Maersk Line: Sharp prices on new ships
The time has come for Maersk Line to order the new ultra large vessels that the carrier has been planning for a long time now, and for which it published the strategy a year and a half ago. The first orders are expected to be placed in the second quarter this year, CFO Jakob Stausholm tells ShippingWatch in an interview after the Maersk Group published its annual report for 2014 yesterday, Wednesday.
When Maersk Line ordered the biggest ships in the carrier's fleet, the Triple-E series, this was done at a time when yard prices were historically high, and the ships turned out to be expensive. Shipbroker Clarksons calculated that Maersk Line paid USD 1.1 billion more for the ships by ordering them in 2011 than it would have cost in 2013.
The Maersk Group made USD 5.2 billion profit in 2014
But now is the ideal time to order, says the carrier.
"We can easily finance the new ships ourselves. We've received very little new capacity in the last three years, though we've increased our utilization rate. There's a limit to how high this utilization rate can get. That's why we need to bring in new ships if we want to keep growing with the market. What kind of ships these will be, and where they'll be built, we don't know that yet, but we'll place some orders in the second quarter," Jakob Stausholm tells ShippingWatch, adding:
"Prices are generally low, ship prices are low, the oil and gas industry is not placing many orders right now, so we believe we're seeing a sound environment where we can secure sharp prices on new ships."
Better 2015 than 2014
Maersk Line's 2014 result came to USD 2.34 billion, a 55 percent improvement from 2013 where the carrier made USD 1.51 billion. The underlying result for the year was USD 2.2 billion, and the carrier expects an improved result for 2015. Return on invested capital - ROIC - amounted to 11.6 percent in 2014.
"I'm very pleased with our result for 2014. Our ROIC is also very satisfactory and surpassed our medium-long and long-term targets of 8.5 percent and 10 percent, respectively. We achieved this result in a market characterized by low growth and pressured rates. We've successfully managed our capacity and reduced our costs. I think 2014 proves that we have the right strategy in place," says Maersk Line CEO Søren Skou in a statement concerning the annual report on Thursday.
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Maersk Line expects a growth in demand of 3 to 5 percent, and a nominal supply growth of 5 to 7 percent.
Increased competition
Jakob Stausholm describes the competition scene for Maersk Line as a situation in which all players in the industry are struggling to make a profit, but Maersk Line has managed to be slightly more efficient than the industry average.
"We have and have had a healthy and profitable growth, and the fourth quarter 2014 was especially good," he says.
The 2M alliance with MSC will help sustain this development on the East-West trade for Maersk Line, and it will be able to do so, said Maersk Group CEO Nils Smedegaard at a teleconference yesterday.
Numerous analysts point out that the North-South trade has become increasingly fierce in recent months, due to factors such as an influx of extra capacity on the routes. But this will not be a problem for Maersk Line, says Jakob Stausholm.
"It's true that we've noted increasing competition on select routes, but that's business as usual for us - on those routes as well," he says.
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