Earnings

Global shipping giant reports 90 percent fall in net profit

CNBC.com with Reuters
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Moller-Maersk kept its downbeat 2016 profit forecast on Friday as the Danish shipping and oil giant reported net profit way under expectations as it struggles to cope with a shipping recession and tough oil markets.

The Danish shipping and oil group said net profit fell to $101 million in April-June, lagging a forecast of $196 million. It was also around 90 percent lower than the $1.069 billion reported for the same period last year.

The company maintained its outlook for an underlying profit for the full year significantly below last year's $3.1 billion. Shares of the group were up 5.3 percent Friday morning.

Trond Westlie, chief financial officer of Maersk Group, told CNBC on Friday that the shipping industry faced turbulent times as a result of the "very difficult" oil market and decline in freight rates.

"When we look at the overall market and when we look at supply and demand and the growth in the world, we still think it's going to be low-growth and volatile."

"For us, like always, we have a view on a couple of weeks or a four weeks' indication on where the market is going but after that it's very opaque for us as well."

Low freight rates - largely as a result of overcapacity in the industry - remain a particular challenge for Maersk and other operators, Westlie said.

"If you look at the general market, the rates are at an all-time low so the shipping market is challenged ... but when we look at ourselves, we also have the lowest cost per shipped box that we've ever had so we are adapting to these environments. But, in general, shipping markets and specifically container markets are uncertain going forward."

In June, Maersk fired their chief executive and announced plans to restructure the business, indicating it could split it into separate companies and sell off part of the group, including its oil division. The group named Soren Skou, head of Maersk Line, as its new group chief executive.

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Maersk is fighting to remain the world's leading container shipping carrier as a wave of mergers and acquisitions, particularly in Asia, creates new challengers trying to grab a bigger share of a depressed market.

Westlie noted that, when looking at the company's peers in the market, its latest earnings were "acceptable numbers, overall."

A record number of around 150 container vessels are expected to be scrapped in 2016 but it will not be enough for an industry battling over capacity, low demand and falling rates, consultancy firm Drewry said in July. Imbalance between demand and supply is expected to persist in coming years.

German container shipping group Hapag-Lloyd said on Wednesday it dropped to a first-half operating loss of 39.7 million euros ($44.2 million) as disappointing freight rates hurt its business.