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Maersk rules the world's commercial shipping lanes

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The Majestic Maersk Triple E class ship, one of the world's largest vessels

The Majestic Maersk Triple E class ship, one of the world's largest vessels

Bloomberg

Maersk Triple-E

Maersk Triple-E

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The Majestic Maersk Triple E class ship, one of the world's largest vessels

If you were asked to name the most revolutionary commercial idea of the last 50 years, the chances are that the industry we are looking at today would come way down the list of responses.

Nevertheless shipping containerisation has become dominant in every port in every country in the world and accounts for 90pc of global trade. Prior to 1956 no purpose-built container ship had been built. Today however the market leader in the shipping container business, the Danish AP Moller Maersk, is not just the largest shipping operation in the world; it is also the bellwether for global trade with 15pc of the world market for sea freight.

It has gone a long way towards proving how cost-efficient and effective container shipping can be and its fleet includes giant container vessels, oil tankers, supply vessels and vessels for purposes like salvage.

Maersk traces its origins to 1904 but it wasn't till 1962 that it was awarded a concession to drill for oil and gas in Danish waters, so providing the basis of its oil and drilling business. Today the group has five significant stand-alone businesses but its shipping-related interests like Maersk Line, APM Terminals and APM Shipping Services account for 60pc of the $3.8bn group profit. The company's oil interests Maersk Oil and Maersk Drilling account for the remainder of group profits.

Maersk Lines is the world's biggest container shipping company and the largest company in the group with sales of $26bn and $1.5bn of group profits. It has a fleet of ships travelling every shipping lane in the world, operating in 120 countries with giant vessels that can carry 18,000 20-foot containers per ship. The average distance a container ship travels each year is equivalent to three-quarters of the distance to the moon.

APM Terminals provides port management, operations, and infrastructures to over 60 ports and terminals in 36 countries and has an annual of revenue of $4.3bn and profits of $770m. APM Shipping Services is a wide ranging set of businesses and includes towing, salvage, tankers and freight forwarding with revenues of over $6bn but with thin margins. The towing business generates $160m in profits, but the oil tanker fleet and freight-forwarding business lost money. The offshore oil services contributed $235m profit.

Maersk Oil is the group's second largest business with revenues of $9bn and operates in the North Sea, Qatao, Algeria, Kazakhstan and Brazil generating a profit of $1bn, a quarter of group profits. Maersk's drilling supports the companies oil activities and show a profit of $528m.

The company sales last year amounted to a considerable $47bn, with profits of $3.8bn, and a market value of 300bn Dkr ($51bn). The family still retains a controlling interest and won't be unhappy that its shares have moved 40pc in the last year, trading at one third above book value.

Interestingly the company intends buying back its shares, a first in its history.

Early this year Maersk signed a ten-year vessel sharing agreement with Mediterranean Shipping. The agreement allows for a sharing of 185 vessels on the regular routes between Europe, Asia and the US coasts. The company thinks there are savings of $1bn in such a scheme. The agreement could also signal a shake-up in the global commercial shipping market. However the agreement will benefit Maersk's earnings and the share price is likely to continue to progress, helped by stable container demand and high capacity utilisation.

Nothing in this section should be taken as a recommendation, either explicit or implicit to buy or sell any of the shares mentioned.

Irish Independent