Shipping giants are paying the price for going overboard following the pandemic. Take Denmark’s Maersk (MAERSKb.CO), which on Thursday delivered just $839 million of EBITDA in the fourth quarter, a dramatic fall from the $6.54 billion it made a year earlier and 26% below the $1.13 billion analysts had pencilled in. Looking ahead, CEO Vincent Clerc also warned that industry overcapacity could hit earnings for the next three years. In a further blow to investors, Maersk cancelled its share buyback programme.
The surprise gloomy outlook sent the $28 billion company’s shares down 14%. That contrasts with a previous perception that Maersk and rivals like Hapag-Lloyd (HLAG.DE) would benefit from disruption in the Red Sea. And indeed the benchmark Shanghai Containerized Freight Index has more than doubled since December of last year. But with too many vessels chasing too few customers, shipping companies may struggle to raise prices more dramatically from having to reroute ships around the southern tip of Africa to avoid attacks from Iranian-backed Houthi militants in the Red Sea.
Maersk’s unhelpful guidance will make it hard for investors to navigate the sector’s rough waters. The company said it expects underlying EBITDA of between $1 billion and $6 billion this year, a $5 billion gap in its range. But even if Maersk is able to generate more revenue and it hits the top of its target, it’s still a long way down from the $9.6 billion achieved last year. With no calm seas in sight, shipping giants will find it hard to fix their leaky boat. (By Aimee Donnellan)
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