Maersk Profit Advances 40% on Oil Exploration Unit

By Christian Wienberg

Aug. 27 (Bloomberg) -- A.P. Moeller-Maersk A/S, the world's largest container shipper, said profit gained 40 percent in the first six months after earnings nearly doubled in the oil exploration division.

Net income rose to 11.6 billion kroner ($2.3 billion) from 8.31 billion kroner a year earlier, the Copenhagen-based company said today in a statement. Profit beat the 10.5 billion-krone median estimate of nine analysts surveyed by Bloomberg. Revenue increased 13 percent to 148.4 billion kroner.

Maersk raised its full-year sales and profit forecasts based on earnings in the Oil & Gas division, which has become the largest profit contributor after oil prices nearly doubled over the past 18 months. The company said today it will buy a competitor to become the biggest shipper of refined oil products. The Maersk Line container business remains ``challenging'' because of rising fuel costs, overcapacity and a weaker dollar.

``Years of investments in Oil & Gas are now seriously paying off for Maersk,'' Karsten Sloth and Christian Nagstrup, analysts at Silkeborg, Denmark-based Jyske Bank A/S, said in a note before the earnings announcement. ``Meanwhile, Maersk Line has little to celebrate.'' They rate the stock ``accumulate.''

Maersk rose as much as 5.9 percent to 56,000 kroner in Copenhagen trading and was up 2,100 kroner, or 4 percent, as of 2:18 p.m. Before today, the shares had dropped 2.8 percent this year, outpacing the Bloomberg European 500 Index of Europe's 500 largest companies, which lost 23 percent.

Qatar, North Sea

The energy exploration unit almost doubled first-half profit to 6.47 billion kroner. It has invested $6 billion kroner in oil and gas fields offshore of Qatar, and also explores in the Danish and U.K. parts of the North Sea.

Maersk predicted profit before minority interests of 20 billion kroner to 23 billion kroner this year, compared with a previous range of 18 billion kroner to 20 billion kroner. Sales will be about 320 billion kroner, up from a previous forecast of 300 billion kroner, the company said.

The Danish company also said today that it will buy Brostroem AB for 3.62 billion Swedish kronor ($568 million), creating the world's largest operator of gasoline, jet fuel and diesel tankers. The purchase will bring Maersk's combined fleet to 301 chemical and refined oil tankers, including 60 that are under construction.

Refining Demand

The additional tankers may help Maersk tap demand for longer-distance oil deliveries as most new refineries are being built in Asia and the Middle East, away from the U.S. and Europe where the bulk of the fuel is consumed.

Maersk is undertaking the biggest cost-reduction plan in its 103-year history by cutting as much as 12 percent of the labor force at the container unit.

Maersk Line, which operates more than 500 vessels that can carry 1.7 million containers, posted a 359 million kroner profit compared with a 1.23 billion kroner loss the year before.

Global container rates were 10 percent higher in the second quarter than a year ago when fuel surcharges are included, Philip Damas, research director at Drewry Shipping Consultants Ltd. in London. Rates from Asia to Europe, the most important for Maersk, rose 3 percent.

Maersk Line's profit is restrained by a weaker dollar because the company generates most of its income in the U.S. currency and incurs many costs in the euro and the Danish krone.

The dollar declined 16 percent against the euro at the end of the second quarter from a year before. Bloomberg 380 Centistoke bunker fuel traded in Rotterdam gained 84 percent.

To contact the reporter on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net