AP Moller-Maersk expects to earn up to $1.5bn more this year as a result of the coronavirus pandemic .
The Danish carrier has reinstated its earnings guidance and expects to earn between $1bn and $1.5bn more this year than initially forecast.
The company expects Ebitda this year to be between $6bn and $7bn, before restructuring and integration costs.
That is significantly up on the forecast of $5.5bn when the earnings guidance was suspended on 20 March due to Covid-19 uncertainty.
But the new scenario has led the operator to significantly raise its expectations after reporting better-than-expected quarterly results.
The company still expects global demand growth for containers to contract in 2020.
But volumes should progressively recover in the third-quarter with only "a mid-single digit contraction" forecast.
Stronger quarter
Maersk is the latest liner operator to turn in impressive second quarter results despite a drop in volumes as the coronavirus shut down ports and stemmed demand.
The liner operator reported higher-than-expected Ebitda, which rose to $1.7bn in the three months to the end of June.
That is up from initial estimates of $1.5bn in early March.
Profits rose despite a 6.5% drop in revenues over the quarter to $9bn.
The fall in revenues was due to a 16% drop in volumes
But the company was able to partly offset that with "agile" capacity deployment which lowered costs.
Capacity management
Maersk was prominent among several carriers to blank and cancel sailings to prevent oversupply on many liner trades.
It also benefited from lower fuel costs and higher freight rates.
“I am pleased that we, despite the headwinds, continued our track record of improving earnings and free cash flow," said Maersk chief executive Soren Skou.
"With a strong result and a strong balance sheet we are well positioned to financially and strategically come out stronger of the crisis," he said.
The liner operator expects to make additional cost and structural measures to offset the negative impact of Covid-19.
It expects organic volume growth for the rest of the year to be in line with or slightly lower than the average market growth.
The outlook for the rest of 2020 is subject to significant uncertainties, and does not take into consideration a second lockdown phase.
Analysts enthusiastic
Clarksons Platou Securities said the result was slightly better than expected.
Ebitda was $1.7bn, versus a consensus of $1.58bn, due to successful capacity deployment and cost savings, analyst Frode Morkedal said.
"Maersk says container volumes are expected to progressively recover with a current expectation of a mid-single digit contraction in 3Q," he added.
"It says the full year guidance does not assume a material potential second lockdown phase. In our view, freight rates are performing better than expected in 3Q despite liner companies adding back ship capacity to trade lanes, an indication of a stronger demand recovery than expected."
Fearnley Securities said that, with continued low spending, Ebitda guidance of $6bn to $7bn in 2020 implies $4bn to $5bn free cash flow.
"The liners are now enjoying a higher freight environment thanks to the significant consolidation the industry has seen over the last five years," analysts Espen Landmark Fjermestad, Peder Nicolai Jarlsby and Ulrik Mannhart added.
"In addition, container volumes are now rebounding with potentially an inventory replenish story on top. Worth waiting for. The share has effectively doubled since trough in March, but we believe another 50% could be achievable in an upcycle."
Fearnley has reiterated its buy rating.
