Maersk to Continue Cost Cuts, Seeks Drilling Unit Listing

   By Dominic Chopping 
 

A.P. Moeller-Maersk A/S (MAERSK-B.KO) will continue to cut costs after lower freight rates and higher fuel costs weighed on second-quarter earnings. The Danish freight carrier said it will seek a separate listing of its drilling unit next year.

Maersk said last week that its earnings would be weaker than expected this year, citing escalating trade tensions as well as higher costs and lower rates, but in its report Friday it said cost cuts and higher freight rates ahead will help improve profitability.

Maersk, which moves about 18% of all containers world-wide and is considered a barometer of global trade, said last week that it expected its core profit this year to come in at $3.5 billion to $4.2 billion compared with previous guidance of between $4 billion and $5 billion.

Maersk said its profit will be hit by a 28% increase in its fuel bill and a 1.2% decline in average freight rates.

With its previous 2018 guidance, Maersk was expecting an underlying annual profit above the $365 million booked last year. Without citing any numbers, it now forecasts "a positive underlying profit."

The shipping firm Friday said second-quarter net profit was $18 million, from a $269 million loss in the same period last year. As previously announced, revenue rose to $9.51 billion from $7.69 billion.

Maersk has been transforming itself from a sprawling shipping and energy conglomerate into a more streamlined shipping and logistics firm. It had set a deadline to sell its oil-drilling arm by the end of this year, but Friday said a listing in Copenhagen next year would offer the most optimal and long-term prospects for its shareholders.

For Maersk Supply Service, the pursuit of a solution will continue but the company said that due to challenging markets the timing for defining a solution is difficult to predict.

Amid continued pressure on freight rates and a significant increase in fuel prices and adverse changes in foreign exchange rates, the company said it would continue to make network changes and reduce capacity on trades not yielding the desired profitability.

It also pledged to halt all new vessel orders until at least 2020 and to increasingly lease new dry containers as opposed to buying them.

Write to Dominic Chopping at [e-mail]; Twitter: @domchopping @WSJNordics

(END) Dow Jones Newswires

August 17, 2018 03:05 ET (07:05 GMT)

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