A.P. Moller-Maersk A/S is planning to launch a US$1.6 billion share buyback program as the world’s biggest container shipping company weathers the COVID-19 crisis better than expected.
Copenhagen-based Maersk, which on Tuesday raised its guidance for a second time since last month, reported a 39 percent rise in earnings before interest, taxes, depreciation and amortization to US$2.3 billion in the third quarter.
Profit by that measure, before restructuring and integration costs, would reach US$8 billion to US$8.5 billion this year, the company said.
Its previous guidance was for US$7.5 billion to US$8 billion.
“The global economic environment was [in the third quarter] still severely impacted by the spread of the COVID-19 pandemic and its effect on economies on all continents. However, volumes have decreased less than expected. As costs were kept well under control and freight rates have increased due to recovery in demand,” Maersk said yesterday.
The company transports about one-fifth of the world’s containers, giving it a unique view of the state of global trade.
“Container demand is expected to be supported by record-low US retail inventories for the next two to three quarters,” Jefferies LLC analyst David Kerstens said in a note. “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 that it can use for acquisitions and share buybacks without jeopardizing its investment-grade rating, Kerstens said, adding that the firm would mainly target takeovers in the land-based container logistics industry.
The outlook for global trade hangs in the balance as the pandemic cements its grip across the northern hemisphere.
However, scientists are moving to developing a COVID-19 vaccine, potentially laying the foundation for an economic rebound next year.
Meanwhile, Maersk is trimming its organization to adapt to the challenges it faces. The company plans to take restructuring costs of about US$100 million in the third quarter related to about 2,000 job cuts.
Maersk’s shares have gained about 20 percent this year and closed 1.2 percent higher on Tuesday.
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