©Reuters. FILE PHOTO: The Maersk logo is seen in containers stored in the Zona Franca in Barcelona, Spain, November 3, 2022. REUTERS/Albert Gea/File Photo
By Jacob Gronholt-Pedersen
COPENHAGEN (Reuters) -Maersk said on Thursday that trade disruptions in the Red Sea would not be a big boost for the company and that an oversupply of ships would hit its earnings this year, sending its shares down sharply.
The warning, which also led the Danish group to suspend its share buyback programme, is in stark contrast to investors’ recent optimism about the sector.
Shipping companies have been among the best-performing stocks in Europe so far in 2024, as the diversion of ships following attacks on ships by Iran-backed Houthi militants in the Red Sea – a key trade route – has increased shipping rates.
Maersk, which like other shippers has diverted some ships to a longer route around Africa, said it expects underlying earnings before interest, taxes, depreciation and amortization (EBITDA) of between $1 billion and $6 billion this year , compared to $9.6 billion achieved last year.
Analysts in an LSEG survey on average expect Maersk, considered a barometer of global trade, to post EBITDA of $6.6 billion this year.
The company said it expects “significant oversupply challenges” in container shipping to fully materialize during 2024. Pandemic-related bottlenecks that boosted profits among shipping lines in 2022 led to a wave of new ship orders.
“There remains high uncertainty about the duration and degree of the Red Sea disruption, with a duration of one quarter to a full year reflected in the guidance range,” the company added in a statement.
CEO Vincent Clerc said such disruptions in no way resemble what happened to container shipping during the pandemic and would not represent a big boost for the company.
Sydbank analyst Mikkel Emil Jensen called the financial report “weak” and said the company’s guidance pointed to a net loss for 2024.
Maersk shares fell 12% at the open, while those of rival Hapag-Lloyd fell about 10%.
Maersk said EBITDA fell to $839 million in the fourth quarter from $6.54 billion a year earlier, falling behind analysts’ expectations of $1.13 billion.
The company also suspended its share buyback program and said it would review the decision once market conditions in container shipping stabilize.