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Maersk Warns Coronavirus Outbreak To Hit 2020 Earnings

Published on Feb 20 2020 9:40 AM in Coronavirus tagged: Trending Posts / Distribution / Warehousing / quarterly report / A.P. Moller-Maersk / Coronavirus / Performance Team

Maersk Warns Coronavirus Outbreak To Hit 2020 Earnings

Shipping giant Maersk warned on Thursday that the coronavirus outbreak would weigh on earnings this year, compounding the woes of a container shipping industry already subdued by trade wars and an economic slowdown.

Maersk, which reported a lower-than-expected fourth-quarter profit on Thursday, forecasted a weak start to the year because factories in China were closed for longer than usual after the Chinese New Year holiday.

"Weekly container vessel calls at key Chinese ports were significantly down compared to last year during the last weeks of January and the first weeks of February," Maersk, the world's biggest container shipping firm, said in a statement.

Optimistic Of A Rebound

It reiterated, however, a forecast for growth in global container demand of 1% to 3% this year, saying chief executive Soren Skou remained optimistic of a rebound in the second quarter. Global container demand grew 1.4% in 2019 and 3.8% the year before.

"The outlook for 2020 is impacted by the current outbreak of the coronavirus in China, which has significantly lowered visibility on what to expect in 2020," Maersk said.

"The market had already priced in a negative impact from the coronavirus outbreak and it looks like they had priced in a bit too much in the case of Maersk," said Sydbank analyst Mikkel Emil Jensen of the rise.

"In addition I believe that Maersk is also getting some kudos for the acquisition they announced yesterday," he added.

Acquisition Of Performance Team

The company said on Wednesday it had agreed to buy US warehousing and distribution firm Performance Team as part of plans to deliver more customised logistics solutions.

Maersk said the the value of the deal is $545 million (€504.78 million), including lease liabilities of around $225 million (€208.40 million).

The world's largest container shipping firm aims to boost its earnings from its inland logistics operations, or non-ocean business. In 2018, the ocean transport business accounted for almost 80% of core earnings.

"This will strengthen our ability to deliver products and solutions that meet our customers' end-to-end supply chain needs," Vincent Clerc, chief executive of ocean and logistics at Maersk, said in a statement.

Coronavirus Epidemic

The coronavirus epidemic has thrown the global container shipping trade off balance, with lines re-routing cargoes and reducing calls to Chinese ports, setting the scene for months of delivery delays.

Maersk said fourth-quarter earnings before interest, tax, depreciation and amortisation (EBITDA) totalled $1.46 billion (€1.35 billion), lagging the $1.51 billion (€1.4 billion) forecast by 24 analysts in a consensus poll compiled by Maersk.

The shipping firm said it expected 2020 EBITDA of $5.5 billion (€5.09), compared to $6.0 billion (€5.55 billion) expected by analysts and the $5.7 billion (€5.28 billion) achieved last year.

The Copenhagen-based company, which handles one in every five containers shipped by sea worldwide, said the price customers such as Walmart and Nike pay for delivery of sea-borne containers is likely to fall as a result of the coronavirus.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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