AP Moller-Maersk said that the coronavirus would hit its earnings this year as the world’s largest container shipping company warned of a “very, very weak February and weak March” due to the deadly epidemic.
Soren Skou, Maersk’s chief executive, told the Financial Times that “visibility is low and a lot lower than we would like due to coronavirus” as the Danish group said its earnings before interest, tax, depreciation and amortisation this year would be well below analyst expectations at $5.5bn.
However, Mr Skou added that on current trends the coronavirus “will not have been a huge event for us”. He said he expected a “sharp rebound” in global trade in April, May and June as Chinese factories started running again.
Maersk is a bellwether for global trade, transporting more than one in six containers by sea, and is forecasting another weak year for demand after a turbulent 2019 hit by trade tensions between the US and China, as well as overcapacity in the shipping industry and an expensive new fuel.
Mr Skou trumpeted the fact that, despite the trade friction, Maersk’s ebitda last year increased 14 per cent to $5.71bn, just below analysts’ forecasts. Analysts had expected ebitda this year to rise to $5.94bn, but Maersk warned its own outlook of $5.5bn was subject to considerable uncertainty.
Mr Skou said the number of new coronavirus cases had peaked at the start of February and if that continued he expected the number of infections to start falling in about 10 days.
“Right now, we estimate factories in China are operating at about 50 to 60 per cent capacity. We think it will be 90 per cent by March 2,” Mr Skou said, adding this “would be a good scenario for us”.
But he cautioned that there were “things that can go wrong”, adding: “The risk we fear is that there are 250,000 migrant workers that have to return to Africa and other countries, and they might bring the virus to countries that are ill-equipped to deal with it.”
Maersk estimated that global container demand — a proxy for trade growth — would increase by 1 per cent to 3 per cent this year, in line with 2019’s 1.4 per cent. That is well below the double-digit rises enjoyed before the 2008/9 financial crisis as well as the 3.8 per cent in 2018. The Danish group estimated trade spats reduced container demand by 0.5 per cent to 1 per cent last year.
Maersk said its own container shipping business would grow in line with, or slightly below, the market. “I need to get my returns up more than I need to get my market share up,” said Mr Skou.
He added that after a significant reduction in Maersk’s debt the company had “firepower” for acquisitions. It bulked up its land-based logistics business on Wednesday with the $545m acquisition of US warehousing group Performance Team.
But he conceded that “we still have a lot of work to do on improving our returns in the coming years” after return on invested capital jumped from 0.2 per cent in 2018 to 3.1 per cent last year. This is well below the long-term target of more than 7.5 per cent. (Financial Times.
