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 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. 


Frank Kane’s Davos diary: Swiss efficiency lapses, but so far Davos lives up to the cuckoo-clock image

Updated 22 January 2020

Frank Kane’s Davos diary: Swiss efficiency lapses, but so far Davos lives up to the cuckoo-clock image

Davos comes and Davos goes, but over the last five decades, the one thing you can rely on is Swiss efficiency, right? The trains run on time, the cuckoo clocks chime on the hour, and the snow is swept from the pathways within minutes of the first fake falling. That is the common (even cliched) view of the Alpine nation and its showpiece event, the World Economic Forum (WEF) annual meeting in Davos.

But — and whisper it very gently beneath your breath — maybe the legendary standards of Swiss efficiency are slipping as the WEF celebrates its 50th birthday. Evidence of a lapse from the highest levels of attainment came at Zurich Airport, when the luggage belt seized up inexplicably, and a full 10 minutes elapsedbefore a maintenance man came to attend to it. Tut tut.

Further signs of falling standards were on display at the railway station. The booking desks were besieged, as usual, by WEF delegates keen to complete the final leg of their journey up the Magic Mountain — a two-hour rail journey involving two stops at increasingly higher altitudes.

But only two of the 10 grills were manned, and the line grew longer and more grumpy with each passing minute. The mood was not helped when some trains were canceled and an extra hour was added to the journey. There was much muttering and dark looks shot when the train finally pulled into Klosters.

But thankfully, once you got to the heart of WEF-land, normal service was resumed. There had been a reasonable fall of snow that morning, which gave the place its usual fairytale appearance, but no traffic snarl ups as in previous years, when massive snowfall had caused the place to grind to a halt.

The shuttle buses that are the arterial life-channels of Davos — for those whose budgets do not extend to the black Mercedes limo — were running with their usual Swiss punctuality: Every 10 minutes or so, or even more frequently during peak rush hours.

These, in my experience over the past few years, are becoming frequently extended. Having battled through the registration process and attended one event at the nearby Seehof hotel, I imagined it would be easy to catch a ride on a virtually empty shuttle back to Klosters at around 9.30 p.m. But even at that hour, there was a long queue of unhappy souls waiting to make the same 20-minute trip to the other side of the mountain and their warm, welcoming hotel rooms.

It was the same thing on the opening morning of the annual meeting. I left my hotel — the homely and comfortable Cresta in Klosters — at 7 a.m. in the dark, and at minus 5 degrees Celsius. Again, there was a crowd of people standing huddled at the shuttle stop, shivering and stamping their feet.

The WEF shuttle service was up to the job, however, and I got into the Congress Hall with little trouble. The airport-style screening process — maybe a little more thorough than usual in view of the impending arrival of US President Donald Trump — passed smoothly. One request though: Please WEF, install some hot-air machines in the security hall. The body shock when you remove outer clothing to pass through the metal detectors was wicked.

Then down to business, which for a journalist at Davos means finding somewhere in the congress complex where you can rest a laptop while also providing a good people-watching vantage point. Over the years, I have learned that the Central Lounge — strategically located between the main plenary meeting halls and the (private) members lounge and bilateral rooms — is the perfect spot. Now, who will come my way in Davos 2020?