The Danish shipping conglomerate A.P. Moller-Maersk has announced a significant downturn in earnings for the last quarter of 2023, accompanied by a grim outlook for the year ahead. This announcement has led to a suspension of the group’s share repurchase program as it endeavors to conserve cash amidst a challenging economic landscape.
Maersk disclosed a staggering net loss of USD -456 million for the final quarter of the year, primarily driven by a sharp decline in earnings from its Ocean division, which encompasses liner shipping operations. Operating losses for shipping plummeted to USD -920 million in Q4, marking a substantial reversal from the same period last year, and notably higher than the operating loss of USD -27 million recorded in Q3. The company has promptly halted its share repurchase program, which had been ongoing since 2021.
The group has issued a cautionary note, indicating that operating losses could potentially escalate to as high as USD 5 billion for the year. However, earnings guidance remains broad to reflect the considerable uncertainty prevailing in the market. Maersk’s CEO, Vincent Clerc, downplayed the impact of events in the Middle East, stating that despite the turmoil in the Red Sea region, the influx of new vessels into the market far outweighed the additional capacity required for rerouting ships around Africa.
Looking ahead to 2024, Maersk anticipates group EBITDA ranging between USD 1.0 billion and 6.0 billion, with EBIT forecasted at USD -5.0 billion to 0.0 billion. The company expects profits to be front-loaded towards the beginning of the year, with free cash flow projected at USD -5.0 billion or higher.
While Logistics and Services, as well as Terminal activities, experienced a less pronounced decline in earnings in Q4, they were unable to contribute substantial profits. Quarterly revenue for the shipping division plummeted by 46% to USD 7.2 billion. Despite a year-on-year increase in container volume by 602,000 twenty-foot equivalent units (TEUs), representing an 11% growth in Q4 2023, Maersk witnessed a sharp drop in the average rate per TEU, which fell from USD 1,934 to USD 963.
