AP Møller-Maersk has forecast a plunge in profits this year and a possible contraction in global trade due to a pandemic-driven boom in container shipping.
The world’s second-largest container shipping group said on Wednesday that operating profit this year would be $2bn-$5bn, down from the record $31bn it made last year.
It made $5.1bn in the fourth quarter of last year, although freight rates, which have rocketed as the pandemic disrupts global supply chains, normalize.
“We see this correction happening. It creates some new challenges. But first and foremost, it returns to normal. . . Do we see more than [a change in] GDP is an inventory correction,” Vincent Clerc, Maersk’s new chief executive, told the Financial Times.
Clerc said his customers, who include most of the world’s biggest retailers, have been ordering more during the glut in recent years.
“When this congestion goes away, you get more goods, your warehouse is full, you have more inventory,” he said.
The first non-Dane to head Maersk and only in his role since January 1, Clerc faces a difficult challenge: presenting record results for 2022 and declining profits and demand this year.
Maersk said it expects global container demand to be between minus 2.5 percent and plus 0.5 percent this year. Shares in Maersk fell by 4 per cent in early trading on Friday.
“It is a message about balance. There is no painting of the world as if everything will be good and easy. The results are incredible. . . Now we are going to a different world, and there is no time for the team to step back and say: thank God, we are back normal,” said Clerc.
Revenue in 2022 tripled to $82 billion while operating profit increased 57 percent to $31 billion.
The Danish group largely held back new ship orders during the boom years, unlike many of its rivals, notably Mediterranean Shipping Company, the secretive Swiss company run by former Maersk executives that last year overtook it as the world’s largest container shipping line by volume.
Some analysts believe the industry is in danger of returning to the boom and bust pattern that dominated before the consolidation of the past decade.
“Capital discipline throughout the industry remains elusive. Capacity investment is ahead of forecast for demand growth,” added Clerc.
This year may be mixed for Maersk’s various businesses. Land-based logistics and port terminal units should see increased profits in the second half, Clerc said. But the main container shipping business will see strong profits in the first quarter due to the number of long-term contracts used, which will fall throughout the year due to lower freight rates. It will be a “pretty clear adjustment”, he added.
Clerc, who has been at Maersk for a quarter of a century, most recently as head of container ships and logistics, said he will stick to Maersk’s strategy of bulking up the logistics business and focusing on solving customer supply chain problems.
Although Maersk predicts a slight decline in profits compared to last year, operating profit of $2bn-$5bn will be better than it posted in 2017-19 as well as possibly $4.2bn in 2020.