Maersk warns trade war could hurt container business

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Thu, 2019-08-15 22:59

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. 

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Source: FS – All-News-Economy
Maersk warns trade war could hurt container business