Maersk Lifts Guidance as Red Sea Disruption and Strong Demand Continue — Update

By Dominic Chopping

A.P. Moeller-Maersk raised its full-year guidance for the third time in as many months as disruptions in the Red Sea and strong container shipping demand continue.

Container operators have been forced to send their vessels on longer routes around southern Africa's Cape of Good Hope to avoid the Red Sea after Houthi rebels began attacking commercial vessels at the end of last year, creating a shortage of vessels and port bottlenecks while inflating freight rates.

Maersk Chief Executive Vincent Clerc last month warned that all of the company's ships that can sail, as well as all ships that were previously underutilized, have been redeployed to try to plug shortages in its network, but that it would probably be unlikely to fulfill demand in the coming months.

The longer sailing times and sharp increase in the number of vessels in the water are having knock-on effects across global shipping networks, causing congestion across most of the main shipping routes as well as at transshipment hubs, throwing ships off schedule and creating a shortage of containers.

The Danish shipping giant said it now expects supply-chain disruption caused by the situation in the Red Sea to continue at least until the end of 2024. Container market demand remains robust and it now expects the global market to grow by 4% to 6% this year, having previously guided for 2.5% to 4.5% growth, while it cautioned that supply and demand visibility into the fourth quarter is unclear and the Red Sea situation is unpredictable.

The group now expects underlying earnings before interest, tax, depreciation and amortization of between $9 billion and $11 billion this year, from $7 billion to $9 billion previously. Underlying earnings before interest and tax is now seen at $3 billion to $5 billion from $1 billion to $3 billion previously.

Free cash flow is expected to reach at least $2 billion, up from previous guidance of at least $1 billion.

Shares in the Danish shipping giant slipped 0.5% Thursday, though, as preliminary second-quarter earnings figures missed analyst forecasts.

Ahead of its earnings report next week, the company said it expects to post revenue of $12.8 billion in the three-month period, with underlying Ebitda of $2.1 billion and underlying EBIT of $756 million, all of which are shy of market estimates.

A FactSet analyst poll had been looking for revenue of $13.06 billion, underlying Ebitda of $2.26 billion and underlying EBIT of $841 million.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

August 01, 2024 09:13 ET (13:13 GMT)

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