A.P. Moller-Maersk the Danish conglomerate said on Wednesday said its net profit for the first quarter dropped as a steep drop in prices for freight pressured its shipping business, as low prices of crude hit the company’s oil unit.
Maersk ended the quarter with a net profit of $211 million in comparison to $1.54 billion for the previous year during the same period.
This result beat expectations on Wall Street, which had an average of $106 million for profit. Group revenue dropped by 19% to end the quarter at $8.54 billion.
The results increased shares of Maersk by 5.9% in early morning Copenhagen trading.
Maersk announced that freight rates dropped by 26% during the quarter and dropped across all its trade routes, especially key North American, Latin American and European lines.
Volumes were up 7% but the high exposure Maersk has to the hard hit route of Asia to Europe means it is going to continue focusing on cutting its costs.
Maersk Line, the largest operator of container shipping in the world by capacity and the biggest earners traditionally in the company, posted underlying earnings for the first quarter of $32 million, having contributed more than $710 million in the same quarter from the previous year.
Maersk Line is still expected to have an underlying result in 2016 that is substantially less that 2015, as a consequence of much lower rates for freight and continued lower growth, as demand globally for seaborne container transport is expected to only increase by between 1% and 3%.
Maersk Oil posted underlying losses of just over $29 million for the quarter, in comparison with a $207 million profit with oil prices on average during the quarter at only $34 per barrel versus last year during the same quarter of $54.
The oil arm of the company said it was expecting to break even for 2016 with oil between $40 and $45 per barrel, having needed previously an average price of between $45 and $55 per barrel.
It forecasted lower costs for exploration than during 2015 and more entitlement production.
The world’s shipping industry is reporting its earnings after what its executives have called the toughest three months since the financial crisis of 2008 when world trade took a nosedive.
Container operators move 95% of the manufactured goods in the world, but are caught between an oversupply of 30% in ships in water and not enough cargo to keep them filled.
As container operators scramble trying to maintain their market share, freight rates have barely covered the costs of fuel over the last 12 months.