Danish container shipping firm A.P. Moller-Maersk (AMKAF.PK, AMKBF.PK) reported Friday a sharp decline in its second-quarter profit, negatively impacted by weakness in the average container freight rates and oil price. Further, the company backed its forecast for fiscal 2016, expecting significantly lower underlying earnings. Operating expenses decreased by $808 million, mainly due to lower bunker prices and cost saving initiatives as well as lower oil exploration costs. The shares were gaining around 5 percent in the morning trading.
For the second quarter, group share plunged to $101 million from last year's $1.07 billion. Earnings per share were $5, down from $49 a year ago. Maersk Line generated a loss of $151 million, compared to last year's profit of $507 million in challenging market conditions.
The underlying profit for the Group was $134 million, compared to last year's $1.1 billion. The profit was significantly lower than last year for all businesses except Damco.
Profit before depreciation, amortisation and impairment losses, or EBITDA, was $1.78 billion, down from $2.63 billion in the prior year.
The company's quarterly revenues decreased 16 percent to $8.86 billion from $10.53 billion last year, as lower average container freight rates and oil price offset higher volumes.
Average freight rates declined 24 percent to $1,716 /FFE from last year's $2,261/FFE. Average fuel price fell 26 percent to $194 per tonne from last year's $335 per tonne. This was partly offset by 6.9 percent higher container Transported volumes to 2,655k FFE and 8.2 percent higher oil entitlement production.
The company attributed the freight rate decline mainly to lower bunker prices and weak market conditions. Container freight rates declined across all trades, and North America and West Central Asia declined the most.
Recognizing the Group's low growth and returns, the Board of Directors during the quarter had initiated a process to develop and consider the strategic and structural options for the Maersk Group to further increase agility and synergies. Until the ongoing strategic review is finalised, the company said its strategy remains unchanged.
Looking ahead, the company said its expectation of an underlying result for the full year significantly below last year's $3.1 billion is unchanged. Gross cash flow used for capital expenditure is now expected to be around $6 billion in 2016, compared to previous view of around $7 billion.
Maersk Line reiterated the expectations of an underlying result significantly below last year's $1.3 billion. Global demand for seaborne container transportation is still expected to increase
by 1-3 percent.
In Copenhagen, Maersk shares were trading at 9,505 Danish kroner, up 4.85 percent.
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