A.P. Møller – Mærsk A/S has published its Annual Report 2015 today, 10 February 2016.
Highlights
- We are satisfied with the good operational performance across our businesses in 2015.
- Despite very challenging market conditions, all business units delivered positive underlying profits and the Group achieved an underlying result of USD 3.1bn.
- Given our expectation that the oil price will remain at a low level for a longer period, we have impaired the value of a number of Maersk Oil’s assets by USD 2.6bn after tax.
- The Maersk Group is in a good position to handle a challenging 2016 and take advantage of opportunities.
- We will continue to strengthen the Group’s position through strong operational performance and growth investments.
The Maersk Group delivered a profit of USD 925m (USD 5.2bn) and an underlying profit of USD 3.1bn (USD 4.5bn). After a satisfactory result in the first half of the year with a ROIC of 10.2%, Maersk Group was severely impacted by a widening supply-demand gap across most of our businesses, leading to significant oil price and freight rate reductions. ROIC for the second half of the year was negative 6.3%, impacted by impairments of USD 2.5bn after tax in Maersk Oil and for Q4 there was an underlying loss of USD 9m (profit of USD 1.0bn).
The Group delivered a strong cash flow from operating activities of USD 8.0bn (USD 8.8bn) for the year and USD 2.0bn (USD 2.4bn) in Q4, despite a significant decline in container freight rates and oil prices.
“We are satisfied with the good operational performance across our businesses in 2015. Despite the very challenging market conditions in our industries, all business units delivered positive underlying profits and the Maersk Group achieved an underlying result of USD 3.1bn. Given our expectation that the oil price will remain at a low level for a longer period, we have impaired the value of a number of Maersk Oil’s assets by USD 2.6bn after tax. We will continue to strengthen the Group’s position through strong operational performance and growth investments,” says Group CEO Nils S. Andersen.
Group Highlights:
The Group’s underlying profit of USD 3.1bn was within the expectations of around USD 3.4bn. Compared to last year, profits were lower in Maersk Line, Maersk Oil and APM Terminals and higher in Maersk Drilling and APM Shipping Services.
The Group delivered a ROIC of 2.9% (11.0%) in 2015, negatively impacted by post tax impairments of USD 2.6bn on oil assets due to the low oil price expectations as well as the revenue impact from the lower oil price and lower average container freight rates.
The Group’s cash flow from operating activities remained at a high level of USD 8.0bn (USD 8.8bn) and net cash flow used for capital expenditure came at USD 6.3bn (USD 6.2bn), excluding the sale of shares in Danske Bank of USD 4.9bn.
With an equity ratio of 57.3% (61.3%) and a liquidity reserve of USD 12.4bn (USD 11.6bn), the Group maintains its strong financial position.
Maersk Line made a profit of USD 1.3bn (USD 2.3bn) and a ROIC of 6.5% (11.6%). The underlying profit declined to USD 1.3bn (USD 2.2bn) due to poor market conditions leading to significantly lower freight rates, in particular in the second half of the year, only partially offset by lower bunker prices, USD appreciation and cost efficiencies.
Maersk Line placed three newbuilding orders for a total of 27 vessels with a total capacity of 367,000 TEU. Further investments have been postponed due to the weak market conditions.
During the first part of 2015, the implementation of the Vessel Sharing Agreement (VSA) with Mediterranean Shipping Company (MSC) on the East-West network was completed successfully with the phase-in of 193 vessels.
Maersk Oil made a loss of USD 2.1bn (loss of USD 861m) and a ROIC of negative 38.6% (negative 15.2%). The result was negatively affected by impairments after tax of USD 2.6bn due to the low oil price expectations. The underlying profit was USD 435m (USD 1.0bn) negatively impacted by lower average oil prices but positively impacted by a higher average entitlement production and lower operating and exploration costs.
The impairments of USD 80m in Q2 and USD 2.5bn in Q4 were primarily related to production assets with short lifetime such as Kazakhstan, Kurdistan and the UK as well as our deepwater development assets in Angola and Brazil, where the current conditions do not allow for viable projects. While we have fully impaired the assets and significantly reduced our on-site activities in Angola and Brazil, we continue our efforts to seek solutions in Angola through concept changes and negotiations with authorities, partners and contractors, and in Brazil we are pursuing extensions of the Wahoo and Itaipu licences which expired in Q4 2015.
The unmanned Tyra South East platform in the Danish North Sea delivered first oil as planned in Q1. Qatar Petroleum initiated a tender process for the selection of a partner to undertake the future development of the Al Shaheen field, when the current agreement expires in mid-2017. The Norwegian Ministry of Petroleum and Energy approved the field development plan for the first phase in the Norwegian Johan Sverdrup field, where Maersk Oil is expected to invest around USD 1.8bn. First oil is expected in 2019.
The Maersk Oil operated Culzean gas field was sanctioned by the UK government in Q3 with a total field development capex programme of around USD 4.5bn. Maersk Oil is expected to contribute with USD 2.3bn of this. First gas from Culzean is expected in 2019. Maersk Oil agreed to acquire half of Africa Oil Corporation’s ownership in three onshore exploration licences in Kenya and two in Ethiopia. The transaction is expected to be completed in 2016.
