August 3, 2012 / 12:43 PM / in 5 years

Maersk CEO sees better outlook for container shipping arm

COPENHAGEN (Reuters) - The head of Danish shipping and oil group A.P. Moller-Maersk (MAERSKb.CO) said the performance of its container shipping arm had been disappointing but the group’s strategy was paying off and the business should be better positioned a year from now.

Maersk, which operates the world’s biggest container shipping company Maersk Line, has been hit by losses in container shipping, as the global shipping market is now into a fourth year of a slump, though freight rates have risen this year, which analysts say has created prospects of a turnaround.

“Although we are not as well positioned as we hoped to be a year ago, the early signs are positive and I am optimistic that Maersk Line will be in a much stronger position in a year’s time,” Chief Executive Nils Smedegaard Andersen said in the company magazine Maersk Post, published on Friday.

He said the development in container freight rates and profitability for Maersk Line had been disappointing, but the company was working to restore rates to sustainable levels.

Maersk updated its strategy in August last year to focus on four core business areas: container shipping, oil and gas production, oil services and ports operations.

The group is also seeking to expand in emerging markets.

“In spite of the difficult short and medium-term outlook for world markets, I am convinced that our clear strategy and strong and consistent execution will enable us to strengthen our foundation and enable us to increase the Group’s results over the coming years,” Andersen said.

Since the launch of the updated strategy last August, the group has invested $12.23 billion in its four core businesses, with the most - $4.75 billion - going into its oil services business which includes oil rigs, drillships and offshore supply vessels, Maersk Post said.

    The second biggest slice - $3.98 billion - has gone to the oil and gas business, with Maersk Line getting $1.90 billion and the ports arm APM Terminals $1.61 billion, the magazine said.

    Andersen said Maersk Line now needs to squeeze out the last unnecessary costs and work to restore rates by expanding its fleet only as fast as the market.

    A.P. Moller-Maersk, which is scheduled to report first-half results on August 14, has forecast a profit for 2012 slightly lower than the $3.4 billion it made in 2011, and a “negative up to neutral” result for Maersk Line this year.

    Some analysts have said that recent freight rate increases could lead the group to upgrade guidance for Maersk Line.

    Shares in A.P. Moller-Maersk were down 0.2 percent by 1206 GMT, against a 0.8 percent rise in the Copenhagen bourse’s benchmark index .OMXC20.

    Reporting by John Acher; Editing by Susan Fenton

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