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AP Møller-Maersk warned of a “difficult patch” in the coming years for the container shipping industry as the group suspended its share buyback programme, slashed its dividend and forecast an operating loss for this year.
Vincent Clerc, chief executive of the world’s second-largest container line, said that large amounts of new ships due for delivery this year and next would saddle the sector with an excess capacity, hitting results for some time.
“This overcapacity will put earnings under pressure . . . and could mean a difficult patch in the coming years. We are in front of a situation that requires a lot of prudence,” he told the Financial Times.
Faced with an especially uncertain outlook, Maersk said it would be scrapping the fifth part of a share buyback plan, worth $1.6bn, that it had announced in November.
Shares in Copenhagen-listed Maersk fell more than 13 per cent in early trading on Thursday.
The container shipping industry, a bellwether of global trade, is facing a difficult period following a boom driven by the Covid-19 pandemic. Clerc said capacity would increase by about 12 per cent in each of the next two years with demand lagging significantly behind that.
Disruption in the Red Sea because of attacks by Houthi rebels in Yemen has led most container lines to send their vessels around the bottom of South Africa rather than through the Suez Canal, pushing freight rates higher.
Clerc said the “situation is still evolving and hasn’t peaked yet [but] the fundamentals will overwhelm the impact of the Red Sea” even if it were to last the rest of this year.
Earnings before interest and tax could be between a $5bn loss and break-even, the group said, while earnings before interest, tax, depreciation and amortisation would be between $1bn and $6bn.
For the fourth quarter, Maersk reported an operating loss of $537mn compared with a profit of $5.1bn a year earlier.
Maersk had already announced 10,000 job cuts and an operational partnership with Germany’s Hapag-Lloyd in an effort to trim costs. It reduced its dividend to DKr515 a share compared with DKr4,300 a year earlier.
The Danish group will also spin off its towage business Svitzer and distribute the shares to existing investors, it said on Thursday.
Asked whether it was a return to the bad old days of container shipping when deep-pocketed owners often took irrational decisions, Clerc replied that the fourth quarter was already “very difficult” and that was before the delivery of new vessels.
“It’s a return to a significant correction following the very high prices we had following Covid. Overcapacity will be with us for a while. What we’re guiding investors is there’s going to be a difficult patch,” he added.
