Cyber-attack impact hangs over Maersk’s Q3 earnings

Cyber-attack impact hangs over Maersk’s Q3 earnings

Maersk is expected to report strong volume and revenue on the key east-west trades. Photo credit: Shutterstock

Maersk Line will first have to factor in an up to $300 million loss from its July cyber attack before joining peers in celebrating the strong growth in peak season volume and revenue when the Danish carrier reports its third-quarter results tomorrow.

The results will reflect the financial damage inflicted by the late-July cyber breach, and it remains to be seen whether the impact will be enough to offset the profitability earned from strong volume on key east-west trades.

The NotPetya virus forced Maersk Group to shut down all its communications with customers and within the company, affecting the carrier, APM Terminals, and forwarding arm Damco. It was several weeks before business was back to normal, and the loss of business was estimated to have been as high as USD300 million.

But encouraging for the carrier, which reported a second-quarter profit of $339 million, is the solid results of its peers such as OOCL, which posted a 26.5 percent year-over-year increase in revenue to $1.45 billion, with total volumes growing by 5 percent to 1.6 million TEU. Unsurprisingly, out of the major east-west trades, the one that stood out was Asia-Europe, and by some measure. Compared with the third quarter of last year, OOCL volume carried on the trade increased by almost 25 percent to 297,897 TEU.

According to Container Trades Statistics, total European imported volume grew by 4 percent in the first eight months of 2017 compared with the same period in 2016. More than half of all containers imported into Europe were from Asia, with volume growing by 5.4 percent from January to August.

The strong demand on Asia-Europe has not been seen since the frantic restocking in 2010 after retailers ran down inventory following the global financial crisis. Maersk Line is a solid performer on this trade and its scale will certainly be reflected in the third-quarter volume figures.

The trans-Pacific trade, another area where Maersk Line has a solid presence, also saw volume increases that have driven up container throughput at US ports to record levels in some cases.

Container trade at the Port of Savannah grew by 32 percent in October, with Garden City Terminal moving 410,000 TEU, an increase of nearly 100,000 TEU year on year. It was the first time in the port's history that it topped 400,000 TEU in a single month. For the fiscal year to date (July 1 to Oct. 31), Savannah handled 1.42 million TEU, up by 12.3 percent.

The Port of Charleston handled 7 percent more containers from January to August at 1.1 million TEU, according to PIERS, a sister product of Asian container volume through the Port of Jacksonville jumped 19 percent in the last 12 months ending in September to more than 1 million TEU.

Container shipping analyst Alphaliner said global container throughput growth was on track to exceed 6 percent in 2017, and which is expected to lift the TEU-to-GDP multiplier to 1.7 times global GDP growth, reversing the recent downward trend that has seen the multiplier drop to below 1 in the previous two years.

Following Maersk Line’s good second quarter, the joint Maersk Group and Line chief executive, Soren Skou, said that after using the price war in 2016 to build up his carrier’s market share, the strategy employed in the second quarter was to maintain a profitable business rather than trying to capture more of the market.

The approach saw the carrier’s second-quarter container volumes rising just 1.6 percent while average revenue per FEU shot up 21 percent to $2,086 per FEU, so it appears to have been successful.

But the third-quarter peak season period was characterised by rising volume and falling freight rates on Asia-Europe and the trans-Pacific, a curious phenomenon that suggests the chase for market share is still going on and that Maersk Line will have no option but to participate.

However, other explanations for the high volume-low rate phenomenon have been put forward. One is that when volume began to pick up the carriers brought in extra loaders that quickly added to the structural overcapacity and eroded rates. A series of rate increases on the key trades were ignored by the market and rates declined instead.

Another explanation, this one suggested by BIMCO chief economist Peter Sand, is that to test the strength of the market, the container lines kept putting capacity into the trades until the prices began to drop. “Only by doing that can they reveal the true strength of the market,” he said.

Maersk Line maintained its expectation that the transport and logistics division would see underlying profit above $1.0 billion, even after absorbing the estimated $200 million to $300 million cost of the cyber attack.

In a note to customers, HSBC was positive on Maersk Group and gave three reasons: strong container industry fundamentals will support a recovery in Maersk Line’s profitability, the $600 million of targeted synergies within the transport and logistics division to be achieved by 2019, and the expected value to be created from the separation of the Energy division.

Maersk agreed to sell its oil division to Total with effect from 30 June 2017. The enterprise value was $7.45 billion, consisting of 97.5 million Total shares worth $4.95 billion at the time of the announcement and the assumption of $2.5 billion of debt.

Contact Greg Knowler at and follow him on Twitter: @greg_knowler.


In a couple of days we will have the results and explanations from Maersk.