Business
Maersk warns lower container volumes to hit 2023 profits
Global Banking & Finance Review®
Company
By Jacob Gronholt-Pedersen
COPENHAGEN (Reuters) -Shipping group A.P. Moller-Maersk warned on Wednesday lower container volumes and freight rates would drive a four-fold plunge in profits this year, even as it reported record earnings for 2022.
The Copenhagen-based company, which transports goods for retailers and consumer companies such as Walmart, Nike and Unilever, raised its profit forecast twice last year as a surge in consumer demand and pandemic-related logjams at ports boosted freight rates.
But freight rates have since tumbled as recession looms and pandemic-fuelled import bubbles deflate in the United States and other major consuming countries.
This year, Maersk expects global demand for shipping containers by sea to fall by as much as 2.5% as a build up in inventories is unwound.
“The shipping market looks difficult right now. Freight rates have stabilized at a lower level that is not catastrophic for us,” Chief Executive Vincent Clerc told journalists.
Clerc, who took over as CEO on Jan. 1, said he would focus on keeping costs down at a time when Maersk has been buying up warehouses and distribution centres to offer an end-to-end transportation service rather than just container shipping.
Maersk, one of the world’s biggest container shippers with a market share of around 17%, said freight rates fell by nearly a quarter in the fourth quarter versus the previous three months.
The company said last month it would end a vessel sharing alliance with Swiss-based MSC in 2025, potentially paving the way for increased competition between the world’s two biggest container shipping companies.
MSC has responded to high freight rates in recent years by increasing the size of its fleet.
“So far we have not seen any price war,” Clerc said. “But we have some clear concerns around the second half of this year, when new ships will come to market,” he said.
Maersk expects underlying earnings before interest, taxation, depreciation and amortisation (EBITDA) of $8-11 billion in 2023, compared with $36.8 billion last year.
The forecast was below the $11.9 billion expected by analysts in a company poll.
The company’s shares have shed more than one-third of their value since peaking in January last year. On Wednesday, they dropped 5% in early trading, but were up 0.6% by 1028 GMT amid a broad stock market rally.
Underlying EBITDA stood at $6.52 billion in the quarter compared with $7.99 billion a year earlier and the $6.95 billion forecast by analysts in the company poll.
Revenues dipped to $17.8 billion as the number of containers it loaded on to ships fell by 14%.
(Reporting by Jacob Gronholt-PedersenEditing by Anna Ringstrom and Mark Potter)
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a financial metric used to evaluate a company's operating performance.
Freight rates are the charges applied for transporting goods by sea, air, or land. They fluctuate based on demand, supply, and market conditions.
A shipping container is a standardized reusable steel box used for transporting goods. They come in various sizes and are designed for efficient loading and unloading.
Corporate profit refers to the financial gain a company makes after all expenses, taxes, and costs have been deducted from its total revenue.
Market share is the portion of a market controlled by a particular company or product, expressed as a percentage of total sales in that market.
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