Copenhagen: Denmark’s A.P. Moller-Maersk said it will not repeat last year’s record earnings in 2011 due to expected lower oil output combined with uncertainty about freight rates and oil prices.
The shipping and oil group beat 2010 forecasts on the back of a container shipping recovery, swinging from its worst result in 2009, when the global economic crisis hit trade and shipping, to its best result ever.
Investors welcomed the bumper profit and a tripling of Maersk’s dividend to 1,000 Danish crowns per share, with the shares 2% higher at 1020 GMT.
Maersk, which owns the world’s biggest container shipping company Maersk Line and produces oil and gas mainly in the North Sea and Qatar, posted a net profit of 28.2 billion Danish crowns ($5.18 billion) for 2010 against a loss of 5.49 billion in 2009.
The profit beat a forecast of 27.7 billion crowns in a Reuters poll and was on the high side of its own November guidance for profit “in the order of $5 billion”.
“Things look better going into 2011 than a year ago, but our share of oil production will be lower and we still see some uncertainty about the oil price and where container rates will end up,” chief executive Nils Smedegaard Andersen said.
Maersk’s chief financial officer Trond Westlie said that the higher dividend reflected the “solidity of the group” and the way it sees the business progressing. The company does not have a stated dividend policy.
The results came two days after Maersk said it would order 10 huge container ships from Korea’s Daewoo Shipbuilding & Marine Engineering for $1.9 billion and take options on 20 more vessels of a similar size to capitalise on expected growth on Asia-Europe routes.
They also followed improved results from container shipping rivals including Singapore’s Neptune Orient Lines and Korea’s Hanjin Shipping.
“The company issued a cautious outlook for 2011, which was expected, and which is in line with former patterns of a usually conservative guidance,” ING shipping analyst Axel Funhoff said.
“The market has factored in this cautious guidance already,” Funhoff added.
The container shipping business -- where Maersk Line’s 570-vessel fleet is the world market leader -- rebounded but missed analysts’ average estimate for its operating profit, while the oil and gas business beat expectations.
Average freight rates and volumes for Maersk’s container ships recovered to near pre-crisis 2008 levels after a steep plunge in 2009.
Tanker shipping lost money with rates depressed throughout 2010, and Andersen said they would remain low this year.
“The Group’s container activities expect a satisfactory result, but below the 2010 result,” Maersk said.
Analysts took “satisfactory” to mean cautiously optimistic guidance. “We interpret (that) as a result above market consensus,” Jyske bank trader Martin Munk said.
Assets, not M&A
Andersen said Maersk had the financial strength to invest, but would not embark on an M&A spree.
“We can’t invest in everything at once but we do in fact have the strength to take some decisive steps by investing in the right assets -- not acquisitions (of companies) -- and the right ships,” he said.
Cash flow used for capital expenditure this year will be significantly higher than in 2010, said Maersk, which used $5.5 billion to reduce debt last year.
Maersk said it expected global demand for seaborne containers to grow by 6-8% in 2011 and the global supply of new tonnage to match or grow more than freight volumes, especially on the Asia to Europe routes.
The group’s oil and gas activities benefited from a 29 percent rise in oil prices to an average of $80 per barrel, but were hit by a lower share of production from its Qatar field.
Maersk Oil, which has production in Denmark, Qatar, the United Kingdom, Algeria and Kazakhstan, expects to see results fall in 2011 from the 2010 level due to lower production even though it assumes an average oil price of around $90 a barrel.