LONDON — Damco’s reduced first-quarter loss came at a price as the Maersk Group’s freight forwarding and logistics unit ceded more market share to its rivals.
The loss narrowed to $9 million from $10 million in the first three months of 2014 as revenue shrank 9 percent year-over-year to $683 million largely because of exchange rate movements.
Damco “is on the same level as last year,” Maersk CEO Nils Andersen said as he announced that the Danish shipping and energy group’s first-quarter net profit grew to $1.6 billion from $1.2 billion, helped by a share sale and a sharply lower tax bill.
Damco remained the group’s worst performing business, with the rate of return on invested capital deteriorating to a negative 11.2 percent in the quarter from 9.3 percent a year ago while the group’s overall figure improved to 13.8 percent from 10 percent.
The company’s loss of market share accelerated in the quarter, with ocean freight volume dipping by 2 percent and air freight traffic collapsing by 19 percent. The supply chain management business bucked the trend with volumes rising 6 percent.
Damco’s ocean and air cargo figures are in sharp contrast to its leading rivals who increased their volumes in the first quarter. Panalpina’s ocean traffic grew 5.1 percent, and air freight traffic edged 0.6 percent higher. Kuehne + Nagel’s ocean traffic shrank by 0.7 percent as it put profit ahead of volume and air freight traffic grew 6 percent. Deutsche Post DHL increased ocean shipments by 2.3 percent and air cargo, 2.3 percent. Ceva’s ocean and air traffic grew 5 percent and 5.2 percent, respectively.
Damco’s negative figures followed a 6 percent drop in ocean traffic in 2014, when the market grew by around 4 to 5 percent, and a 16 percent dive in air freight in a market that expanded by 3 to 4 percent.
Andersen said Damco expects to make progress in cutting costs through the rest of the year, but it also needs to increase volumes.
The focus in 2015 will remain on driving commercial competitiveness and capturing targeted productivity improvements “through a number of ongoing select initiatives,” the company said.
A return to profit likely would place Damco among Maersk’s potential divestments as it focuses on four core businesses — container shipping, port terminals, oil production and exploration and drilling — according to industry analysts.
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