The container arm of Denmark’s AP Moller-Maersk has confirmed the Q2 loss is $658m lower than its $507m profit for the corresponding period in 2015.
Q2 revenue was $5.06bn, down 19% period-on-period on the back of a 24% decrease in average freight rates due to lower bunker prices, weak demand and overcapacity. Compared to Q2 2015, Maersk Line’s average rate declined to $1,716 which is the lowest average freight rate ever reported by the world’s largest container carrier.
The sobering numbers shine further light on Maersk Line's $114m net loss for the first half of 2016, reported by Seatrade Maritime News on August 12.
Maersk Line said volumes grew 6.9% as it delivered on its objective of growing at least in line with the market to defend its leading position. Capacity grew 2.2%.
Overall container shipping demand growth was about 2% and the global capacity growth was about 6%. “Consequently, the market conditions continue to be very challenging,” Maersk Line said.
Unit costs reached an all-time low of $1,911 per FFE in the second quarter of 2016 “due to a clear cost focus and very tightly managed capacity”.
“Freight rates dropped in the second quarter of 2016 to record low levels and we made a loss as we were unable to reduce costs at the same speed. We are not satisfied with our second quarter result. We continue to deliver on our growth and cost objectives. We have won market share and we have record low unit costs as our network is close to fully utilised. On top of this, we maintain our lead on competition measured on profitability,” says new ceo Søren Skou.
Maersk Line announced last November a cost reduction programme designed to reduce Selling, General and Administrative Expenses (SG&A) by $250m per year in 2016 and 2017 including reducing the work force by at least 4,000 positions.
It says this is “progressing as planned” but maintains its 2016 full year expectation of a significantly lower underlying result than $1.3bn net profit in 2015.
“We believe that the freight spot rates have bottomed out and we anticipate that they will increase in the third quarter due to seasonal factors.
“However, the rates will remain under pressure due to overcapacity and low demand. And while we see improvements in e.g. European imports, we maintain our expectation that the demand for container shipping will only grow by 1-3% in 2016,” Skou said.
Maersk Line employs 7,700 seafarers and 22,000 land-based employees and operates 630 container vessels, serving customers through 306 offices in 114 countries.
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