Coronavirus Outbreak Impact! Maersk Warns of Really Weak Earnings This Year!

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  • $61m loss in Q4 dragged Maersk to an overall net loss of $44m last year and expects a ‘really weak’ Q1 20.
  • Revenue from operations was slightly down on the previous year, at $38.9bn and contribution from ocean remain unchanged at $28.4bn.
  • Liner liftings were also static, at 26.6m teu, and its average rate per teu remain unmoved, at $940.
  • The 50 cancelled sailings from China could cause weak earnings for the month and March would be “difficult” even if production and intermodal recovered quickly.
  • “V-shaped recovery” from April would see a significant spike in demand.
  • Maersk to deploy extra sailings, sourced from the charter market, to cater for the additional demand.

Maersk’s loss in Q4 dragged the group into the red and expects a ‘really weak’ Q1 20, writes Mike Wackett for an article published in The LoadStar.

Coronavirus outbreak impact

A $61m loss in Q4 dragged Maersk to an overall net loss of $44m last year. And the group remains concerned about the impact on all its businesses of the coronavirus outbreak in China.

Revenue significantly down 

  • Top line revenue from operations was slightly down on the previous year, at $38.9bn. 
  • The contribution from ocean unchanged at $28.4bn.
  • Liner liftings were also static, at 26.6m teu.
  • Despite bringing in IMO 2020 surcharges in Q4, liner liftings average rate per teu remained at $940.

Too early to assess impact

Chief executive Soren Skou warned analysts that the first-quarter 2020 results would be “significantly impacted” by the coronavirus crisis. He also added that, the extent of the damage was too early to be assessed.

Weak earnings

Mr Skou said the 50 cancelled sailings from China could cause earnings of the month to be “really, really weak”. He added saying that March would be “difficult” even if production and intermodal recovered quickly.

V-shaped recovery

Mr Skou still suggested that there could be a “v-shaped recovery” from April and would see a significant spike in demand from the backlog of pent-up orders.

Global supply chain

Mr Skou said, “China’s role in global supply chains is much bigger now than it was when the SARS epidemic happened more than 15 years ago, so today many factories in South-east Asia rely on parts, raw materials or semi-finished goods from China, so we will see. But if we end up with a v-shaped recovery then we could see an overshooting in the later part of Q2.”

Extra sailings for demand

He said that Maersk would deploy extra sailings, sourced from the charter market, to cater for the additional demand.

IMO 2020 compliance cost 

Mr Skou also spoke of the challenge of IMO 2020 and recovering the extra costs of having to use low-sulphur fuel from shippers.

According to Mr Skou :

  • For the carrier’s spot cargo, which now represents some 50% of its liftings, surcharges had been successfully implemented. 
  • For contracts, Maersk is about halfway through its negotiations.

Maersk’s revenue info

  • In Maersk’s Terminals & Towage segment, revenue increased by 3.2% to $3.9bn, with turnover from its gateway terminals up 4.1% to $3.2bn.
  • Logistics & Services saw revenue decline, to $6bn from $6.1bn the previous year, as the “extraordinary” volumes of Q4 18  gained from the front-loading of cargo ahead of US tariffs on Chinese goods, were not repeated.

Maersk announced the $545m acquisition of the US-based warehouse distribution and logistics firm Performance Team which it said formed a “strategic component towards becoming a global integrator”.

Warned of significant uncertainties

Maersk said it expected an ebitda of about $5.5bn this year, before restructuring and integration costs, but warned that the 2020 outlook was “subject to significant uncertainties”.

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Source: The LoadStar

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