Maersk Line’s 2015 result was USD 1.3 billion which is 44% lower than 2014 (USD 2.3bn) due to weak demand and very low freight rates. Revenue was USD 23.7 billion which is 13.2% lower than in 2014 (USD 27.4bn).
2015 was characterised by deteriorating market conditions with declining rates and close to zero volume growth. Maersk Line’s average rate decreased by 16% compared to 2014. In the fourth quarter (Q4), the decrease was 25% compared to Q4 2014. Rates declined due to weak demand, over-capacity and intense price competition. Rates declined across all trades except North America. In the Asia – Europe trade, rates reached an all-time low.
Global container shipping demand growth was 0-1% and the global container fleet (capacity) growth was 8%. The low demand growth was due to weaker imports into Europe and slowdown in emerging market economies. The Europe, West Africa and South America (East Coast) markets had negative growth.
“2015 was a challenging year. We delivered a record first quarter result and a strong first half year result. However, the continued lack of demand and over-capacity resulted in sharply declining rates from the second quarter and onwards. At the end of 2015, rates were record low and our fourth quarter result was negative. In light of our expectations at the beginning of the year, our result is less than satisfactory. But considering the market in 2015 it is a solid financial performance,” says Søren Skou, CEO of Maersk Line.
Maersk Line achieved a number of milestones in 2015.
“We maintained our market share. We improved our competitiveness by continuing to reduce unit cost. We successfully implemented 2M, the world’s largest vessel sharing agreement. We launched a new container shipping line – SeaLand – in the Americas. We accelerated cost and transformation efforts to prepare our organisation to the future. Last but not least, we ordered new vessels and containers to support our growth ambition,” says Søren Skou.
The unit cost decreased by 11.5% to a record low of 2,288 USD/FFE. The EBIT-margin gap to peers is at 6.6%-points (est.), in line with the +5%-points target.
The implementation of the 2M vessel sharing agreement (VSA) with MSC entailed an unprecedented phase-in of 193 vessels and 2M is delivering benefits in line with the target.
In November 2015, Maersk Line announced the acceleration of its organisational transformation driven by standardisation, automation, and digitisation of processes. This includes reducing the global organisation by at least 4,000 positions by the end of 2017. This will result in a leaner, more agile and more focused organisation.
In August 2015, Maersk Line announced a revised growth strategy: To grow at least in line with the market to defend its market leading position. In support hereof, Maersk Line ordered 27 new container vessels and 130,000 containers. The container vessels will be delivered 2017 and onwards.
Maersk Line expects the container shipping market to remain weak and rates under pressure due to over-capacity. Maersk Line expects the global container shipping demand to grow by 1-3% in 2016.
“We expect the container shipping market to grow a bit more in 2016, but it will still be a challenging year. Not least as over-capacity and a large order book, sufficient for many years of growth, plague the industry. We will continue to drive out costs and tightly manage our capacity in line with demand. We will return chartered tonnage and close down underutilised or unprofitable services,” says Søren Skou.
Maersk Line expects a significantly lower underlying result for 2016 compared to 2015 (USD 1.3bn).
“In the last three years, we have pursued a cost leadership strategy and we have been the most profitable company in the industry, both in relative and absolute terms. In fair weather and in strong headwinds, our strategy has proven to be the right one. We have the financial, commercial, operational strength to grow and remain a market leader in container shipping. Also in 2016,” concludes Søren Skou.