AP Møller-Maersk has forecast a plunge in profits this yr and a possible contraction in world trade as the pandemic-driven boom in container shipping involves an abrupt finish.
The world’s second-largest container shipping group mentioned on Wednesday that underlying working profits this yr could be $2bn-$5bn, down from the file $31bn it made final yr.
It made $5.1bn in the fourth quarter of final yr alone, even as freight charges, which had rocketed as the pandemic disrupted world provide chains, normalised.
“We are seeing this correction happen. It creates a few new challenges. First and foremost though, it’s a return to normal . . . What we see more than [a change in] GDP is an inventory correction,” Vincent Clerc, Maersk’s new chief govt, instructed the Financial Times.
Clerc mentioned that prospects, who embody many of the world’s largest retailers, had over-ordered throughout the congestion of current years.
“When this congestion goes away, you get more goods, your warehouses are full, your inventory is high,” he added.
The first non-Dane to move Maersk and solely in the function since January 1, Clerc faces a difficult problem: presenting file outcomes for 2022 and a steep drop in profits and demand this yr.
Maersk mentioned it anticipated world container demand to be between minus 2.5 per cent and plus 0.5 per cent this yr. Shares in Maersk fell by 4 per cent in early buying and selling on Wednesday.
“It’s a message about balance. There is no painting the world like everything is going to be fine and easy. Delivering those results is extraordinary . . . We are heading now into a different world, and there is no time for the team to lean back and say: thank God, we are going back to normal,” Clerc mentioned.
Revenues in 2022 elevated by a 3rd to $82bn whereas working revenue rose by 57 per cent to $31bn.
The Danish group largely shunned ordering new ships throughout the boom years in contrast to many rivals, particularly Mediterranean Shipping Company, the secretive Swiss firm run by a former Maersk govt which final yr overtook it as the world’s largest container shipping line by quantity.
Some analysts consider the business is in hazard of returning to the sample of boom and bust that dominated earlier than the previous decade of consolidation.
“Capital discipline across the industry remains evasive. Capacity investments is ahead of what we foresee for demand growth,” Clerc added.
This yr is more likely to be blended for Maersk’s totally different companies. Its land-based logistics and port terminals models ought to see bettering profits in the second half, Clerc mentioned. But its major container shipping enterprise would see robust profits in the primary quarter due to the variety of long-term contracts employed, which might then fall all year long as the drop in freight charges feeds via. It could be a “pretty sharp adjustment”, he added.
Clerc, who has been at Maersk for 1 / 4 of a century, most lately as head of container shipping and logistics, mentioned he would follow Maersk’s technique of bulking up its logistics enterprise and give attention to fixing prospects’ provide chain issues.
Although Maersk is forecasting a pointy drop in profitability in contrast with final yr, working profits of $2bn-$5bn could be higher than what it delivered in 2017-19 as properly as probably 2020’s $4.2bn.