Shipping giant Maersk’s profit sinks, warns of Red Sea risk

A Maersk container ship near Sir Abu Nuair island off Dubai on June 4, 2022. (Karim Sahib/AFP)
A Maersk container ship near Sir Abu Nuair island off Dubai on June 4, 2022. (Karim Sahib/AFP)

Shares in shipping giant Maersk have plummeted after it warned of an uncertain 2024 earnings outlook linked to an oversupply of container vessels and Yemeni rebel attacks in the Red Sea.

The downbeat forecast came after its 2023 earnings were hit by overcapacity in the shipping sector, which caused a drop in freight rates.

The group reported a more than sevenfold drop in its net profit last year to $3.8 billion, compared to $29.2 billion in 2022.

Its revenue fell to $51 billion from $81.5 billion the previous year.

Maersk’s stock price closed almost 15 percent lower on the Copenhagen stock exchange today, also hurt by the company’s announcement it was suspending its share buyback plan.

Freight rates had soared in 2022 due to capacity shortages amid high demand following the end of COVID pandemic restrictions.

“The high demand eventually started to normalize as congestions eased and consumer demand declined leading to an inventory overhang,” Maersk says in its 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 adds.

The “oversupply challenges” in the maritime shipping industry are expected to “materialize fully” over the course of 2024, Maersk says.

The group lowered its 2024 forecast for its core profit — earnings before interest, tax, depreciation and amortization — to a range of between $1.0 billion and $6.0 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 says.

Chairman Robert Maersk Uggla and CEO Vincent Clerc say in the earnings report that “2023 ended with multiple distressing attacks on cargo ships in the Red Sea and the Gulf of Aden.”

They note that two of the company’s ships had been targeted.

“We are horrified by the escalation of this unfortunate conflict,” they say.

Maersk and other shipping companies have redirected ships away from the Red Sea, taking the longer and costlier route around the southern tip of Africa.

The Red Sea usually carries about 12 percent of global maritime trade.

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