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AP Moller Maersk : Maersk to Cut Services as It Battles Shipping Glut -- Update

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05/17/2018 | 04:32pm CEST

By Costas Paris and Ian Walker

A.P. Moller-Maersk A/S said it would cut back on capacity to combat falling freight rates and rising fuel costs, after the Danish shipping giant reported a weak first quarter that sent its shares down about 8%.

The world's biggest container operator said its underlying loss widened to $239 million from a loss of $139 million a year earlier, with Chief Executive Soren Skou blaming rampant overcapacity as the main culprit and warning that a trade war between the U.S. and China would dash any hopes of a recovery in the shipping industry after a long down cycle.

"In the short term we will be closing down some services," Mr. Skou said in an interview. "Overcapacity is the biggest defect."

Maersk shares were down 7.9% to 9,350 Danish kroner (about $1,480) on the Copenhagen Stock Exchange.

Maersk reported a net profit of $2.75 billion, compared with a profit of $245 million in the same period last year, but the gain came from the sale of two units, Maersk Oil and Maersk Tankers.

Mr. Skou said higher fuel prices had added $70 to the cost of shipping a container from Asia to Europe and across the Pacific. Maersk currently moves more than 4 million containers, or 19% of global capacity.

Freight rates between Asia and Europe hover around $780 per box, about half the $1,500 break-even level.

Maersk reiterated previous guidance that it expects 2018 underlying profit to be above the 2017 figure of $356 million, but Mr. Skou said that depends on growing geopolitical risks.

"A trade war between the U.S. and China would be very, very bad," he said, adding that new U.S. sanctions on Iran are "a driver" for rising oil prices.

"Costs are rising overall and becoming inflationary. That's no what we are used to," Mr. Skou said.

He said Maersk leases or charters around 400 ships from a total of 750 in operation and that a number of them would be returned to their owners.

Maersk bought German competitor Hamburg Süd for $4 billion last year, which expanded its network by around 30%, while cargo volumes have grown by 24%.

Mr. Skou said Maersk would stop moving cargo to and from Iran, fearing repercussions from Washington.

"No shipping line that operates globally will be able to do business in Iran if the sanctions come to full force the way they intend to," he said.

Container ships move the vast majority of manufactured goods and Maersk's performance is seen as a barometer of the health of global trade.

Write to Costas Paris at [email protected] and Ian Walker at [email protected]

Stocks mentioned in the article
ChangeLast1st jan.
AP MOELLER MAERSK A/S --End-of-day quote.
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Financials ($)
Sales 2018 38 124 M
EBIT 2018 1 456 M
Net income 2018 3 211 M
Debt 2018 9 386 M
Yield 2018 2,27%
P/E ratio 2018 13,39
P/E ratio 2019 16,16
EV / Sales 2018 1,05x
EV / Sales 2019 0,99x
Capitalization 30 601 M
Duration : Period :
AP Moller-Maersk Technical Analysis Chart | MAERSK B | DK0010244508 | 4-Traders
Technical analysis trends AP MOLLER-MAERSK
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 21
Average target price 1 833 $
Spread / Average Target 24%
EPS Revisions
Søren Skou Chief Executive Officer
Jim Hagemann Snabe Chairman
Bhushan Ivaturi Chief Information Officer & Vice President
Ane Mærsk Mc-Kinney Uggla Vice Chairman
Jan Leschly Director
Sector and Competitors
1st jan.Capitalization (M$)
AP MOLLER-MAERSK-10.04%30 601
BOLLORÉ-6.76%14 338
HAPAG-LLOYD AG10.63%7 571
DFDS A/S27.08%3 850