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Maersk Line slashes profit expectation by US$600m

Maersk Line slashes profit expectation by US$600m
Maersk's share price fell on the news

The Maersk Group announced on Friday (October 23) that it expects to make US$600m less profit in 2015 than it had predicted a few months ago.

The group said that it’s shipping line subsidiary Maersk Line would make US$1.6bn in profit this year, instead of the US$2.2bn it had previously predicted.

The group as a whole therefore is predicted to make only US$3.4bn instead of US$4bn. Its share price fell after the news was announced.

According to a company statement, US$500m of the reduced projection can be attributed to a decline in the freight rate of US$100 per forty foot equivalent (FFE) and US$100m can be put down to a volume reduction of 200,000 teu.

The statement continued: “The container shipping market has deteriorated beyond the Group’s expectations especially in the later part of Q3 and October and the Group does not expect market recovery in 2015.”

Group CEO Nils Andersen said: “Maersk Line has, over the years, taken steps to ensure a cost effective and resilient operation but the current deterioration in the container shipping market is impacting also our business.”

In the third quarter of 2015, Maersk Line achieved an average freight rate of US$2,163 per FFE and carried 4.85m teu, lower than expected but up slightly from 4.8m teu in the same period last year.

The company said that, as a result of the market circumstances, initiatives have been taken to adjust Maersk Line’s network accordingly.

An example of this was when, on October 20, 2015, Maersk Line and MSC suspended their joint Asia-Black Sea service.