Danish shipping and oil giant A.P. Moller-Maersk blamed weak freight rates and low oil prices for a 90 fall in second quarter net profits. But as Hayley Platt reports investors were reassured by the group's cost cutting progress, lifting shares 5 percent.
Times are tough for shipping giants like Maersk, amid a challenging global environment. Low oil prices and an industry recession are taking a toll. Operating profit in the second-quarter came in at $656 million, above expectations. But net profit between between April and June plunged 90 percent to $101 million. Nonetheless investors were supportive. (SOUNDBITE) (English) CMC MARKETS ANALYST, JASPER LAWLER, SAYING: "The results were actually well received today just because even though there's a really difficult environment because of a drop in the oil price Maersk has been able to cut costs and just become a bit more of an efficient operation at these lower price levels." The Danish group fired its CEO in June - replacing him with Soren Skou head of Maersk Line - the group's biggest division. He's been concentrating on cutting costs and undertaking a strategic review of the business. Maersk Line has already reduced costs by 15 percent - although still not enough to counter the fall in freight rates. And later this year it's expected to scrap around 150 container vessels. But over capacity, low demand and persistently low oil prices remain a worry. (SOUNDBITE) (English) CMC MARKETS ANALYST, JASPER LAWLER, SAYING: "Slower commodity demand from China has really impacted the demand for these shipping companies. A lot of the big freighters just lying around unused down from the lofty days of the commodity boom when China was really stimulating its economy." Maersk isn't the only shipper struggling to find growth. Earlier in the week Germany's Hapag-Lloyd reported first half losses of almost 40 million euros.