Shipping giant A.P. Moller-Maersk A/S reported yesterday a massive drop in net profit for last year and warned of “uncertainty” for this year due to Yemeni rebel attacks on vessels in the Red Sea.
An oversupply of container shipping last year caused prices to drop after they had soared in 2022 due to capacity shortages amid high demand following the end of COVID-19 pandemic restrictions, the Danish group said.
“The high demand eventually started to normalize as congestions eased, and consumer demand declined leading to an inventory overhang,” Maersk said in its annual earnings report.
This “correction” resulted “in rapid and steep declines in shipped volumes and rates starting” at the end of the third quarter of 2022, it added.
Maersk said its net profit reached US$3.8 billion last year, slightly more than forecast by analysts but down sharply from the US$29.2 billion logged in 2022.
Its revenue was also slightly above forecasts, reaching US$51 billion compared to US$81.5 billion the previous year.
The “oversupply challenges” in the maritime shipping industry are expected to “materialize fully” over the course of this year, Maersk said.
The group lowered its forecast for its core profit for this year — earnings before interest, tax, depreciation and amortization — to a range of between US$1 billion and US$6 billion.
“High uncertainty remains around the duration and degree of the Red Sea disruption with the duration from one quarter to full year reflected in the guidance range,” Maersk said.
Maersk's stock price sank more than 13 percent on the Copenhagen stock exchange after the release of the earnings report, which also included the announcement of the suspension of its share buyback plan.
Chairman Robert Maersk Uggla and CEO Vincent Clerc said in the earnings report that "2023 ended with multiple distressing attacks on cargo ships in the Red Sea and the Gulf of Aden".
They noted that two of the company's ships had been targeted.
"We are horrified by the escalation of this unfortunate conflict," they said.
Maersk and other shipping companies have decided to redirect shifts away from the Red Sea, making them take the longer and costlier route around the southern tip of Africa.
The Red Sea usually carries about 12 percent of global maritime trade.
Yemen’s Iran-backed Huthi rebels have targeted ships crossing the Red Sea since last year, saying their campaign was in solidarity with Palestinians in the war between Israel and Hamas.
"While the Red Sea crisis has caused immediate capacity constraints and a temporary increase in rates, eventually the oversupply in shipping capacity will lead to price pressure and impact our results," Clerc said.
Maersk also announced it would spin off its towage business, Svitzer, as a separate listed company.
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