APM Terminals made a profit of USD 654m (USD 900m) and a ROIC of 10.9% (14.7%). The underlying profit declined to USD 626m (USD 849m) due to lower volumes particularly in West Africa, Russia and Brazil only partly offset by revenue improvement and cost saving initiatives. APM Terminals accelerated their global growth ambition with several significant acquisitions and new projects.
APM Terminals agreed to acquire 100% of the shares in Grup Marítim TCB (TCB), the leading Spanish container terminal operator, with terminals located in Spain, Colombia, Brazil, Mexico, Guatemala and Turkey. APM Terminals’ global terminal network will grow from 63 to 74 terminals in 37 countries across five continents and with additional seven terminals under implementation. The 11 acquired TCB terminals add an additional 4.3m TEU in capacity and 3.5m TEU in estimated annual container volumes (2.6m TEU throughput when weighted with APM Terminals’ ownership interest in the individual terminals). The acquisition has an implied enterprise value of USD 1.1bn with additional capex investments of USD 400m over the next five years. Subject to regulatory approvals, the transaction is expected to be completed in Q1 2016.
APM Terminals agreed to invest around USD 800m in a newbuilt container terminal and connected road infrastructure next to its present facility in Tema, Ghana, with 3.5m TEU annual throughput capacity. During 2015, APM Terminals also agreed to invest in a greenfield grain terminal in Qingdao, China and acquired a terminal in Cartagena, Colombia as well as a reefer terminal in Vado, Italy. Additionally, APM Terminals upgraded and expanded a number of its terminals globally.
Maersk Drilling made a profit of USD 751m (USD 478m) and an underlying profit of USD 732m (USD 471m) positively impacted by good contract coverage, fleet growth, cost savings and strong operational performance. Furthermore, the result benefitted from fewer yard stays and additional gain from the sale of the Venezuela business partly offset by increased idle time and Maersk Endurer being decommissioned and recycled. ROIC was 9.3% (7.1%).
Maersk Drilling took delivery of one drillship, Maersk Voyager, and one ultra harsh environment jack-up rig, Maersk Integrator. Maersk Drilling has one ultra harsh jack- up rig under construction to be delivered in 2016. Maersk Drilling signed seven new contracts during 2015 and five contract extensions. Although at significantly lower day rates compared to previous contracts, the new contracts and extensions added USD 2.0bn to Maersk Drilling’s revenue backlog and 8,700 contracted rig days.
APM Shipping Services made a profit of USD 446m (loss of USD 230m) and a ROIC of 9.5% (negative 4.2%). The underlying profit increased to USD 404m (USD 185m). Maersk Tankers made an underlying profit of USD 156m (USD 139m), Maersk Supply Service saw a decreasing underlying profit of USD 117m (USD 189m), Svitzer improved underlying profit to USD 116m (USD 82m) and Damco improved from an underlying loss of USD 225m in 2014 to an underlying profit of USD 15m in 2015.
As part of the fleet renewal, Maersk Tankers signed a newbuilding contract for nine MR vessels with a contract value of approximately USD 300m. The order book totals 17 MR newbuildings to be added to the fleet over the next three years. With the re – delivery of three VLCCs in 2015, Maersk Tankers has two chartered VLCC vessels left in the fleet.
The Group’s guidance for 2016
The Maersk Group expects an underlying result significantly below last year (USD 3.1bn). Gross cash flow used for capital expenditure is expected to be around USD 7bn in 2016 (USD 7.1bn).
Maersk Line expects an underlying result significantly below last year (USD 1.3bn) as a consequence of the significantly lower freight rates going into 2016 and the continued low growth with expected global demand for seaborne container transportation to increase by 1-3%.
Maersk Oil expects a negative underlying result (profit of USD 435m). Breakeven is reached with oil prices in the range USD 45-55 per barrel. Maersk Oil’s entitlement production is expected to be around 315,000 boepd (312,000 boepd). Exploration costs are expected to be in line with 2015 (USD 423m).
APM Terminals expects an underlying result around the 2015 level (USD 626m). Maersk Drilling expects an underlying result significantly below last year (USD 732m) mainly due to lower dayrates and more idle days.
APM Shipping Services expects the underlying result to be significantly below the 2015 result (USD 404m) predominantly due to significantly lower rates and activity in Maersk Supply Service.
The Group’s guidance for 2016 is subject to considerable uncertainty, not least due to developments in the global economy, the container freight rates and the oil price. The Group’s expected underlying result depends on a number of factors. Based on the expected earnings level and all other things being equal, the sensitivities for the calendar year 2016 for four key value drivers are listed in the table below:
Copenhagen, 10 February 2016
Contacts: Head of Media Relations Denmark, Simon Augustesen,
phone. +45 3363 1912
The Interim Report 1st Quarter is expected to be announced on May 4, 2016.