COPENHAGEN • Danish oil and shipping conglomerate A.P. Moller-Maersk yesterday reported a plunge in first-quarter profit, weighed down by low freight rates and oil prices, but cheering investors with significant cost cuts.
"While market conditions remain challenging, we continue to adjust our cost base to the new conditions and maintain a good operational performance across our businesses," Mr Nils Andersen, the chief executive of Maersk which runs the world's biggest container shipping line, said in a statement.
Net income was US$211 million (S$286 million) last quarter compared with US$1.54 billion a year earlier, the Copenhagen-based company said in a statement yesterday.
The company's shares opened as much as 6.5 per cent higher and traded 5.1 per cent up at 9,140 kroner (S$1,916) as of 9:08am in Copenhagen. Maersk is up about 2 per cent this year. Yesterday's gain is its biggest since Feb 15.
Thanks to its cost cuts, Maersk Oil "now expects a breakeven result to be reached" with an oil price of US$40-45 per barrel, compared with US$45-55 previously, the statement added. "Previous guidance was a negative underlying result."
Maersk Oil reported a net operating loss after tax of US$29 million in the quarter, compared with a profit by the same measure of US$208 million a year earlier. The loss was smaller than the US$58 million predicted in a survey by Ritzau.
The unit, which has axed 1,300 jobs, targets 20 per cent in cost cuts by the end of this year.
It said its operating expenses, excluding exploration costs, fell 21 per cent in the quarter. The unit was helped by higher production as well as deferred income from British tax breaks.
Maersk Line reported a net operating profit after tax of US$37 million, down from US$714 million in the first quarter of 2016, as freight rates declined 26 per cent on average.
Meanwhile, Daewoo Shipbuilding & Marine Engineering, the world's second-biggest shipbuilder, also posted a first-quarter loss after incurring more costs to finish some offshore projects.
The operating loss was 26.3 billion won (S$31 million), it said in a regulatory filing yesterday. Daewoo Shipbuilding said it could not provide a comparative figure as it is revising earnings dating back to 2013 at the request of its auditor.
Daewoo Shipbuilding dropped 5.6 per cent to close at 5,100 won in Seoul yesterday before the results.
Shares of the company have fallen 72 per cent in the past 12 months, compared with a 7.3 per cent decline in the benchmark Kospi index. The stock was the worst performer on the Kospi 200 Index last year.