Danish shipping and transport giant A.P. Moller-Maersk (APMM) is suspending its 2020 guidance on EBITDA because of “lack of visibility” in what lies ahead for the industry as the coronavirus pandemic continues to drag down global trade and economic activity.
In a statement dated March 20, Maersk said it had previously guided an EBITDA (earnings before interest, taxes, depreciation, and amortization) of around US$5.5 billion before restructuring and integration costs.
But as the COVID-19 pandemic continues to severely impact the global transport market and supply chains, “this is leading to material uncertainties and lack of visibility related to the global demand for container transport,” it said.
“While the global operations are running as normal, APMM has, as a consequence of the current uncertainties related to the outlook, decided to suspend the 2020 guidance on EBITDA pending more clarity on the market development and financial implications.”
The suspension comes as Maersk also announced a higher EBITDA in the first quarter of 2020 compared to the same period in 2019.
EBITDA for the first three months of this year is expected to be around $1.4 billion from $1.24 billion year-on year.
Maersk said earnings were negatively impacted by weak volume “but mitigated by strong implementation of our IMO 2020 strategy, both in terms of cost reduction initiatives and fuel price recovery.”
“During the first two and a half months of 2020 we have executed well on our IMO2020 strategy for how to manage the extra cost involved with the IMO mandated switch to low-sulphur fuel oil from January 1st. We have effectively mitigated a part of the extra cost through good procurement, blending and manufacturing fuel ourselves and we have implemented rate increases to recover the actual fuel price increase from customers. We consequently expect to deliver a Q1 2020 which is better than Q1 2019, despite declining volumes across our businesses, driven by the COVID-19 pandemic.”
The company reiterated its previous guidance for 2020 that volume growth in ocean is expected to be in line with or slightly lower than the market growth.
“Because of the current situation with high uncertainties related to global container demand due to the COVID-19 pandemic and the measures being taken by governments to contain the outbreak, we have chosen to suspend our 2020 full year guidance on earnings but will as soon as we have more clarity return with an outlook for 2020,” said Soren Skou, CEO of Moller-Maersk.
Photo courtesy of Maersk