Container shipping may experience major merger and acquisition activity during the next decade, Maersk Line says.
The world’s largest container line, however, dismissed the potential of revising its 2017 newbuilding schedule in the face of a difficult market.
Soren Skou, chief executive of Maersk Line, said on a conference call today the container sector was experiencing a “wave of consolidation”.
He explained the trend started with Hapag-Lloyd’s purchase of CSAV, continued to the German firm’s capture of United Arab Shipping Co and may extend further given the restructuring of South Korea’s two carriers.
Skou said the “clear consolidation wave” was a response to the poor results many lines had experienced during the past five years. “This is an overall positive for the industry”, he said.
Maersk Line M&A 'further out'
The executive - who is conducting a strategic review of the Danish conglomerate - added: “There is a chance the industry will consolidate significantly over the next decade. But obviously that is speculation.”
Analysts are expecting AP Moller-Maersk to be involved in M&A activity given the ongoing review, the findings of which have been delayed until the end of the third quarter.
Fearnley Securities interpreted the delay in reporting the results of the review as a sign that "larger transactions, such as a sale of Maersk Oil or accretive acquisitions within the liner business", were “a bit further out that previously anticipated".
“That said, we believe M&A opportunities will stand high on the new CEO’s agenda, and based on current depressed valuations it can only bring upside as we see it,” Jonathan Staubo, Peder Nicolai Jarlsby and Espen Landmark Fjermestad explained.
DNB Markets said the postponement was an indication that the company is looking for a more significant change in its structure.
“In our view the chairman's media comments are an open invitation to advisors to provide input in the process,” analysts Nicolay Dyvik, Petter Haugen and Jorgen Lian said.
Newbuilding plans unchanged
AP Moller-Maersk today reported a near 90% fall in second quarter profit.
While underlying profit of $134m was worse than expected, operating results surpassed expectations and investors focused on the significant cost cuts achieved by Maersk Line.
Trond Westlie, chief financial officer of AP Moller, said Maersk Line had 22 newbuildings set for delivery in 2017.
He explained the ships were already part of the line’s growth plans and he did not foresee any changes to their planned phasing into the fleet.
Maersk Line posted a loss of $139m in the quarter, a swing from a profit of $499m a year ago, with costs lowered to the lowest in the division’s history.
Skou said he would continue to delve into the large tool box at his disposal for further cost reductions, noting he would never say all measures had been exhausted.
Further help will come via the third revision of the 2M network, with the potential addition of Hyundai Merchant Marine likely to bring further benefits, Skou said.
Shares in AP Moller-Maersk rose strongly in the immediate aftermath of the results but lost some of that momentum by late morning.
At the time of writing, AP Moller’s B shares were up 3.25% on the day.
DNB Markets said the results mix and neutral guidance had provided a relief to the stock.
