World’s Largest Container Line Shares Fall by 6%!

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  • Shares in A.P. Moeller-Maersk fell more than 6% this week recently.
  • This happened after the Danish shipping giant warned of a sharp drop in global container volumes as the coronavirus pandemic disrupts global supply chains.
  • Earlier, the world’s largest container line by market share posted a 23% rise in first-quarter.

A recently published article Market Watch, written by Lina Saigo and Callum Keown reveals the challenging year the Danish shipping giant Maersk is to face due to coronavirus pandemic.

Second quarter blinks at a decrease of 25%

The world’s largest container line by market share – widely considered a barometer of global trade – posted a 23% rise in first-quarter earnings before tax, depreciation and amortization (Ebitda). But the company said it expects 2020 to be a “challenging year,” with demand expected to decrease across all business lines in the second quarter by up to 25%.

“We continue to support our customers in keeping their supply chains running, however as global demand continues to be significantly affected, we expect volumes in the second quarter to decrease across all businesses, possibly by as much as 20-25%,” Maersk MAERSK.B, -5.80% chief executive Søren Skou said.

The Copenhagen-based company has cancelled more than 90 sailings, or 3.5% of total shipping capacity in the first quarter to cope with the slowdown in trade and keep freight rates from falling. It said close to 10% of its fleet was idled by the end of the quarter and it expects to cancel some 140 sailings in the April to June period.

Global flows of goods across borders will weaken

Maersk, which also reported a 23% rise in first-quarter core profits on Wednesday, now expects global container demand to contract this year, after previously forecasting growth of between 1% and 3%.

Maersk suspended its 2020 guidance of Ebitda

Ebitda rose 23% to $1.52 billion, slightly above company guidance provided in March.  Revenue increased slightly to $9.6bn, despite lower volumes and was mainly fuelled by growth in its Ocean segment.

Maersk suspended its 2020 guidance of Ebitda of $5.5 billion – down from $5.7 billion in 2019 – in March, citing the lack of visibility to global demand for container transport as a result of the coronavirus pandemic.

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Source: Market Watch