AP Møller-Maersk warned of a “radically changed business environment” as profits plunged at the world’s second-largest container shipping line due to a sharp drop in demand and freight rates.
The Danish shipping and logistics group beat analyst expectations in the first quarter but cautioned that earnings for the rest of the year would be weaker even as it forecast demand to improve in the second half.
“We delivered a solid financial performance in a challenging market with lower demand caused by a continued destocking. Visibility remains low for the remainder of the year,” said chief executive Vincent Clerc.
Container shipping went through an extraordinary boom after the first wave of the Covid-19 pandemic in 2020, with the industry making more money in three years than in the previous six decades.
But companies such as Maersk and market leader Mediterranean Shipping Company are braced for a tough 2023 as businesses reduce their inventories and freight rates fall from record highs.
Operating profit at Maersk fell by more than two-thirds to $2.3bn in the first quarter compared with a year earlier but was ahead of analyst expectations of $2bn. Revenues were down by a quarter to $14.2bn.
Maersk stuck by its full-year guidance of $2bn-$5bn of operating profits but said the first quarter was likely to be the strongest of the year.
Nevertheless, the company expected the inventory correction to be over by the end of the first half and volumes to pick up in the final six months of the year.
Volumes in its core ocean business fell by 9.4 per cent in the first three months of the year while freight rates dropped by 37 per cent. Revenues in ocean fell by more than a third to $9.9bn while operating profits plunged by almost three-quarters to $2bn.
Maersk said it expected economic growth to be “muted” and the container market — a proxy for global trade — to most likely contract.
“As we adjust to a radically changed business environment, we continue to support our customers in addressing their supply chain challenges,” Clerc said. “We are pleased to note that customers continue to value the integrated logistics solutions and close partnership we provide.”