Danish shipping giant AP Moller-Maersk has scrapped its earnings guidance for 2020 due to uncertainty caused by the coronavirus pandemic.
The company said Ebitda, before restructuring and integration costs for the first quarter, is expected to be around $1.4bn.
Maersk has been affected by weak volume development this year, but helped by "strong implementation" of its IMO 2020 strategy, both in terms of cost-reduction initiatives and fuel-price recovery from customers, the Copenhagen-listed outfit said.
For 2020 as a whole, Maersk had previously expected Ebitda of $5.5bn.
But the outbreak is severely impacting the global transport market and supply chains, leading to "material uncertainties" and a lack of visibility related to demand for vessels, the company added.
"While the global operations are running as normal, [Maersk] has, as a consequence of the current uncertainties related to the outlook, decided to suspend the 2020 guidance on Ebitda pending more clarity on the market development and financial implications," the company said.
Consensus beaten
The first-quarter figure beats analyst consensus of $900m, according to Fearnley Securities.
"We understand that a portion of the beat ascribes to financial gains from the oil trading division, tied to bunker inventories," it said.
"Still, we believe these numbers match that of CMA CGM, showing that liners to a large extent have been able to reduce costs to offset lower volumes."
Fearnley said the company's move to pull its 2020 forecast suggests weakening numbers in the second and third quarters as the virus pandemic spreads across the Western hemisphere.
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"We could also see less discipline amongst the carriers as more vessels come back from scrubber installation, impacting freight rate levels," it said.
Clarksons Platou Securities said: "Although the shutdown of economic activity in the West could point to potentially rocky waters ahead, we believe the company does not have any forward visibility on this at the moment."
It added: "That said, there is clearly downside potential to container trade in coming quarters, in our view.
"If world GDP growth is less than 2%, then historically container trade could reverse."
Based on an assumption of a 5% drop in volumes for Maersk in the full year, Clarksons Platou said Ebitda is likely to drop below $3bn.
Growth could under-perform market
The only prediction Maersk is making is that volume growth for the ships is expected to be in line with or slightly lower than the overall market growth.
The company is reiterating that its capital expenditure should be between $3bn and $4bn, but it is trying to reduce this amount. However, it gave no further details on this.
The group will continue to buy back shares and pay dividends.
Compatriot owner DFDS also tore up its guidance on Thursday, but halted shareholder payouts in addition.
Fortunately the company has low leverage [about 30%] so we believe Maersk should be able to weather the storm well.
Clarksons Platou
Clarksons Platou said Maersk's newbuildings and other investments could be deferred to reduce capex, but it could still be faced with bills of $1bn.
Scheduled debt repayments total $2bn this year, it added.
"Fortunately the company has low leverage [about 30%] so we believe Maersk should be able to weather the storm well," Clarksons Platou said.
Maersk chief executive Soren Skou said that so far this year, the company has executed its strategy well for managing the costs of complying with the IMO 2020 sulphur cap.
"We have effectively mitigated a part of the extra cost through good procurement, blending and manufacturing fuel ourselves, and we have implemented rate increases to recover the actual fuel price increase from customers," he said.
Skou added that the first quarter will be better than last year, despite Covid-19 hitting volumes.
"Because of the current situation with high uncertainties related to global container demand due to the Covid-19 pandemic and the measures being taken by governments to contain the outbreak, we have chosen to suspend our 2020 full-year guidance on earnings but will, as soon as we have more clarity, return with an outlook for 2020," he said.
Crew staying on board
This week, it emerged that the group had decided to cancel all crew changes until 14 April because of coronavirus travel restrictions globally.
It wants to protect the welfare of thousands of seafarers working on its 749-ship fleet, according to Danish union Metal Maritime.
The union is supporting the decision and will meet management to clarify the consequences and agree details on how to resolve the crisis situation caused by the global coronavirus pandemic.
The company also said it hopes to appoint a new director at its AGM on 23 March.
UK citizen Blythe Masters is a partner at Motive Partners, a New York fintech private equity and venture capital firm.
From 2015 to 2018, she was chief executive at Digital Asset Holdings, a blockchain company, and prior to that she was managing director at JP Morgan Chase & Co.
Maersk's 2019 annual net loss was $44m, versus a profit of $3.2bn in 2018, when it was boosted by a $3.8bn gain from discontinued operations.
