Maersk CEO Says Shipping Rates Still Too Low -- Update
By Costas Paris and Dominic Chopping
Danish shipping and energy giant A.P. Moeller-Maersk A/S swung to a profit in the fourth quarter, but the company's leader said global freight rates are still depressed.
"We are simply not making enough money," Chief Executive Soren Skou said in a telephone interview Friday. "We need to improve profitability through a combination of higher container (freight) rates and cutting costs."
Mr. Skou said 2017 was "an unusual and eventful year" after suffering a $300 million cyberattack last June along with buying and selling $14 billion worth of companies.
Maersk reported a fourth-quarter net profit of $386 million, from a $2.68 billion loss in the same period last year. Revenue rose to $8.17 billion from $7.08 billion.
The result came in shy of analyst expectations of a $400 million profit, reflecting a slow recovery in ocean freight rates.
Maersk said it expects 2018 underlying profit to be above the 2017 result of $356 million, while earnings before interest, tax, depreciation and amortization is seen between $4 billion and $5 billion, from $3.5 billion in 2017.
Mr. Skou said Maersk wants to move the shipping and logistics industry into the digital age through a joint venture signed last month with International Business Machines Corp., using blockchain technology.
The move comes as Maersk and IBM have been attempting to reinvent themselves. IBM, the 106-year-old technology giant, has been looking to new lines of business including blockchain as sales in its legacy business of selling hardware and software slow. Maersk has been trying to transform itself to into a global supply-chain major like United Parcel Service Inc. and FedEx Corp. by integrating its transport and logistics units and spinning off its oil business.
"In the 1980s the freight cost of moving a container across the ocean was $4,000," Mr. Skou said. "Now it's $2,000, but there is still the same paper trail of documents as it was 100 years ago. A digitized paperwork can cut costs by at least 20%."
The company's shipping unit, Maersk Line, which contributed 80% of the group's revenue in the quarter, made a $53 million underlying profit, compared with a loss of $155 million a year earlier. Maersk said freight rates slowed from the beginning of the fourth quarter after peaking in the second quarter.
Maersk Line, the world's leading container operator, moves close to 19% of seaborne freight after the acquisition of German peer Hamburg Süd for $4.4 billion last November.
Mr. Skou said Maersk is now looking for "smaller, targeted acquisitions" and that he expects synergies from the deal with Hamburg Süd to cut annual costs by about $1 billion by 2019.
Maersk is making progress in breaking up its conglomerate structure, having sold its oil unit to France's Total SA and its tankers arm to its main shareholder A.P. Moller Holding for a combined $10 billion. It has set a deadline to sell its oil drilling arm by the end of this year.
Write to Costas Paris at firstname.lastname@example.org and Dominic Chopping at email@example.com
(END) Dow Jones Newswires
February 09, 2018 11:15 ET (16:15 GMT)Copyright (c) 2018 Dow Jones & Company, Inc.