A.P. Moller Maersk Reports Interim Results

Wednesday, August 17, 2011

Revenue for the period increased by 9% to $29.9bn $27.4bn), primarily due to higher oil prices and container volumes. Profit for the period was 8% higher at $2.7bn $2.5bn), positively affected by divestment gain from sale of Netto Foodstores Limited, UK of $0.7bn. The Group’s ROIC was 12.8% (12.8%)..
"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,” says Group CEO Nils S. Andersen.

• The container activities made a profit of $0.4bn $1.2bn) and a ROIC of 4.5% (13.9%). Supply of new capacity reduced rates and this, combined with high bunker prices, set margins under pressure throughout the period. The number of containers carried increased by 6% to 3.8m 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 $1.2bn ($0.9bn) and a ROIC of 54.7% (36.1%). At an average oil price of $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 $355m ($180m).

• The terminal activities made a profit of $304m ($528m and $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 $250m ($171m) and a ROIC of 3.4% (2.4%). The profit was negatively affected by impairments of $250m in Maersk FPSOs and positively affected by reversal of impairments of USD 91m in Maersk LNG.

• Retail activities made a profit of DKK 4.6bn (DKK 0.9bn) and a ROIC of 61.8% (13.6%) and 10.6% excluding divestment gain. The result was positively affected by the divestment gain of DKK 3.8bn corresponding to USD 0.7bn from divestment of Netto Foodstores Limited, UK, which was completed in April 2011.

•  Other businesses made a profit of DKK 597m (DKK 404m) and a ROIC of 5.0% (3.8%).

• Cash flow from operating activities was $4.1bn ($4.4bn), while cash flow used for capital expenditure was $2.9bn ($1.9bn). The Group's free cash flow was $1.2bn ($2.5bn) and net interest-bearing debt was reduced to $11.7bn ($16.0bn).

•  Total equity was $37.2bn compared to $34.4bn at 31 December 2010, positively affected by the result for the period of $2.7bn and by conversion from functional currency to presentation currency of $0.8bn. Dividend was deducted by $0.9bn

Outlook for 2011
The Group still expects a result lower than the 2010 result, as stated in the interim management statement in May 2011, including the USD 0.7bn gain from the divestment of Netto Foodstores Limited, UK.
The Group 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. 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.
Oil and gas activities now expect a profit at the same level as for 2010, based on an oil price of $105 per barrel, 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.
Cash flow from operating activities is expected to develop in line with the result, while cash flow used for capital expenditure is expected to be significantly higher than in 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.

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