Maersk Profit Jumps on Lower Costs, Higher Shipping Volumes

May 21, 2014 5:00 am ET

(Updates with analyst comments from fourth paragraph, vessel sharing delay in last.)

May 21 (Bloomberg) -- A.P. Moeller-Maersk A/S’s container- shipping line, the world’s largest, said first-quarter profit more than doubled and raised its forecast as lower costs and higher volumes countered falling freight rates. The stock rose the most in more than four months.

Net income at Maersk Line rose to $454 million in the three months through March from $204 million a year earlier, the Copenhagen-based company said today in a statement. Earnings before interest and taxes at parent company A.P. Moeller-Maersk rose to $2.24 billion, beating the $2.09 billion median estimate of analysts surveyed by SME Direkt.

Maersk Line, which transports about 15 percent of the world’s containers, has been battling industry overcapacity after a boom in ship orders collided with the global financial crisis, triggering the worst slump in prices for carrying cargo since containerization became global in the 1970s. The company said today it now expects its 2014 net income to be “above” the 2013 result, compared with a previous forecast for profit “in line” with last year’s $1.5 billion.

“The decline in unit costs seen in the first quarter would isolated support higher full-year results than the company guidance,” Frode Moerkedal, an analyst with RS Platou Markets AS in Oslo, said in a note to clients. He repeated a recommendation to buy the stock.

Shares Rise

Maersk shares rose as much as 4.2 percent in the Danish capital, the steepest intraday gain since Jan. 7, and were trading up 3 percent to 13,730 kroner as of 10:16 a.m. local time, giving the company a market value of 293 billion kroner ($53.9 billion).

Parent Maersk, which also owns a port operator and an oil division, said it now expects 2014 underlying profit, which excludes discontinued operations, impairment losses and divestment gains, will be about $4 billion, up from a previous estimate of about $3.6 billion. The higher expectations are “driven by improved operational performance and utilization,” the company said.

Freight volumes increased 7.3 percent in the quarter while rates declined 5.1 percent. Unit costs fell by 9 percent, the company said.

“The unit cost decline reflects a high load factor given that volumes increased more than expected,” Moerkedal said. “Load factors may and will fluctuate and it could be difficult to cut unit costs at the same pace in coming quarters.”

Maersk Line also said today that plans to form a vessel sharing agreement with its two biggest competitors, Mediterranean Shipping Co. and CMA CGM SA, has been delayed, pending competition-authority approval. The so-called P3 network, which includes 255 vessels on 29 loops, will start operating “in the autumn of 2014” compared with a previous estimate of a start in the second quarter, the company said.