Maersk starts RM6.5b buyback

Company raises guidance for 2nd time since October as CEO Skou says things will calm down and normalise in 2021

by BLOOMBERG / pic by AFP

COPENHAGEN • AP Moller-Maersk A/S has launched a US$1.6 billion (RM6.54 billion) share buyback programme, as the world’s biggest container shipping company said the Covid-19 crisis has so far dented its business less than feared.

Copenhagen-based Maersk, which late on Tuesday raised its guidance for a second time since October, reported a 39% increase in Ebitda to US$2.3 billion in the third quarter (3Q). Profit by that measure, before restructuring and integration costs, will reach US$8 billion to US$8.5 billion this year, it said. Previous guidance was for US$7.5 billion to US$8 billion.

The global economy was “still severely impacted” by the pandemic last quarter, Maersk said in a statement yesterday. “However, volumes have decreased less than expected.”

The company also said “costs were kept well under control and freight rates have increased”.

Maersk transports about a fifth of the world’s containers, giving it a unique view of the state of international trade.

Global container volumes increased by around 1% last quarter, which is better than Maersk expected earlier this year, it said. Freight rates rose around 4.4%, on average, from the previous year.

“Very strong results, of course, but again somewhat lower than we had expected given observed freight rate developments,” said Frode Morkedal, MD at Clarksons Platou in Oslo. The improved guidance was also “less than expected”, he said.

In an interview with Bloomberg TV’s Anna Edwards, CEO Soren Skou said the surge in freight rates is “of a temporary nature”.

“I certainly don’t think that prices will continue to rise,” the CEO said. “We think things will calm down and normalise in 2021.”

And despite its profit upgrade, Maersk warned that “the trading conditions and the outlook remain subject to a higher than normal volatility given the disruptions caused or potentially being caused by Covid-19”.

David Kerstens, an analyst at Jefferies, said container demand is “expected to be supported by record-low US retail inventories for the next two to three quarters”, in a note published before Maersk released its results yesterday. “Upcoming fixed price contract renewals will likely be at materially higher rates.”

Maersk should now have a “war chest” of about US$12.5 billion it can use for acquisitions and share buybacks without jeopardising its investment grade rating, the analyst said. The company will mainly target takeovers in the land-based container logistics industry, Kerstens said.

Meanwhile, Maersk is trimming its organisation to adapt to the challenges it faces. The company took restructuring costs of just over US$100 million in 3Q related to around 2,000 job cuts, as it reorganises its ocean and logistics and services operations. — Bloomberg