Maersk Line Q3 financial results

“We deliver a good result for the quarter considering the challenging economic environment. Thanks to our rate initiatives and cost reductions, Maersk Line is back in black figures year-to-date, and the high oil price supports a satisfactory result for Maersk Oil. We are expanding our terminals network in Latin America, Russia and other growth markets and expect our strategic initiatives to support both our returns and earnings stability as we move forward.”

The Group delivered a profit of USD 933m (USD 371m) and a return on invested capital (ROIC) of 8.3% (4.9%) for Q3. Cash flow from operating activities was USD 2.9bn (USD 2.1bn) and cash flow used for capital expenditure was USD 678m (USD 4.8bn). The Group’s equity ratio was 52.2% (51.9%) and net interest-bearing debt was USD 14.8bn (USD 14.5bn).

The third quarter result was better than expected, particularly in Maersk Line and Maersk Oil, while the result was negatively affected by vessel impairments of USD 267m on some of Maersk Tankers’ crude and product tanker segments.

Maersk Line’s profit for the period was USD 498m (loss of USD 289m) with an average rate increase of 5.7% to 3,022 USD/FFE. Rates were higher on all main trades. Volumes were unchanged at 2.1m FFE. Head haul volume declined by 15% on the Asia – Europe trade. Average unit costs decreased by 6% due to decreased bunker consumption per FFE and network optimisation. Maersk Line announced rate increases especially for reefer containers with impact from January 2013.

“Maersk Line has done what they set out to do when we entered the second quarter and will continue their efforts to secure rates at a level where we can achieve a fair return on our investments,” says Nils S. Andersen.

Maersk Oil’s profit for the period was USD 243m (USD 368m). The result was negatively impacted by a 23% decline in share of production to 240,000 barrels of oil equivalent per day (312,000 boepd) a lower average oil price of USD 109 per barrel (USD 113 per barrel), as well as a change in the decommissioning relief tax in the UK. Maersk Oil completed three exploration/appraisal wells (five wells) and exploration costs were USD 268m (USD 336m). The Caporolo discovery offshore Angola was announced.

“We continue to make progress and receive positive news, most recently from Chissonga in Angola, and we are confident that we will reach our production target of 400,000 barrels per day by 2020,” says Nils S. Andersen.

APM Terminals’ profit for the period was USD 160m (USD 173m) and the EBITDA margin was at 23.5% (23.2%). Volume throughput increased by 4% to 9.0m TEU (8.6m TEU), equivalent to a 2% increase on a like-for-like basis. Positive developments in Africa and Americas were able to offset reductions in the ports servicing the Asia – Europe trade. APM Terminals signed an agreement to acquire a co-controlling 37.5% ownership interest in the publicly listed company Global Ports Investments PLC (Global Ports). Subject to regulatory approvals, the transaction is expected to close in 2012.

”We are expanding our terminals network in growth markets, most recently with Global Ports in Russia. We strive to grow in Latin America as well and have just received approval from authorities to open our new Santos terminal in Brazil in the first quarter of 2013. Callao in Peru is already in operation and in Costa Rica and Mexico, we are approaching the construction phase,” says Nils S. Andersen.

Maersk Drilling’s profit for the period was USD 87m (USD 139m). The result was negatively impacted by delayed start-up and maintenance yard stays of two units. Maersk Drilling has contract coverage of 100% of the available rig days for the remainder of 2012 and 97% for 2013. The divestment of the FPSO Maersk Peregrino resulted in a divestment gain of USD 177m, recognised in Q3.

“In Maersk Drilling, we have just signed a three-year contract on one of our newbuilds with ConocoPhilips. That brings the number of newbuilds covered by contracts up to five out of seven, one year before the first is delivered – an indication that our strategy is right and that the customers have confidence in our ability to deliver,” says Nils S. Andersen.

Highlights for the Group for the first 9 months 2012 Revenue decreased slightly to USD 44.3bn (USD 45.3bn), primarily due to lower oil entitlement production partly offset by higher container volumes and slightly higher average freight rates. Profit was on par with last year at USD 3.1bn (USD 3.1bn), negatively affected by higher bunker costs, an impairment of USD 267m recognised in Maersk Tankers in Q3 and lower divestment gains, which in 2011 included a gain related to the disposal of Netto Foodstores Limited, UK, of USD 699m. Profit was positively affected by the settlement of an Algerian tax dispute of USD 899m and divestment gain for Maersk LNG (USD 80m) and the FPSO Maersk Peregrino (USD 177m).

