Soft car sales data has led Danske Bank to lower its first quarter profit forecasts for car carrier giant Wallenius Wilhelmsen.
Analysts at the Nordic lender also question if a tragic dam disaster in Brazil will boost demand for high and heavy equipment shipments.
Anders Karlsen of Danske Bank says the first quarter is typically a seasonally weak period for car carriers but 2029 is likely to see additional effects from low activity in car sales globally.
While efficiency measures may offset part of the forecast decline, both ocean and land based businesses will likely see earnings hit by the reduced volumes, the analyst believes.
Karlsen is now forecasting Wallenius Wilhelmsen to clock up a profit of $16m in the opening three months of 2019, below the $32m consensus.
For the full year, however, Danske’s profit forecast of $165.2m remains ahead of the $155m average projected by analysts.
“Near term, we expect the margin improvement targeted by WALWIL to be based on successful cost measures and new cost initiatives previously announced, rather than an increase in rates,” Karlsen said.
“Longer term, we also expect rate levels to increase. We note that the order book for car carriers remains limited and fleet growth should be under control.
“However, there is still slack in the current fleet that needs to be absorbed in order for vessel owners to command higher rates under contracts.”
Karlsen says Wallenius Wilhelmsen guidance on the cost savings and comments relating to developments in the high and heavy segment will be important come results time on 7 May.
“We may potentially see renewed interest over the coming months in mining capex to offset some of the lost Brazilian iron ore production,” the analyst wrote.
“The flip side will be whether the recent indications of a softening in the global economy may pull in the opposite direction.”
Shares in the shipowner were trading up marginally at NOK 30.70 each today, valuing Wallenius Wilhelmsen at NOK 12.96bn. The shares are up over 5% in the year to date.
