APM Terminals' Russian port business Global Ports saw revenue as well as profit decline during the first half of 2014, according to the company's 2nd quarter interim report.
The company's investment in the major Russian port network two years ago came to around USD 900 million, and Maersk had great expectations for the new business unit.
However, the 2nd quarter interim report shows that revenue has gone down USD 14 million, or around five percent, to USD 287 million in the first half of the year. The operating profit also decreased, from USD 144 million to USD 126 million.
The numbers thus confirm what ShippingWatch reported in early August when Morgan Stanley performed a massive downgrade on Global Ports. The development was caused by low growth in Russia, problems in one of the ports and the escalating conflict in Ukraine.
Earlier this year, Global Ports held a presentation outlining developments at the company in the first five months of 2014 for several foreign and Russian investors and stockbroking companies - and the presentation made it evident that numerous factors were not developing according to management expectations.
Oil and container declined
Things looked worst for the oil terminal Vopak EOS (VEOS) in Estonia, of which Global Ports owns 50 percent in a joint venture with Royal Vopak. Volumes have gone down 27 percent up to and including May, compared to the same period last year. According to an analysis of Global Ports, performed by Morgan Stanley in July following the presentation, it was somewhat expected that the oil terminal would face difficulties. But as Morgan Stanley added:
"However, the size of the volume decline (based on the latest update) is significantly worse than we would have expected."
The major container port in St. Petersburg also experienced disappointing developments, according to Morgan Stanley.
"2014 will be a difficult year, as volume growth will likely be negative, thanks to low market growth and some market share loss. We estimate -2 percent year-on-year volume growth for Global Ports in 2014," said Morgan Stanley.
Following the publication of the Maersk Group's latest interim report, Group CEO Nils Smedegaard Andersen downplayed the consequences of the Russian conflict on the Maersk companies, arguing that only 2-3 percent of the group's business involves Russia.