By Dominic Chopping 
 

A.P. Moeller-Maersk A/S (MAERSK-B.KO) will seek a separate listing of its drilling unit next year, generating cash proceeds of around $1.2 billion, as the Danish freight carrier continues to reshape itself into a global supply chain player.

Maersk Drilling--which operates a fleet of drilling rigs--was put on the block two years ago when Maersk set out a strategic plan to transform itself from a sprawling shipping and energy conglomerate into an integrated container logistics firm.

The company had set a deadline to sell or list Maersk Drilling by the end of this year, but Friday said a listing in Copenhagen next year would offer the best prospects for its shareholders, "offering them the possibility to participate in the value-creation opportunity of a globally leading pure play offshore drilling company with long-term development prospects."

Ahead of the 2019 listing, the company has secured debt financing of $1.5 billion from a consortium of international banks to ensure a strong capital structure after a listing.

The unit reported revenue growth of 4.9% to $366 million in the second quarter, while earnings before interest, tax, depreciation and amortization rose 2.3% to $159 million.

Maersk has already sold Maersk Oil to Total S.A. (TOT) in a cash-plus-shares deal while Maersk Tankers was sold to its controlling shareholder. It retains 78.3 million shares in Total, worth around $5 billion, and the company said that following the demerger of Maersk Drilling a material part of these remaining Total shares will be distributed to Maersk's shareholders in cash dividends, share buy-backs or as a distribution of the Total shares directly.

When Maersk Drilling is listed, its shares will be distributed to Maersk's shareholders, it added.

The pursuit of a solution for its remaining non-core business, offshore support vessel operator Maersk Supply, will continue, but the company said that due to challenging markets the timing for finding a solution is difficult to predict.

Net cash proceeds to Maersk from the separation of Maersk Oil, Maersk Tankers and now Maersk Drilling is around $5 billion, the company said.

Maersk is currently battling lower freight rates and higher fuel costs and said in its second-quarter report Friday that it must continue to cut costs.

It said last week that its earnings would be weaker than expected this year, citing escalating trade tensions as well as higher costs and lower rates, but in its report Friday it said cost cuts and higher freight rates ahead will help improve profitability.

Maersk, which moves about 18% of all containers world-wide and is considered a barometer of global trade, said last week that it expected its core profit this year to come in at $3.5 billion to $4.2 billion compared with previous guidance of between $4 billion and $5 billion.

The company said its profit will be hit by a 28% increase in its fuel bill and a 1.2% decline in average freight rates.

With its previous 2018 guidance, Maersk was expecting an underlying annual profit above the $365 million booked last year. Without citing any numbers, it now forecasts "a positive underlying profit."

The shipping firm Friday said second-quarter net profit was $18 million, from a $269 million loss in the same period last year. As previously announced, revenue rose to $9.51 billion from $7.69 billion.

Amid continued pressure on freight rates and a significant increase in fuel prices and adverse changes in foreign exchange rates, the company said it would continue to make network changes and reduce capacity on trades not yielding the desired profitability.

It also pledged to halt all new vessel orders until at least 2020 and to increasingly lease new dry containers as opposed to buying them.

 

Write to Dominic Chopping at dominic.chopping@wsj.com; Twitter: @domchopping @WSJNordics

 

(END) Dow Jones Newswires

August 17, 2018 04:55 ET (08:55 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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