Maersk Line feels the squeeze but stays ahead of the pack

The world's largest container shipping company missed earnings forecasts and lost market share in the first quarter but remained the most profitable operator in an industry bedevilled by overcapacity and low prices.

Nils Andersen, chief executive of Danish conglomerate AP Moller-Maersk, said he was untroubled by weaker-than-expected volumes at its container shipping business in a sluggish period for global trade.

Container demand - a proxy for global trade - increased by only 1 per cent in the first quarter while Maersk Line's volumes dropped by 1.6 per cent.

"We will be able to hold our own and also able to hold our share. As long as we make a return that is 10 percentage points higher almost than the rest of the industry it's the right approach," said Mr Andersen.

Maersk Line's operating profit margin, which reached 11.8 per cent in the quarter, was 9.3 percentage points higher than the industry average at the end of last year as most container shipping groups operated at a loss.

Still, Maersk Line's quarterly net profit of $714m lagged behind analyst estimates of $783m.

Mr Andersen counselled investors not to be worried, saying that Maersk Line had lost market share due to staying clear of a price war as well as being exposed to some of the worst-hit routes such as imports into Europe.

"The market is very difficult, the industry is very difficult . . . I don't see an end in sight. But we make very good money [and] I'm confident of a good full-year result," Mr Andersen said.

Maersk Line stands out in the industry as a combination of cost-cutting and scale have allowed it to withstand a depressed environment for container shipping companies ever since the 2008-09 global financial crisis.

The Danish group said freight rates were 5.1 per cent lower compared with a year earlier while industry capacity was 7.2 per cent higher.

Mr Andersen refused to confirm reports that Maersk Line is on the verge of ordering up to 11 large ships capable of carrying about 20,000 containers.

He said there was a danger that global trade could increase by less than Maersk's 3-5 per cent target range this year after a sluggish first quarter.

At a group level, Maersk's underlying net profit rose from $1.1bn to $1.3bn despite a fall in earnings at its oil division on lower crude prices.

Mr Andersen said that Maersk was looking at picking up oil assets if they were at an acceptable price and fitted its strategy. "For sure, it's a good time to pick up assets if you're keen to do that. We are looking at that but it's too early to say."

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