Image: Maersk

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A.P Moller - Maersk reports that bunker costs for its Ocean segment rose year-on-year (YoY) by $253m, or 22.2 percent, to $1.395bn in the first quarter (Q1) of 2020, as prices rose on the back of the shipping industry's switch to lower-sulphur fuels in 2020.

The average price spent on bunkers by Ocean in Q1 was $551 per tonne - a YoY hike of $134, or 32.1 percent.

However, the total amount of marine fuel consumed in Q1 decreased YoY by 205,000 tonnes, or 7.5 percent, to 2.534m tonnes. Maersk explained that the reduction was a result of blanked sailings from capacity adjustments and the delivery of more efficient vessels delivered in recent years.

Quarterly bunker figures

	Q1 2020	Q1 2019	Q4 2019
Cost ($bn)	1.395	1.142	1.096
Avg Price ($/mt)	551	417	395
Consumption (MMT)	2.534	2.739	2.773

Ocean results and Covid-19

Overall, the Ocean division recorded a YoY EBITDA growth of $235m, or 25 percent, to $1.175bn in Q1.

Revenue in Q1 climbed YoY by $215m, or 3.1 percent, to $7.230bn.

On the issue of Covid-19, Maersk noted that there had been a marked reduction in demand, especially in East-West trades, but also globally. To manage the situation, a number of sailings have been cancelled - especially East-West - and vessels have been idled.

In total, more than 90 sailings - leading to a decline of 3.5 percent in deployed capacity - were idled in Q1 and for Q2. Close to 140 blanked sailings are expected.

These initiatives are said to have resulted in significant cost reductions.

In addition to the steps taken in Q1 to reduce Ocean's CAPEX, Maersk said further CAPEX reductions are to be carried out in the remainder of the year as the business focuses on protecting profitability and cash flow.

A.P. Moller - Maersk: Key indicators

Maersk posted an after-tax profit of $209m - a YoY improvement of $865m on last year's $656m Q1 loss.

Profit before tax was $337m, up from $2m during the prior-year period; and the underlying result from continuing operations rose by $266m to $197m.

First-quarter EBITDA increased YoY by $285m, or 23.1 percent, to $1.521bn, whilst revenue climbed marginally by $31m to $9.571bn.

Guidance

In its sensitivity guidance, 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 $0.3bn.

Maersk suspended its full-year guidance for 2020 on March 20 due to Covid-19. Prior to this, the EBITDA forecast (before restructuring and integration costs) for this year was around $5.5bn.

Discussing Q2, CEO Søren Skou said: "Visibility remains low as a result of the Covid-19 pandemic. We continue to support our customers in keeping their supply chains running, however as global demand continues to be significantly affected, we expect volumes in Q2 to decrease across all businesses, possibly by as much as 20-25%. 2020 is a challenging year, but as we proactively respond to lower demands and show progress in our transformation and financial performance, we are strongly positioned to weather the storm."