Maersk warns trade war could hurt container business

Maersk warns trade war could hurt container business
Earnings before interest, tax, depreciation and amortization (EBITDA) grew 17 percent to $1.36 billion, topping the $1.24 billion forecast by analysts in a Reuters poll. (AFP)
Updated 16 August 2019

Maersk warns trade war could hurt container business

Maersk warns trade war could hurt container business
  • Maersk said the escalating trade dispute between Washington and Beijing could limit growth in global container traffic

COPENHAGEN: A.P. Moller-Maersk warned a trade war between the US and China could curb container traffic this year after the world’s largest container shipping company beat second-quarter profit expectations.

Maersk said the escalating trade dispute between Washington and Beijing could limit growth in global container traffic to the lower end of its 1 to 3 percent guidance range this year, after growth of about
2 percent between April and June.

Newly imposed tariffs between the US and China combined with additional US tariffs due to be implemented later this year could remove up to 1.5 percent of global container demand in 2020, Maersk said.

However, CEO Soren Skou remained upbeat.

“It is not tariffs that decide how many goods are being transported, but rather how much Americans buy when they go to Walmart. Luckily for us, the US consumer is still in a good mood,” Skou told a media briefing.

He said that Maersk had seen “solid progress” in the second quarter, including realizing synergies of $1 billion from restructuring earlier than expected.

Earnings before interest, tax, depreciation and amortization (EBITDA) grew 17 percent to $1.36 billion, topping the $1.24 billion forecast by analysts in a Reuters poll.

Maersk benefited from higher container freight rates, larger volumes and lower costs and said it still expects EBITDA for the full year to total $5 billion. Analysts on average expect EBITDA of
$5.4 billion for 2019.

“The results were good, but in a market where concerns over the global economy are escalating, investors are not going to reward a cyclical stock like Maersk,” said Frans Hoyer, analyst at Handelsbanken.

Some investors may have been disappointed that Maersk did not raise its full-year guidance despite a good result for the first six months.

“It looks like consensus was running ahead and some had seen Maersk’s guidance as conservative,” Hoyer said.

“But I think it would be crazy to lift guidance in this environment,” he said.

Skou said that he was planning for low growth in container shipping demand this year and next, but not recession.

“Some expect a recession in the United States. We doubt it will happen this year or next,” Skou said.

“We wake every morning to new tweets from the US president. Now tariffs have been canceled on all the consumer goods that will be in demand during Christmas shopping. Those are the goods we ship, so now we’re a bit more optimistic,” he said.

Skou has overseen a major shift in Maersk’s strategy, which has included selling off its oil and gas business to focus on the container and logistics business for customers that include Walmart and Nike.

While Maersk moves around one in five containers shipped at sea, it handles the land transportation from ports to warehouses and distribution centers for less than a quarter of its customers.

Maersk’s share price has fallen 43 percent since a peak in July 2017 and now trades around the level it was at when Skou took on the CEO job in June 2016. 


Market traders ready to ride ‘Biden bounce’

Market traders ready to ride ‘Biden bounce’
Updated 25 min 47 sec ago

Market traders ready to ride ‘Biden bounce’

Market traders ready to ride ‘Biden bounce’
  • "Biden moving into the White House could drive markets into a bull run more sharply than previous inaugurations," a financial expert says

DUBAI: Investors are expecting a “Biden bounce” in global markets following the inauguration on Wednesday of Joe Biden as the 46th US president.

“History teaches us that we can expect the markets to react favorably to the inauguration of a new US president — and this time around it is likely to be no different,” said Nigel Green, CEO of deVere Group, one of the world’s largest independent financial advisers, with over 80,000 clients and $12 billion under advisement.

“Indeed, Biden moving into the White House could drive markets into a bull run more sharply than previous inaugurations because it is hoped the incoming administration will bring stability and, possibly, a halt to the uncertainty following the fiercely contested election. 

“Investors will also be buoyed by the $1.9 trillion fiscal stimulus announced by Biden, the Federal Reserve’s willingness to support markets, the new president’s multilateral trade agenda and his plans for stepping up the vaccine rollout. All of this will encourage confidence and optimism,” Green said.

Mazen Al-Sudairi, head of research at Riyadh-based financial services company Al Rajhi Capital, agreed with the optimism regarding a “Biden bounce.”

“One of the important outcomes with Biden is stability in the market. But there is also the stimulus factor coupled with the vaccine that is giving an indication of recovery in the market. This perceived unity in the US will be healthy for the global and Saudi market,” he told Arab News.

However, Green said that investors should be cautious for three reasons: “First, a market rally is going to be difficult to sustain indefinitely due to the enormous economic scarring caused by the pandemic.

“The major long-term headwind is mass unemployment, which is hitting demand, growth and investment on Main Street and which, ultimately, will have to impact Wall Street.

“Second, the new administration will have policies that will have an effect on different sectors of the economy. There will be a readjustment period that needs to be taken into account.

“And, third, not all shares are created equal and stock markets are heavily unbalanced at the moment. A handful of sectors are bringing up entire indexes,” he said.