Maersk raises profit forecast amid strong demand, Red Sea disruptions

Maersk raises profit forecast: Maersk, a leading shipping group, has revised its full-year profit guidance upwards following the release of its first-quarter earnings on Thursday. The company attributes this adjustment to robust demand and the necessity of longer sailing routes to circumvent conflicts in the Red Sea.

CEO Vincent Clerc, noting Maersk's status as a global trade barometer, highlighted the impact of disruptions caused by attacks on vessels by Houthi militants in the Red Sea. These disruptions are expected to persist until the end of the year, influencing shipping routes and driving freight rates higher due to extended sailing times.

Clerc stressed that the resilience of demand for container shipping, surpassing earlier projections. Despite the current high container volumes relative to global GDP growth, Clerc expects a normalisation in volumes in the future.

Maersk, along with its competitors, has adjusted shipping routes, redirecting vessels around Africa since December to mitigate risks posed by the escalating conflict in the Red Sea.

The company now forecasts full-year underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) to range between $4 billion and $6 billion, an increase from the previous guidance of $1 billion to $6 billion.

While Maersk reported first-quarter EBITDA of $1.59 billion, surpassing analysts' expectations, its ocean container shipping division recorded a third consecutive quarterly loss, primarily due to heightened costs associated with the Red Sea disruptions.

However, Clerc expressed confidence in the company's ability to pass on additional costs to customers, thus bolstering the profitability of the ocean division in the second quarter.

Looking ahead, Maersk faces challenges from an influx of new container vessels entering the market, which could lead to overcapacity and dampen profits. Analysts anticipate a 15% expansion in fleet capacity across 2024 and 2025, outpacing demand growth.

Despite freight rates tripling to nearly $3,500 per container earlier in the year, they have since moderated to approximately $2,400.

Shares in Maersk have experienced a significant decline since reaching record highs in January 2022, falling by more than half.

(With Reuters inputs)