Maersk: It is full steam ahead despite weak rates

The world's largest container shipping company A P Moller-Maersk will go full steam ahead with large investments to generate focused future growth, even though tougher shipping conditions are shaping up for the quarters to come, its chief executive said.


"We will also continue to streamline our costs side, but we are poised to invest in growth now. This also means that the deteriorating freight rates won't make our hands shake. They won't make us scale back our ambitions," Maersk chief executive Nils Smedegaard Andersen told Dow Jones Newswires.


Earlier, Maersk announced it's first-quarter net profit rose 85 percent to US$1.22 billion, but also cautioned that declining freight rates will hamper the profitability of its container shipping division, Maersk Line, in the second quarter.


Analysts have fretted that the weaker rates could lead to a full-year guidance reduction, but Maersk kept its full-year targets unchanged.


Smedegaard Andersen said he expects second-half 2011 rates will be "somewhat better", but stopped short of guaranteeing weak rates won't lead to a guidance revision later this year.


"We are dependant on market developments, so I can't give any guarantees," Smedegaard Andersen said. "What I can say is that the tougher environment will hurt our competitors more than it will us."


"We have better margins than our competitors, so they will be the ones suffering," he said.


The coming three quarters will also be burdened by higher bunker fuel prices and added time charter costs, which Maersk expects will impact shipping margins negatively throughout 2011, and drive the company's earnings below the 2010 level, it said.


"We will still continue to invest heavily in continued organic growth," Smedegaard Andersen said, underlining that future investments will be directed toward building its core business areas - terminals, oil and gas and shipping. As a consequence of this focus, Maersk recently sold off its UK supermarket chain Netto UK. A next step is the planned divestment of its liquified natural gas unit Maersk LNG.


"The outlook for our LNG business is actually quite good after we returned it to profitability last year, but with only eight ships we can't make a difference in this industry. That's why we have decided to say: let's invest elsewhere in the company instead," Smedegaard Andersen said.


Maersk's assets in the LNG business are worth roughly $1.3 billion, and the company is already in talks with potential buyers, Smedegaard Andersen said.


"We are still at an early stage in the sales process. A number of potential buyers have flagged up their interest, but we will only sell if the price is right," he said, declining to put a price tag on the unit. If Maersk does decide to sell, a deal will likely be closed this year, he said.
(Source:http://www.cargonewsasia.com)