UPDATE 2-Maersk says to shut Odense shipyard

Mon Aug 10, 2009 9:55am EDT

* Maersk to end shipbuilding at Odense Steel Shipyard

* To put Baltija Shipyard in Lithuania up for sale

* Shares down 2 pct, underperforming local bourse

(Adds CEO quotes, details, share price)

By Teis Jensen

COPENHAGEN, Aug 10 (Reuters) - Danish shipping and oil group A.P. Moller-Maersk (MAERSKb.CO) will end shipbuilding at the loss-making Odense Steel Shipyard in Denmark and put its Baltija Shipyard in Lithuania up for sale, the company said on Monday.

Maersk said in spite of major efforts to improve competitiveness at Odense through new technology and more efficient production processes, it had run up "very considerable" annual deficits and was unable to attract "commercially sound" orders.

The shutdown of the Odense yard marks the end of a 900-year-old tradition of building big ships in Denmark.

Maersk shares fell 2 percent to 34,000 crowns by 1342 GMT, underperforming a 0.9 percent fall in the Copenhagen bourse blue-chip index .OMXC20.

A.P. Moller-Maersk Chief Executive Nils Smedegaard Andersen said Odense Steel Shipyard had played a key role as Maersk became a global player in the shipping industry.

"But times have changed. Overcapacity in the market and tough competition have made the situation increasingly difficult in spite of initiatives taken to meet these challenges," Andersen said in the statement.

Odense Steel Shipyard posted a 562.3 million Danish crowns ($107.2 million) pretax loss in 2008, a 156.7 million crowns pretax loss in 2007 and a 1.07 billion crowns pretax loss in 2006.

In March, the A.P. Moller-Maersk group posted a net profit of $3.5 billion for 2008, up from $3.4 billion in 2007.

The yard, which currently has 2,700 employees, will fulfill existing orders and continuously downsize the workforce, the company said.

The first redundancies of about 175 employees are expected to take place from the end-August, and the last new vessel on order is expected to be delivered in February 2012, it said.

"With the discontinuation of the shipbuilding activities at Odense Steel Shipyard there is no longer a need for ownership of the Lithuanian shipyard, Baltija Shipyard. The company is therefore put up for sale," Maersk said.

Design and engineering company UAB Baltic Engineering Centre in Lithuania is also up for sale, it said.

Sydbank analyst Jacob Pedersen said Maersk could not avoid closing Odense Steel Shipyard.

"They are looking closely at all parts of the company to find places to cut costs," Pedersen told Reuters, adding there was no prospect of a rebound in shipbuilding orders in the short term. ($1=5.247 Danish Crown) (Editing by Simon Jessop)

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