On the wires: Hapag-Lloyd – worth $76bn; Q1 $4.7bn income; 0.4% tax rate
There’s one for you, nineteen for me
Maersk has been obliged to issue a profit warning ahead of the publication of its half-year results on 18 August after its earnings guidance proved to be “overly optimistic”, according to consultant Alphaliner.
The Danish transport group issued the “adjustment to expectations” to the stock exchange, based on challenging trading in the second quarter.
It said it saw profitability “negatively impacted”, with a 28% increase in bunker prices over the same period of 2017, and a 1.2% drop in average freight rates.
In its Q1 results, published in May, Maersk confidently reiterated its full-year guidance of an ebitda of $4bn-$5bn with a net profit above the 2017 figure of $356m.
However, CEO Soren Skou said spot rates suffered a “significant drop” in the second quarter and Maersk Line had continued to experience “very high” bunker prices, for which it had “not been able to get fully compensated in freight rates”.
As a consequence, Mr Skou said, Maersk’s 2018 guidance was being downgraded to an ebitda of $3.5bn-$4.2bn and an, as yet unspecified, lower but still “positive” net profit.
“While east-west spot freight rates are holding up well, freight rates on several north-south tradelanes have tumbled under pressure from overcapacity,” noted Alphaliner.
“Maersk, which has a significant exposure on the north-south tradelanes, would be particularly impacted by the weaker rates on these routes.”
Indeed, spot rates between Asia and South America, for instance, have fallen dramatically since the beginning of the year, and last week the Shanghai Containerized Freight Index (SCFI) recorded a further $355 slump in rates to Santos to $1,576 per teu, which compares with the market rate of over $3,000 in January.
During Maersk’s Q1 earnings call, chief commercial officer Vincent Clerc conceded that the carrier had been unable to pass on to shippers the full extent of the fuel increase, and added that it had been “pretty dicey” to renegotiate contracts during a period of escalating bunker prices.
Maersk reported an “unsatisfactory” underlying net loss of $239m in the first quarter and pledged that it had “a number of plans in place” to reduce its costs, including capacity reductions and feeder optimisation.
But despite the profit warning, Maersk saw its shares bounce back by around 7% yesterday, as investors regarded the revised guidance as “not as bad as feared”, along with Mr Skou’s prediction of improved rates in Q3.
Maersk’s stock price had tumbled around 22% on concerns of a “loss of focus” at the Copenhagen headquarters, along with fears of an escalating trade war between the US and China impacting liftings.
Elsewhere, Hapag-Lloyd is scheduled to announce its H1 interim results on Friday. The Hamburg-headquartered carrier issued a profit warning on 29 June, based on the first five months’ trading and blaming the rise in fuel costs and charter rates together with “persistently low freight rates”.
In the first quarter, the liner industry cumulatively lost around $1.2bn, based on the financials of the carriers that report their results.