February 27, 2014 / 8:58 AM / 5 years ago

UPDATE 2-Maersk sees flat year ahead

* Denmark’s A.P. Moller-Maersk 2013 net profit higher than expected

* Company will issue bonus shares to bring down share price

* Container shipping unit outperform competitor

* Shares down 3.3 pct, underperforming market (Adds details, quotes, share reaction)

By Ole Mikkelsen

COPENHAGEN, Feb 27 (Reuters) - Danish shipping and oil group A.P. Moller-Maersk predicted no profit growth in 2014 due to the cost of new drilling rigs and lower oil production while container shipping rates remain under pressure.

The owner of the world’s largest container shipping line is trying to reduce its dependence on volatile container shipping and is investing in oil rigs, ports and oil production where planned maintenance projects will hit output.

Profit from oil and drilling in 2014 is expected to fall below the 2013 level while the outlook was flat for Maersk Line, seen as a bellwether for the global economy as its vessels make up around 15 percent of the world’s container shipping capacity that carries 90 percent of world trade.

Maersk Line, accounting for about 50 percent of group revenue, more than tripled underlying profit to $1.5 billion in 2013, offsetting lower earnings from the other divisions.

“We expect container freight rates will surge up and down. There is over-capacity in the market and it will be until at least 2016,” Chief Executive Nils Smedegaard Andersen said on a teleconference.

Andersen said Maersk Line still aims to be more profitable than competitors, which include Swiss-based and privately-owned MSC, French-based CMA CGM and China’s COSCO Container Lines . It wants to keep its operating margin five percent higher than rivals.

“We have reached that in the last six quarters which means we make money while earnings in the rest of the industry are around zero,” Andersen said.

Underlying group net profit for 2013 fell 6.5 percent to $3.78 billion, beating the market’s average forecast of $3.44 billion in a Reuters poll of analysts.

The outlook for profit in 2014 to be in line with 2013 was described as “disappointing” by Nordea analysts.

Shares in A.P. Moller-Maersk, up 40 percent in the last 12 months, were 3.3 percent lower at 1105 GMT, while the Danish benchmark index was down 1.4 percent.

The better than expected 2013 result at Maersk Line was achieved by lowering unit costs. Average freight rates decreased by 7.2 percent to $2,674 per forty foot container (FFE) and volumes increased by 4.1 percent to 8.8 million FFE. Fuel consumption was reduced by 12.1 percent, the group said.

Maersk has ordered 20 super-size vessels from South Korea’s Daewoo Shipbuilding & Marine Engineering. Four of them were put into service on the busy route between Asia and Europe last year, helping to lower costs per unit.

Following calls from investors, the group proposed issuing four bonus shares for each existing share held, in a move that will lower the per share price of the stock in the hope of expanding its shareholder base.

With a share price around 64,000 Danish crowns ($11,700) the Maersk share is currently among the world’s most expensive.

A dividend payout of 1,400 Danish crowns ($260) per share was recommended, up from 1,200 crowns last year.

$1 = 5.4600 Danish crowns Editing by Elaine Hardcastle

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