The Group’s ROIC was 9.2% (10.0%). Cash flow from operating activities was USD 5.6bn (USD 6.2bn) while cash flow used for capital expenditure was USD 3.7bn (USD 7.7bn). Net interest-bearing debt decreased by USD 516m to USD 14.8bn (USD 15.3bn at 31 December 2011). Total equity was USD 38.3bn (USD 36.2bn at 31 December 2011), positively affected by the profit of USD 3.1bn. Dividend paid was USD 902m (USD 925m).

Maersk Line made a profit of USD 126m (USD 40m). The volume increased by 9% to 6.5m FFE and average freight rates, including bunker surcharges, were 0.2% higher. Cash flow from operating activities was USD 999m (USD 881m) and cash flow used for capital expenditure was USD 3.0bn (USD 2.3bn). Maersk Oil’s profit for the first nine months was USD 2.0bn (USD 1.6bn), positively affected by the one-off tax income of USD 899m from the settlement of an Algerian tax dispute and a gain from a partial divestment of interests in Brazil. This was partly offset by a decline in the Group’s share of oil and gas production of 22% to 261,000 boepd in the first nine months of 2012 (336,000 boepd), primarily due to a lower share of production in Qatar, Denmark and the UK. Maersk Oil completed 13 (nine) exploration/appraisal wells and exploration costs were USD 766m (USD 691m). Maersk Oil acquired a 30% interest in the Dumbarton and Lochranza fields, UK. Cash flow from operating activities was USD 3.5bn (USD 4.0bn) and cash flow used for capital expenditure was USD 1.6bn (USD 3.2bn).

APM Terminals made a profit of USD 555m (USD 476m) including divestment gains of USD 117m (USD 18m) before tax. Container throughput increased by 7% compared to the same period 2011, and 3.7% on a like-for-like basis. The portfolio changes affecting APM Terminals include a terminal in Gothenburg, Sweden where control was taken over on 4 January 2012 as well as full year effect of 2011 acquisitions in Poti, Georgia and Callao, Peru. APM Terminals signed an agreement to acquire a co-controlling 37.5% stake in Global Ports Investments PLC. Subject to regulatory approvals, the transaction is expected to close in 2012. Cash flow from operating activities was USD 723m (USD 636m) and cash flow used for capital expenditure was USD 345m (USD 578m).

Maersk Drilling realised a profit of USD 313m (USD 360m). Extensive maintenance and upgrade of two rigs were partly offset by reversal of impairment of USD 30m. Cash flow from operating activities was USD 470m (USD 555m) and cash flow used for capital expenditure was USD 370m (USD 538m).

Outlook for 2012 The A.P. Moller – Maersk Group expects a result for 2012 around USD 3.7bn (USD 3.4bn in 2011) with an impairment of USD 267m in Maersk Tankers recognised in Q3. Cash flow used for capital expenditure is expected to be lower than 2011 (USD 9.8bn) while cash flow from operating activities is expected to be at the same level as 2011 (USD 7.3bn).

Maersk Line still expects a modest positive result in 2012 based on higher average rates in the second half of the year. Global demand for seaborne containers is expected to grow modestly in 2012 with a decline in inbound European volumes.

Maersk Oil now expects a result for 2012 above the result for 2011 (USD 2.1bn) including the USD 900m impact from the settlement of the tax dispute in Algeria.The expected result is based on a share of production of 258,000 boepd during 2012 and an average oil price of USD 110 per barrel for the remainder of the year. Exploration costs are now expected to be around USD 900m.

APM Terminals still expects a result for 2012 above the result for 2011 (USD 648m) and above market growth in volumes supported by portfolio expansion. Maersk Drilling expects the result for 2012 to be lower than 2011 (USD 488m), mainly due to delayed start-up on new contracts.

The total result from all other activities is still expected to be lower than 2011, excluding divestment gains and impairments, primarily due to lower expected result in Dansk Supermarked and Maersk Supply Service. The outlook for 2012 is subject to considerable uncertainty, not least due to developments in the global economy. The Group’s expected result depends on a number of factors. Based on the expected earnings level and all other things equal, the sensitivities for four key value drivers for the remainder of 2012 are shown in the table below.

Source: Maersk Line

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