Maersk's major investment in Russian port company Global Ports Investment, which is listed on the London Stock Exchange, has received a veritable beating from investors after the economic sanctions against Russia are starting to have a real effect.
Through its port division APM Terminals, Maersk controls 31 percent of Global Ports Investment, Russia's biggest port operator for containers and oil products, but 2014 was a bloody year for the company as its share dropped by more than 81 percent.
The massive decline means that Global Ports Investment PLC's market share has dropped around USD 776 million.
Escalating share drop
The share in Global Ports Investment, which currently has a market value of USD 535 million, is now trading at USD 2.80, compared to approximately USD 14.99 one year ago.
The massive decline of the Russian port company picked up speed in the latter part of the year, dropping 61 percent in the 4th quarter 2014.
APM Terminals invested around USD 900 million in Global Ports in the late summer 2012, for a 37 percent stake in the Russian company at the time. Even though some observers said the price was very high, APM Terminals has continuously maintained that the transaction represented a strong and long- term investment in Russia as one of the biggest growth economies going forward, especially in the wake of the acquisition.
"It's a long term investment, so to us it's an opportunity to secure a platform in that part of the world, to develop the business and make new investments. We believe Russia in itself holds an enormous growth potential, and it won't be many years before Russia is the biggest consumer market in Europe," APM Terminals CEO Kim Fejfer told ShippingWatch in 2013.
Fear of Russian collapse
The economic sanctions from the US and the EU following the conflict in Ukraine are not the only factors making the most pessimistic economists and politicians fear an actual collapse of the Russian economy and difficult times ahead for the most exposed companies.
Global Ports lost revenue as well as profits in the first half of 2014. The 2nd quarter interim report showed a five percent decline in revenue, USD 14 million, down to USD 287 million in the first six months of the year. The operating profit also decreased, from USD 144 million to USD 126 million, in a period where Global Ports' two major container terminals in St Petersburg and Ust-Luga were hit by lower growth in Russia and the escalating conflict in Ukraine.
Last summer this negative development made analysts Morgan Stanley perform a significant downgrade of Global Ports investment, pointing to negative growth for the full year 2014.
Tough political confrontation
Last month, numerous observers in the West began discussing whether the sanctions against Russia should be eased because the country's economy has entered an acute crisis. The downturn is very much caused by the declining price of oil, traditionally a huge source of income for the country. But the western sanctions are said to play a big part in the crisis as well.
The value of Russia's currency, the ruble, has plummeted and the Russian national bank has tried to soften this decline by increasing interests significantly. This means that many Russian companies are facing serious financial troubles as it has now become extremely difficult to borrow money.
The European heads of state and governments decided shortly before Christmas to maintain this position in a long-term confrontation if president Putin continues the current Russian stance in terms of Ukraine.
However, not all the EU countries seem to back a hard line against Russia, and Germany's Minister of Foreign Affairs, Frank-Walter Steinmeier, among others, has warned that it could be dangerous and destabilizing for Russia if the EU and the West add further pressure on Russia through the sanctions.
The terminals
Global Ports' terminals are located by the Baltic Sea and in the far eastern part of Russia. In addition to five container terminals in Russia, the company also operates two terminals in Finland, Multi-Link Terminals Helsinki and Multi-Link Terminals Kotka.
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