Maersk lifts profit guidance, expects Red Sea disruption to continue

2nd May 2024 11:34

(Sharecast News) - Danish shipping and logistics giant A.P. Møller - Mærsk has lifted its 2024 profit guidance, saying that Red Sea disruptions are likely to continue for the rest of the year.

The company, known simply as Maersk, raised the lower end of its guidance range for underlying earnings before interest and tax (EBIT), guiding to a loss of up to $2.0bn, from previous projections of a loss of up to $5.0bn.

It said that container volume growth is now expected to be towards the upper end of the 2.5% to 4.5% range.

Disruptions in the Red Sea - after attacks on vessels travelling the major trade route by Houthi militants - have led to higher freight rates (and higher costs) for container shippers, with ships having to divert around Africa.

"With the Red Sea crisis still ongoing, plans are made for the current rerouting south of the Cape of Good Hope [South Africa] to be extended potentially for the remainder of the year, while A.P. Moller - Maersk still expects overcapacity to prevail which implies lower rates during the second half," Maersk said in a statement.

First-quarter revenues totalled $12.36bn, down from $14.21bn a year earlier, while underlying EBIT dropped to just $174m from $2.56bn - though profits came in ahead of market forecasts.

Chief executive Vincent Clerc said the first quarter had developed "precisely as we expected". He said: "Demand is trending towards the higher end of our market growth guidance and conditions in the Red Sea remain entrenched. This not only supported a recovery in the first quarter compared to the previous quarter, but also provide an improved outlook for the coming quarters, as we now expect these conditions to stay with us for most of the year."