Maersk Line Readies for Much Lower Results in 2016

Maersk Line expects a significantly lower underlying result for 2016 compared to 2015 as the container shipping market sails into yet another challenging year.

For 2016, the container shipping market promises to remain weak and rates under pressure due to over-capacity, with global container shipping demand likely to grow by 1-3% in 2016, the company said.

“We expect the container shipping market to grow a bit more in 2016, but it will still be a challenging year. Not least as over-capacity and a large order book, sufficient for many years of growth, plague the industry. We will continue to drive out costs and tightly manage our capacity in line with demand. We will return chartered tonnage and close down underutilised or unprofitable services,” says Søren Skou, CEO of Danish container shipping giant Maersk Line.

Weak demand and very low freight rates have seen Maersk Line post USD 1.3 billion in its 2015 underlying result, down by 44% from USD 2.3bn reported in 2014.

The company’s revenue reached USD 23.7 billion, which is 13.2% lower than in 2014 (USD 27.4bn).

In the fourth quarter, the decrease was 25% compared to Q4 2014 with rates declining across all trades except North America and in the Asia – Europe trade, rates reached an all-time low.

In 2015, global container shipping demand growth was 0-1% and the global container fleet capacity growth was 8%. The low demand growth was due to weaker imports into Europe and slowdown in emerging market economies. The Europe, West Africa and South America (East Coast) markets had negative growth.

“At the end of 2015, rates were record low and our fourth quarter result was negative. In light of our expectations at the beginning of the year, our result is less than satisfactory. But considering the market in 2015 it is a solid financial performance,” says Skou.

However, according to Skou, despite these headwinds Maersk Line maintained its market share and imrpoved is competitiveness by continuing to reduce unit cost.

“We successfully implemented 2M, the world’s largest vessel sharing agreement. We launched a new container shipping line – SeaLand – in the Americas. We accelerated cost and transformation efforts to prepare our organisation to the future. Last but not least, we ordered new vessels and containers to support our growth ambition,” says Skou.

The unit cost decreased by 11.5% to a record low of 2,288 USD/FFE. The EBIT-margin gap to peers is at 6.6%-points (est.), in line with the +5%-points target.