INTERNATIONAL ENTERPRISES

International Enterprises

Introduction

AP Moller-Maersk, the 105-year-old Danish shipping group, suffered its first ever annual loss last year and warned the woes of the container industry were set to persist in 2010.

As it reported a $1.02bn net loss for 2009, the group said on Thursday it expected only modest profits this year amid the "tough times" for the container industry, which has been hit by the worst crisis in its 54-year history.

Maersk itself incurred $2.09bn losses for 2009 in its container shipping and related activities division, centred on Maersk Line, the world's largest container line. The results and gloomy prognosis countered a renewal of optimism in the container sector following a surge in volumes in this year's early weeks.

Nils Andersen, chief executive, said Maersk had concluded the volume increase was a result of companies' repositioning stocks.

"That seemed to indicate that it could be a passing trend," he said. The company believed 2010 would be a year of "reasonable growth" in demand for container shipping but that the 7-10 per cent growth in world ship capacity would outpace the 3-5 per cent growth in demand. Nor were there real signs of a pick-up in demand in Europe and North America.

"Until that happens, I think it's hard to accept the tough times are over," Mr Andersen said. There remained problems with a world oversupply of container ships following the binge of ordering during the sector's 2001 to 2008 boom. The oversupply and collapsing earnings have pushed many lines into major losses.

"When you have a risk of over supply, of course there's a risk of poor pricing," Mr Andersen said. The company's shares fell 3.45 per cent after the results.

The 2009 loss is considered the first in Maersk's history as it excludes the first and second world wars from its calculation of its past financial record because the group ceased to operate normally. During the second world war, the company's fleet split into allied and German-controlled halves.

The 2009 loss compared with a $3.46bn net profit for 2008 and was struck on revenue down 21 per cent to $48.5bn.

Revenue at the container shipping division fell 28 per to $20.6bn after traffic fell 1 per cent but revenue per container fell 28 per cent. The division made a $583m profit for 2008.

Discussion

Approach the Carsten Maersk from dockside in the Long Beach, Calif., harbor and it's hard to grasp that you are walking up to an oceangoing container ship, not a high blue metal wall. If you're anywhere close, bow and stern are outside your peripheral vision. The Danish-flagged Maersk Sealand vessel is 1,138 feet from end to end and 140 feet wide at midship. That's longer and only a bit narrower than three football fields laid out end zone to end zone, and longer than all but the ultra-large supertankers(Brooks, 2006).

Go up to the bridge and you look out over rows of boxes that are 17 containers wide and piled 14 deep over the keel--nine below deck, five above the hatch ...