AP Moller-Maersk is to make 2,000 employees redundant despite raising its profit forecast for 2020 in stronger boxship markets.
The giant Danish shipowner and terminals group said it expects to book a restructuring charge of around $100m in the third quarter as it lays off workers as a consequence of changes to its Ocean and Logistics & Services businesses.
The company said last month that up to 27,000 staff could be affected by the streamlining measures, which will see the Safmarine and Damco brands integrated into the wider group.
Group chief executive Soren Skou said the company was on track to deliver a "strong" third quarter, with solid earnings growth across all businesses, but in particular in Ocean and Logistics & Services.
Box business booming
"Volumes have rebounded faster than expected, our costs have remained well under control, freight rates have increased due to strong demand and we are growing earnings rapidly in Logistics & Services," he added.
The outlook for the fourth quarter is solid for the same reasons, Skou said.
But prospects for 2021 remain uncertain due to the ongoing pandemic.
"The positive impact from stimulus packages may be less strong in 2021, potential new lockdowns will impact demand and the timing and effectiveness of a potential vaccine will impact 2021," Skou added.
Volumes down less than expected
The company now expects to bank revenue of $9.9bn in the third quarter, with Ebitda at $2.4bn.
Container volumes for its vessels fell by 3% in the three months to 30 September, compared to a year ago.
This is "slightly better" than the anticipated mid-single digit contraction, Maersk said.
Ebitda for the whole of 2020 is now expected to be between $7.5bn and $8bn, up from the previous forecast of $6bn to $7bn.
Fearnley bullish on prospects
Fearnley Securities said: "We believe the company generates close to $10bn of run-rate Ebitda presently."
The investment bank believes the outlook is very favourable in 2021 and 2022 and has lifted its earnings estimates by 10%, with a continued buy rating on the shares.
The third quarter profit guidance is 20% higher than consensus expectations.
Freight rates are 100% higher year-on-year, Fearnley said.
Assuming a similar fourth quarter, the investment bank forecasts 2020 Ebitda of $7.8bn.
"A more interesting discussion is what Maersk can generate in a normalised year," analysts Espen Landmark Fjermestad, Peder Nicolai Jarlsby and Ulrik Mannhart said.
Spot rates are likely to come off for seasonal reasons, they added, but there are further tailwinds with 2021 contract renewals being based on 2020 spot levels, and volume recovery to the tune of 5% to 10%.
David Kerstens at Jefferies said the third-quarter forecast was better than expected and a 45% jump on the previous estimate.
The US investment bank has recently upgraded the containership sector, after a faster than expected recovery of demand drove up freight rates, profitability and return on invested capital.
Job losses will save money
There is also further cost improvement potential through the redundancies.
The full results will be published on 18 November.
Last week, Moody's Investors Service upgraded its outlook on Maersk's credit rating from negative to positive after a strong response to coronavirus disruption.
The ratings agency reaffirmed its Baa3 long-term issuer assessment, a week after US investment bank Goldman Sachs rated the company's stock as a buy.
The liner operator reported higher-than-expected Ebitda of $1.7bn in the three months to the end of June.
