Maersk Line Profit Jumps 50%

Bunker consumption fell 7.9 percent

Maersk Line Wednesday posted in its Annual Report for 2014 a 50 percent year-on-year jump in underlying profit to $2.2 billion on revenues of $27 billion, citing lower bunker costs as a key component of its improved performance.

While freight rates declined 1.6 percent over the year, weighing on revenues, a 6.8 percent increase in volumes to 9.44 million forty-foot equivalent unit (FFE) and a reduction in unit costs meant profits grew strongly.

Unit cost per container per FFE fell 5.4 percent to $2,584, "mainly due to improved network efficiencies and lower bunker price."

In 2014, Maersk Line paid an approximate average of $562 per metric tonne (pmt) for bunkers compared with $595 pmt in 2013, reducing its biggest single cost by around 5.7 percent.

In addition, bunker consumption, as measured in kilograms per FFE, fell 7.9 percent year-on-year.

The container line said it had outstripped its peers in terms of profitability, estimating that it had achieved 9 percent better than rivals at the Earnings Before Interest and Taxation (EBIT) level, surpassing even its own target of a 5 percent EBIT margin gap.

Maersk Line's fleet capacity rose from 2.6 million twenty-foot equivalent units (TEU) in 2013 to 2.9 million TEU in 2014, after adding 11 new Triple E box ships.

In addition to attracting higher volumes, Maersk Line said it had actively managed the extra capacity.

"To minimise the impact of the low and volatile freight rate environment, Maersk Line continued to absorb capacity by active capacity management in the form of idling, slow steaming and blanked sailings."

Free cash flow was flat year-on-year even after cash outflows for capital expenditure rose $387 million to $2 billion, mainly to pay for the new ships.

Overall, Maersk Line contributed a little under half of the Maersk Group's $5.2 billion profit for the year.

On Wednesday the Group also said that $98 million of a total $598 million in bunker savings were as a result of efficiency improvements.