very high” market share, Andersen said without elaborating.
Maersk reduced its Asia-Europe slots and achieved “relatively high“capacity utilization during the quarter. “Our competitors are doing something different and they are paying the price,” he said.
“Our competitors have all lost money. When we have a tough time … our competitors have a bad time,” Andersen said. Maersk took out capacity to increase utilization because it read the market better than some of its rivals.
“We do expect a lot of volatility going forward” before there is a better supply-demand balance in the market.
A.P. Moller-Maersk’s first quarter profit declined 33 percent to $790 million from a $1.2 billion profit a year earlier, which was impacted by the settlement of a $899 million tax dispute in Algeria and divestment gains of $325 million before tax. Revenue dipped 2 percent to $14.1 billion.
Maersk Line was the No. 2 carrier in U.S. container trade in 2012, ranking first in imports, with a 10.6 percent market, share but lagging rival Mediterranean Shipping Co. in exports, with a 9.8 percent market share.