Maersk Q1 2011 Interim Management Statement

Revenue for the period increased by 10% to USD 14.5bn (USD 13.2bn), primarily due to higher container freight rates, container volumes and oil prices. The profit for the period increased by 82% to USD 1.2bn (USD 0.6bn) and was driven by better operational performance in most business units. The Group’s ROIC increased to 11.7% (7.6%).

“We have had a good start to the year and are very satisfied with the results. Our businesses have performed very well, even as tanker rates have remained low and container rates have been decreasing during the period. In the past six months we have made significant investments in ships, terminals, drilling rigs and oil fields. These reflect our continued strong confidence in the long term future of our markets and not least our ability to continue to compete successfully,” says Group CEO Nils S. Andersen.

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The container activities made a profit of USD 438m (USD 169m) and a ROIC of 10.2% (3.9%). The number of containers carried increased by 5% to 1.84m FFE, while the average freight rate of USD 2,908 per FFE was 2% higher than the same period last year.

•       Maersk Oil made a profit of USD 512m (USD 450m) and a ROIC of 44.1% (35.2%), positively affected by a 38% higher average oil price at USD 105 per barrel, partly offset by tax rate increase in the UK. The Group’s share of oil and gas production declined by 13% to 30 million barrels, primarily due to higher oil prices as well as reduced investments and costs in Qatar. Exploration costs of USD 141m were at the same level as last year.

•       The result for terminal activities was a profit of USD 139m (USD 114m). Container throughput increased by 8% to 7.8m TEU and ROIC increased from 8.8% to 11.6%, primarily through efficiency gains and cost reductions.

•       Tankers, offshore and other shipping activities made a profit of USD 213m (USD 115m) and a ROIC of 5.9% (3.1%). The Group is seeking to divest Maersk LNG.

•       Retail activity made a profit of DKK 331m (DKK 352m) and a ROIC of 8.5% (10.5%). The divestment of Netto Foodstores Limited, UK was completed in April 2011 with a USD 0.7bn gain, corresponding to DKK 3.8bn, that will be recorded in the second quarter 2011.

•       Other businesses made a profit of DKK 241m (DKK 97m) and a ROIC of 4.5% (1.9%).

•       Cash flow from operating activities was USD 2.3bn (USD 2.1bn), while cash flow used for capital expenditure was negative by USD 1.2bn (negative by USD 1.2bn). The Group’s free cash flow was USD 1.0bn (USD 0.9bn) and the net interest-bearing debt was reduced to USD 11.3bn.

Outlook for the full year 2011

The Group still expects a result lower than the 2010 result, as stated in the annual report for 2010, including the USD 0.7bn gain from the divestment of Netto Foodstores Limited, UK.

The Group expects the global demand for seaborne containers to grow by 6-8% in 2011. The global supply of new tonnage is expected to match or grow more than the freight volume especially on the Asia to Europe trade. The Group expects freight rates to remain under pressure short term, but see a stronger market in the second half year, while increased bunker and time charter costs are expected to continue to impact margins negatively. The Group’s container activities expect a satisfactory result, but below the 2010 result.

Maersk Oil expects a result below the 2010 result, based on a higher level of exploration activities, a share of oil and gas production of around 120 million barrels which is 13% below 2010, and an oil price of USD 100 per barrel.

The outlook for Terminal activities, Tankers, offshore and other shipping activities, Retail activity and Other businesses is expected to be above 2010.

Cash flow from operating activities is expected to develop in line with the result, while cash flow used for capital expenditure is expected to be significantly higher than in 2010.

The outlook for 2011 is subject to considerable uncertainty, not least due to developments in the global economy and global trade conditions. The oil price has been affected by political unrest in North Africa and the Middle East and the outcome can have material impact on the Group’s result.


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