World's largest shipping company A.P. Moeller-Maersk A/S (OMX: MAERSK A, MAERSK B) reported profit for the period of just under 1.2 billion US Dollars (EPS of 248 USD or around 1448 DKK) on Wednesday. This is almost on par with last year but operational result excluding one-off items is around zero. The company admits that the underlying result isn't satisfactory and the highlight numbers are skewed by an extraordinary item related to the Algerian tax claims settlement. Consolidated first quarter revenue of 14.3 billion is down slightly year-on-year. EBITDA of about 2.5 billion USD is 38% lower than last year. Cash flow was 1.2 billion on the positive side, down from 2.3 billion, on higher investments. This does not include the tax settlement, since that cash will be coming in later in the year.
Market share of Maersk Line has now stabilized around 16% after strong growth last year and the company does not aim to aggressively grow it further. Last year it had a very strong first quarter. The net operating loss of 600 million is about the same as on Q4 2011. Bunker price was up 31% and freight rates were down by 9%, slashing margins compared to last year. Excluding higher bunker fuel prices, unit costs were down by 1% since ships were running at a lower speed, then in turn lessening fuel consumption.
The company expects gradual improvement as freight rates have now been improving. There is also an expectation for a more stable bunker fuel price picture going forward. The Daily Maersk has been well received and has changed the market dynamic on Asia-Europe route. Maersk Line tends to be able to price a little bit above an average competitor. The company has seen less exports from Asia to Europe but higher exports from Europe to Asia. CEO Nils S. Andersen said in the conference call that the company thinks the industry is ready to “review capacity” in unison if rates do not develop “as expected”. For the year Maersk Line expects” negative to neutral “result (previously negative).
In addition to the 902 million USD tax solution gain Maersk Oil’s result was also helped by higher oil prices. There was a 25% decline in production to 254 000 boepd but the average oil price of 119 USD mitigated some of the decline in profits. Higher exploration activity is ongoing. Revenue was around 2.54 billion (vs. 3.07), EBITDA at 1.85 billion (2.55) and net profit of 1.3 billion. APM Terminals' profit improved. Revenues were down 1.2 billion (1.06) EBITDA margin and bottom line were up. Reduced ownership share in Xiamen terminal in China gave a small one-off gain. Taken into account the higher oil price and the one-off gain Maersk Oil expects 2012 result to be on par with last year (previously ‘clearly weaker).
Maersk Drilling has a near 100% contract coverage and grew quarterly revenues to 488 million. Profit for the period climbed to 125 million, which is determined to be a good result. Ultra-harsh and ultra-deepwater and mid-water rigs are fully covered with new contracts signed going forward too. Maersk Supply Service also performed rather well with revenue of 215 million and a profit of 42 million. It has two thirds of capacity covered for 2012 highlighted by four long-term contracts for large AHTS vessels in Brazil and Africa. Maersk LNG divestment is completed and the company feels that was done at an opportune time. CEO Andersen hinted of possible further divestments but did not go into details. There wasn’t a lot of colour on Dansk Supermarked’s results that were down to 267 million DKK.
The company also raises annual group-wide outlook slightly. The company expects results slightly below 2011 level as opposed to lower result with CAPEX around the same level as last year. The outlook is very sensitive to market situation. The market demand outlook is the same. The investors had already been expecting some sort of a guidance raise, so coupled with the disappointing quarter this wasn’t enough to avoid a sell-off. The B-share closed at 37 840 DKK (~6480 USD).
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