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A.P. Moller-Maersk A/S, the world's largest container line and bunker buyer, has said that it expects the rise in marine fuel prices to continue to have an adverse effect on margins in 2011.

In its latest intermin report, Maersk said: "The group expects freight rates to remain under pressure, and high bunker and time charter costs are expected to continue to impact margins negatively. The group’s container activities now expect a modest positive result."

During the first six months of 2011, net profit rose by USD 0.21 billion (bn), or 8.3%, to USD 2.733bn, up from USD 2.523bn during the corresponding period last year. Revenue for the period increased by 9% to USD 29.9bn, from USD 27.4bn in 2010.

Commenting on the results, Group CEO Nils S. Andersen said: "Thanks to the good performance of our terminals and oil related businesses, the group has delivered a satisfactory result for the first half-year. As we anticipated at the start of the year, the shipping market has been difficult, due to growing capacity, and we expect the slow economic growth and market volatility to continue for the coming quarters. We have taken advantage of our solid financial position to invest in our core businesses and are thereby preparing ourselves for continued and profitable long term growth."

Group Activities

The group's container activities made a profit of USD 0.4bn (USD 1.2bn) and a ROIC of 4.5% (13.9%). Supply of new capacity reduced rates which, combined with high bunker prices, put margins under pressure throughout the period. The number of containers carried increased by 6% to 3.8 million FFE, while average freight rates, including bunker surcharges, were 3% lower than in the same period last year.

Oil and gas activities continue to benefit from the high oil prices and made a profit of USD 1.2bn (USD 0.9bn) and a ROIC of 54.7% (36.1%). At an average oil price of USD 111 per barrel, the oil price was 44% higher than the same period last year. The group’s share of oil and gas production declined by 11% to 342,000 barrels of oil equivalent per day, primarily due to a lower share of production in Qatar and lower production in Denmark and the UK. Exploration costs were USD 355m (USD 180m).

Terminal activities made a profit of USD 304m (USD 528m and USD 231m excluding divestment gains and other special items). Container throughput increased by 8% on a like-for-like basis and ROIC was 12.2% (21.5% and 9.9% excluding divestment gains and other special items). During the period, APM Terminals secured a number of new investment and development opportunities primarily in emerging markets.

Tankers, offshore and other shipping activities made a profit of USD 250m (USD 171m) and a ROIC of 3.4% (2.4%). The profit was negatively affected by impairments of USD 250m in Maersk FPSOs and positively affected by reversal of impairments of USD 91m in Maersk LNG.

Outlook for 2011

The group still expects a result lower than the 2010 result, as stated in the interim management statement in May 2011.

Maersk expects global demand for seaborne containers to grow by 6-8% in 2011. The global supply of new tonnage is expected to grow more than the freight volumes, especially on the Asia to Europe trade. Freight rates are forecast to remain under pressure.

Oil and gas activities now expect a profit at the same level as in 2010, based on an oil price of USD 105 per barrel, a higher level of exploration activities and a share of oil and gas production of around 120 million barrels, which is 13% below 2010.

The result for terminal activities, tankers, offshore and other shipping activities, retail activities and other businesses is expected to be above 2010.

"The outlook for 2011 is subject to considerable uncertainty, not least due to developments in the global economy, oil price and global trade conditions," Maersk said.