"2010 started better than expected and overall expectations for the A.P. Moller-Maersk group are thus a profit for 2010 -- an improvement compared to the previous statement on March 4 of a modest profit," the Danish company said.
Profit before financial items more than doubled to 11.2 billion Danish crowns ($1.9 billion) in the three months to the end of March, beating forecasts in a 5.56-10.37 billion range in a Reuters poll in which the average estimate was 8.23 billion.
"Very strong results, no doubt about it," said ING analyst Axel Funhoff. "Pretty strong across the board but the key surprise really came out of the container shipping division."
Container shipping swung back into profit from a year-ago loss. In March, the group said its container business, where its Maersk Line is world leader, would post another loss this year.
"The group's container shipping and related activities are now expecting a positive result for 2010 based on the improved market conditions for the container shipping activities," the company said.
Chief executive Nils Smedegaard Andersen told Reuters in an interview the development in freight rates had improved significantly from three months ago, but he cautioned against expecting the first-quarter trend to last all year.
"We believe that what continues to drive this is restocking, so one should beware of thinking that this will develop at the same speed for the rest of the year," Andersen said.
The main driver in the container business was an 18 percent rise in freight rates from a year ago, he told analysts in a conference call. "Rates have recovered faster than we expected just a few months ago," Andersen said, but added that rates had not recovered to the 2008 level.
"We expect that (container shipping) rates will continue to go up from the first quarter, and that is also necessary to deliver a positive result," he said.
First-quarter tanker rates remained below year-ago levels.
"Out of the Woods"
Shipping markets have recovered from a deep plunge in 2009 when Maersk suffered its first annual loss.
Maersk's container shipping arm swung to a first-quarter operating profit of 1.26 billion crowns from a 2.61 billion loss in the 2009 period and with analyst expecting another loss.
"Maersk Line seems to be well on track to really perform better than people had originally expected," ING's Funhoff said. "You can even say that division is out of the woods."
The bulk of group earnings still came from the oil and gas business where operating profits rose to 8.1 billion crowns in the first quarter from 5.43 billion a year earlier, exceeding analysts' average estimate.
Andersen said higher oil prices were the sole reason for the higher oil and gas profits as output fell to 35 million barrels of oil equivalents in the quarter from 43 million a year ago.
Maersk forecast that its 2010 oil and gas production on an entitlement basis would be "somewhat below" that of 2009, primarily due to a lower share of production from its Qatar assets, and slightly below the first quarter in 2010.
Maersk, with a fleet of 539 container vessels and sometimes seen as a barometer of world trade, said there was still uncertainty about how freight volumes and rates would develop.
"Global cargo volumes for 2010 are expected to rise by minimum 5 percent, driven mainly by the strong development in demand in the first quarter," Maersk said.
Andersen told Reuters Maersk was monitoring the Greek crisis for any impact on European consumption -- a key driver of container shipping which is largely transport of consumer goods.
Andersen said that the focus of Maersk investments will remains on oil and gas and its port terminal business. (Reuters)
