Maersk warns on trade volumes even as profits balloon

AP Moller-Maersk warned that container trade could decline this year due to the ongoing supply chain crisis even as the shipping group upgraded its annual profit forecasts by a quarter.

The Danish company, the world’s largest container line by profits but second-biggest by capacity, boosted its full-year guidance after its first-quarter results came in above expectations thanks to continued high freight rates.

Maersk now expects its underlying earnings before interest, tax, depreciation and amortisation to be $30bn this year, up from its previous forecast of $24bn and analysts’ average expectation of about $28bn.

But Maersk added that it now forecast container demand — a proxy for global trade growth — to be between 1 per cent growth and a 1 per cent decline this year, against previous guidance of a 2-4 per cent increase.

Maersk is seen as a bellwether for global trade as it transports one in five containers on the seas. It credited an “exceptional market situation” in shipping, which led to volumes falling 7 per cent in the first quarter due to bottlenecks but freight rates shooting up 71 per cent compared with a year previously.

Its shares rose 8 per cent on Tuesday morning to DKr19,605, reversing some of their decline so far this year. The stock jumped by almost three-quarters last year.

Maersk said revenues in the first quarter increased by 56 per cent to $19.3bn while underlying ebitda more than doubled to $9.2bn.

Container shipping groups, and in particular Maersk, have benefited from supply chain woes that started in 2020 during the Covid-19 pandemic and have persisted in recent months. The group warned last month that the lockdown in Shanghai, one of China’s biggest ports, would increase transport costs.

It stuck to its forecast that supply chain conditions would normalise in the second half of the year but declined to comment more ahead of the full publication of its results next week.

Maersk upgraded its 2021 profit forecast four times as high freight rates and supply problems helped boost its earnings throughout the year.

Soren Skou, Maersk’s chief executive, told the Financial Times in February that regulators had taken a close look at the elevated profit levels in both 2020 and 2021 but that “it’s my impression that regulators see it for what it is”. He added this meant the “sharp spike in demand” that followed the end of the first wave of the Covid pandemic in 2020, after which retailers and manufacturers have struggled to get their hands on enough stock.

Maersk is using its bumper profits to plough money into its land-based logistics business as it aims to offer customers a one-stop shop for freight. Some shareholders have expressed scepticism over the price of multiple deals, but Maersk has also increased its dividend and upped its share buyback programme.