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A.P Moller - Maersk reports that third-quarter (Q3) earnings before interest, taxes, depreciation, and amortization (EBITDA) increased year-on-year (YoY) by 16 percent to $1.1bn even though the metric was negatively impacted by increased Ocean segment bunker costs, which the company says were not fully recovered via freight rates and the emergency bunker surcharge implemented at the end of Q2.

The overall spend on marine fuels in Q3 - following Maersk Line's acquisition of Hamburg Sud last November - jumped YoY by $509m, or 62.9 percent, to $1.318bn. For the first nine months, the figure was $3.717bn - an increase of $1.346bn, or 56.8 percent.

The total amount of marine fuel consumed in Q3 by Maersk increased YoY by 279,000 tonnes, or 10.6 percent, to 2.915m tonnes, whilst between January and September the rise was 1.476m tonnes, or 19.5 percent, to 9.046m tonnes.

Latest and future prices

The average price spent on bunkers by Ocean in Q3 was $452 per tonne - a rise of $145, or 47.2 percent, on the previous year. And for the first nine months, the mean bunker price was $411 per tonne, which was $98, or 31.3 percent, higher than the $313-per-tonne figure recorded in the prior-year period.

Maersk also noted that Rotterdam bunker prices were 44 percent higher in Q3 2018 compared to the prior-year period, and 5.5 percent higher compared to Q2 2018.

Discussing future market trends, Maersk posited: "Forward markets indicate that bunker prices will increase by a further 4.9% in Q4 2018 compared to Q3 2018. Thereafter, forward market pricing points to a 20% decline in bunker prices by Q4 2019."

The boxship operator added that the "anticipated" price drop was due to an expected wider spread between the price of crude and bunker fuel, "reflecting the market's view of the impact of the IMO 2020 sulphur regulations on demand for high[-]sulphur bunker fuels".

Unit cost at fixed bunker price

The unit cost at fixed bunker price in Q3 rose YoY by $21, or 1.2 percent, to $1,809 per forty equivalent unit (FFE), including income from vessel sharing agreements (VSAs).

This was said to be mainly due changes in the portfolio mix following the inclusion of Hamburg Sud.

For the first nine months, Ocean posted a minor YoY rise in the unit cost at fixed bunker price of $3 to $1,755 per FFE.

Ocean EBITDA and revenue

The Ocean division achieved a 32.1 percent increase in Q3 revenue to $7.32bn, up from $5.54bn in the prior-year period. In the first nine months, sales climbed 31.5 percent YoY to $21.08bn.

EBITA, meanwhile, grew YoY by $125m, or 15.6 percent, to $925m in Q3, whilst year-to-date (YTD) figures showed a 3.7 percent drop to $2.08bn.

Maersk's Ocean segment includes the ocean activities of Maersk's Liner Business (Maersk Line, MCC, Seago Line and Sealand) together with Hamburg Sud brands Hamburg Sud and Alianca as well as strategic transshipment hubs under the APM Terminals brand.

A.P. Moller - Maersk: Key indicators

Maersk posted a Q3 underlying profit of $251m, which was marginally lower than the $254m recorded during the corresponding period in 2017. For the first nine months, underlying profit was $100m - $220m below last year's figure.

EBITDA in Q3 increased YoY by $161m, or 16.5 percent, to $1.14bn; however, the shipper notes that it was "negatively impacted by increased bunker costs in Ocean" of $509m. YTD EBITDA, meanwhile, was up $2m to $2.69bn.

Revenue in Q3 jumped $2.36bn, or 30.6 percent, to $10.08bn; and YTD revenue grew $6.33bn, or 28.1 percent, to $28.84bn.

Commenting on the results, Maersk CEO Soren Skou said: "Our profitability and cash flow is improving, positively impacted by the emergency bunker surcharge announced due to the significant increase in bunker price, synergies from Hamburg Sud and strong collaboration between Ocean and our terminal activities."

Emergency bunker surcharge

On the issue of the emergency bunker surcharge (EBS), Maersk also explained that the EBS fee implemented from the end of Q2 led partly to an increase of 4.8 percent in the average freight rate compared to Q2 (and a 5.5 percent rise compared to Q3 2017), but that "these developments were not fully reflected in the results as bunker prices continued to increase".

Guidance

In its guidance for 2018, Maersk said that a $100 change in the price of bunker fuel (net of expected BAF coverage) would lead to the group's EBITDA varying by $0.1bn.

Maersk expects to post an EBITDA in the range of $3.6-4.0bn in 2018 and a positive underlying profit.