Maersk Expected to See Decline in Earnings Amid Ongoing Shipping Disruptions
Giant gantry cranes and offloading freighter in Haifa container port, Israel
Giant gantry cranes and offloading freighter in Haifa container port, Israel.
Ucg | Universal Images Group | Getty Images
Challenges Faced by Maersk
Maersk, a leading global shipping company, anticipates a decline in its annual underlying EBITDA from $9.6 billion in 2023 to a projected range of $1 billion to $6 billion this year. This revelation has caused significant uncertainty surrounding the company’s future earnings. The CEO of Maersk, Vincent Clerc, highlighted the unpredictable nature of the ongoing situation, stating that the duration and impact of the shipping disruptions remain unclear.
The company has already taken measures to mitigate potential challenges. Maersk’s board has promptly suspended the share buy-back program, which will be reassessed once market conditions in the Ocean division stabilize.
Weakened Financial Performance
The announcement coincided with Maersk’s release of its fourth-quarter financial results, which fell short of expectations. The EBITDA for the three-month period reached $839 million, significantly lower than the analysts’ projected figure of $1.13 billion.
Ongoing Shipping Disruptions
The disruptions in global supply chains began in late 2023, when shipping companies redirected their vessels away from the Red Sea due to repeated attacks by Yemen’s Houthi rebels. These attacks, carried out using drones and missiles, were allegedly intended to show support for Palestinians amidst the ongoing Gaza-Israel conflict.
As a result of these diversions, shipping time and costs have increased, leading to potential inflationary effects. The Organization for Economic Co-operation and Development (OECD) issued a warning about the potential for elevated inflation, citing the prolonged rerouting of vessels in one of the world’s busiest shipping lanes. The substantial rise in seaborne freight rates, if sustained, may cause import price inflation to rise by nearly 5 percentage points across the 38 member countries of the OECD.
Diminished Profit Prospects
Although shipping companies have benefited from the increased freight rates resulting from the rerouting, Maersk’s CEO, Vincent Clerc, expressed doubts about their direct contribution to profits. The substantial costs incurred in maintaining the global supply chain remain uncertain, making it unlikely that significant profits will be generated from the ongoing situation. Clerc emphasized Maersk’s priority of sustaining the supply chain over short-term earnings.
