AP Møller-Maersk cuts global trade growth forecast

AP Møller-Maersk cut its forecast for global trade growth and abandoned several medium-term profit forecasts but the Danish conglomerate still posted higher-than-expected earnings.

Maersk overcame low oil prices and freight rates in its container shipping business to post a 7 per cent fall in underlying net profit in the second quarter at $1.1 billion, which was well ahead of analysts’ expectations of $820 million.

Shares in the shipping-to-oil-rigs conglomerate rose 7 per cent on Thursday as it also said it would start its second share buyback programme to purchase about $1 billion of stock.

Citing global economic uncertainty and the persistence of low oil prices and the weak state of the container shipping industry, Maersk made an unusually large number of changes to its guidance.

It now expects global container demand – a proxy for growth in world trade – to increase only 2-4 per cent, down from 3-5 per cent. It abandoned its midterm profit targets for all businesses except Maersk Line, the world’s largest container shipping company.

But it also strengthened its guidance for its oil and drilling rig businesses this year while boosting its return target for Maersk Line and insisting it would defend its market leadership in container shipping aggressively.

"Surely we are looking at a global economy that is facing a lot of challenges but it has been like that for the past five years and still we are increasing our results. We are a resilient company," said Nils Andersen, chief executive.

Mr Andersen said he saw no signs of either a pick-up or dramatic slowdown in the global economy.

Speaking of China’s decision to devalue its currency this week, he added: “The devaluation of China is a statement that they see export as an important part of their economy, which, all other things being equal, is good for our business.”

Maersk Line, closely watched by investors and trade experts because of its role in transporting 15 per cent of seaborne freight, posted net profit of $507 million, ahead of analysts’ forecasts but still down 7 per cent year on year.

Container shipping has been blighted by overcapacity and falling freight rates since the world financial crisis and the second quarter was no different. Rates were 14 per cent lower than a year earlier while capacity was up 11 per cent.

Targets for its port terminals and drilling rigs businesses to earn $1 billion by 2018 and for its oil unit to produce 400,000 barrels a day by 2020 have been abandoned because of low crude prices.