Danish shipping-and-oil giant A.P. Moller-Maersk A/S (MAERSK-B.KO) said Thursday that the container market is finally starting to emerge from one of the worst industry downturns, with demand outgrowing capacity for the second consecutive quarter and average freight rates ticking higher.
Maersk Line, the company's biggest unit and the world's largest container operator by capacity, said average freight rates increased 4.4% in the first-quarter while revenue improved by 10% compared with a year earlier, but a $381 million rise in the cost of fuel meant the unit sank to an underlying loss of $80 million in the three-months to March 31.
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Speaking after the release of the company's earnings Thursday, chief executive Soren Skou said that freight rates improved further in April and while much of the quarter's revenue improvement was down to better rates on its East-West routes, the North-South rates are also starting to recover. The upward trend in revenue at the unit is continuing and there is more to come in the second quarter, he added.
"Global container demand grew nearly 4% in 2016, and strengthened towards the end of the year," the company said. "The momentum continued into the first quarter 2017, with global container demand of around 5% year-over-year, reflecting improvements in the global economic environment."
The company's Maersk Oil unit contributed most to earnings in the quarter, benefiting from an average oil price in the quarter of $54 a barrel compared with $34 last year, while cost reductions and lower exploration costs as well as a one-off tax income also contributed.
Mr. Skou said that at today's oil price the unit is "very profitable."
As reported earlier, the four businesses within the Energy unit--Maersk Oil, Maersk Drilling, Maersk Supply Service and Maersk Tankers--will either remain part of the Maersk group or be separated in the form of joint ventures, mergers or a listing. A decision on plans for the energy unit will be made before the end of 2018.
The group's net profit for the quarter was $245 million compared with $211 million a year earlier. Revenue rose 5% to $8.96 billion.
Analysts had expected net profit of $204 million on revenue of $9.13 billion, according to a poll by FactSet.
Maersk still forecasts full-year underlying profit above the $711 million achieved in 2016 with gross capital expenditure still seen at $5.5 billion-$6.5 billion.
The Hamburg Sud acquisition is progressing as planned toward a closing in the fourth quarter, the company said.
-Write to Dominic Chopping at email@example.com; Twitter: @domchopping @WSJNordics
(END) Dow Jones Newswires
May 11, 2017 07:55 ET (11:55 GMT)