Maersk back in black in Q2, but warns of USD300 million cyber attack losses

Rising freight rates helped Maersk Group report a Q2 profit of USD389 million. Credit: Maersk
Rising freight rates helped Maersk Group report a Q2 profit of USD389 million. Credit: Maersk

Maersk Line reported a second quarter (Q2) profit of USD339 million on the back of sharp increases in freight rates, while at the same time warning that Q3 losses from the mid-year cyber attack would be in the region of USD200-300 million.

The carrier said in its earnings statement that market fundamentals continued to improve in Q2 as demand growth of 4% outgrew nominal supply growth of 1.4%, and this was starting to be reflected in the freight rate.

Maersk Group reported a loss of USD264 million as it was negatively impacted by post-tax impairments of USD732 million primarily relating to lower asset valuations in Maersk Tankers and a few commercially challenged terminals in APM Terminals. Group revenue increased by USD743 million to USD9.6 billion with liner revenue up USD1 billion, an increase of 21%.

But Q2 was all about Maersk Line. The carrier’s profit in the period was driven by freight rates that were up 7.6% compared to Q1. Rates in Q2 increased by 36% on East-West trades and 17% on North-South trades. Transported volumes increased by 1.7% compared to Q2 2016, with headhaul volume up 5.2% year-on-year, although there was a decrease on backhaul cargo of 5.6%.

First half profit at Maersk Line reached USD273 million against a loss of USD114 million in the same period of 2016. The group first half profit was USD635 million.

Maersk said it expects the financial impact of the 27 June NotPetya malware attack attack to be in the range of USD 200-300 million, but this would be felt mainly in Q3, stemming from lost volumes during the incident as well as extraordinary costs in IT and operations. The attack forced Maersk to defensively shut down all its IT and communications, impacting container-related businesses Maersk Line, APM Terminals, and Damco.

Despite the financial impact of the cyber attack, Maersk Line is still predicting a USD1 billion improvement in net profit compared to that of 2016, during which the carrier recorded a loss of USD384 million. The carrier has left the expectation unchanged because of improvements in freight rates and increasing volumes, with global demand for seaborne container transportation expected to increase by close to 4%.

A look at the freight rate per 40-ft container tells the story of Maersk Line’s improving financials. The average rate rose 21% between April and June to USD2,086 per teu, and while total volume during those three months was only up by 1.6%, 2.7 million containers benefited from the higher rate levels. However, total unit cost were negatively impacted by a 61% increase in the bunker price.

Maersk Line took delivery of two out of 11 second-generation Triple-E’s ordered in 2015 and recycled four vessels. By the end of June, Maersk Line had 25 vessels in its order book totalling 347,000 teu for delivery in 2017 and 2018 consisting of nine 20,600 teu second-generation Triple-E, nine 15,200 teu vessels, and seven 3,600 teu ice-class vessels for the intra-European market.

The carrier’s total order book corresponds to 9.9% of current fleet compared to an industry order book of around 13.1%, according to Alphaliner.

In its earnings report, Maersk gave guidance on the market. It said the global container fleet capacity stood at 20.6 million teu at the end of Q2, an increase of 1.4% compared to same quarter last year. However, adjusting for the decline in the idle fleet from 4.6% to 2.6% of global nominal capacity, the offered capacity grew in line with container demand growth at around 4%.

Container demand continued to outgrow the global container fleet in the second quarter, contributing to the improved market as freight rates out of China increased by 31% compared to Q2 2016, according to the China Composite Freight Index (CCFI).

A total of 332,000 teu (40 vessels) were delivered and 86,000 teu (36 vessels) were scrapped between April and June. The modest number of scrapped vessels followed high scrapping rates in the preceding quarters. No new vessels above 10,000 teu were ordered.

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