Moeller Maersk (”CPH”:”MAERSK-A”), a container shipping giant, is not too happy with its latest profit posting, and this is not unconnected with the fact that the Danish oil and shipping giant posted 90 percent lesser profit than it forecasted for its 2016 net profit.
The container shipping company had predicted a net profit of $196 million for its April-June quarter, but the company was barely able to realize $101 million. And while the company posted a profit of $1.069 billion for its second quarter in 2015, it was only able to raise 10 percent of this for the same period in 2016 – a 90 percent net profit loss in comparison.
Reasons for Maersk posting weak Q2 profits
Container shipping experts agree that this year has not been too good in terms of sales and revenues, and Maersk (”CPH”:”MAERSK-A”) has a reason to complain more because competitors are taking aware its fair share of dominance in the oil and shipping freight markets.
Declining freight rates and global oil glut have been the bane of Maersk’s misfortunes this year, and chief financial officer Trond Westlie thinks both markets remain largely volatile and unpredictable for some foreseeable future, the CBNC reports. The Maersk Line is the largest container shipping company in the world, but increased volumes and lowest cost per shipped box have not assisted in any measureable way to offset the $151 million loss it suffered in Q2.
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Considering the level of acquisitions and mergers in the container shipping industry and how other companies have been struggling to make a sense of everything, Westlie still credits the capability of his company to have made the profits it realized in the second quarter of this year, despite its falling below expectations
And to drive home this point, Hapag-Lloyd, a German container shipping company announced it is reducing its operating loss costs to $44.2 million in the face of severe challenges it is having from low shipping rates and declining patronages.
Two CEO changes within this year has not really helped Maersk
Moeller Maersk (”CPH”:”MAERSK-A”) has a new chief executive officer after the first one left a couple of months back, but this change has not helped to pull the Danish shipping company out of the woods yet. Soren Skou was installed as CEO after Nils Smedegaard Andersen was fired on June 23, and the board of Maersk will soon be holding a meeting to review the strategic policies of the new CEO in the light of recent developments.
CEO Skou expressed dissatisfaction with Q2 net profits posted by Maersk Line, stating that “cost reductions and operational optimizations however made a significant contribution to mitigating the impact of the negative market conditions,” Bloomberg writes.
In order to counter the effects of declining shipping rates, low patronage, and overcapacity in the container freight industry, consultants revealed in July that about 150 container vessels might have to be shed this year, but how this will correct the prevailing imbalance between supply and demand remains to be seen in the nearest future.