COPENHAGEN • Danish conglomerate AP Moller-Maersk yesterday reported an 82 per cent drop in annual profit as its shipping unit was hit by lower freight rates and its oil business by lower crude prices.
Shipping unit Maersk Line, seen as an international trade bellwether as it controls about 15 per cent of global sea freight, was hit by a "combination of low demand and high supply increase... in the second half of 2015", the group said.
Net profit plunged to US$925 million (S$1.2 billion) from US$5.19 billion a year earlier as revenue fell 15 per cent to US$40.3 billion.
"The demand for transportation of goods was significantly lower than expected, especially in the emerging markets as well as the group's key Europe trades," it said.
Copenhagen-based Maersk also wrote down the value of its oil business by US$2.6 billion as it posted a loss of US$2.1 billion.
Chief executive Nils Smedegaard Andersen said the oil price was the biggest short-term challenge for the company.
"Given our expectation that the oil price will remain at a low level for a longer period, we have impaired the value of a number of Maersk Oil's assets by US$2.5 billion after tax," Mr Andersen said.
The result for 2015 fell short of previously lowered guidance for a profit before special items of US$3.1 billion. "The downgrade of 2015 guidance in October warned everybody of a tough fourth quarter, but it turned out a lot harder than expected," said analyst Ricky Rasmussen from Nykredit Markets.
Shares in the group have dropped 50 per cent since April last year.
Maersk Line announced a cost-cutting programme in November, saying it would cut 4,000 jobs by the end of next year and defer vessel investments to support its dominant position in a falling market.
In the current year, Maersk Line would be hit by "the significantly lower freight rates going into 2016 and the continued low growth with expected global demand for seaborne container transportation", Maersk said yesterday.
As a result, the group's underlying result would be "significantly below last year's", it said.
AGENCE FRANCE-PRESSE, REUTERS