- A.P. Moller-Maersk said the ocean side
of its business had a good fourth quarter as
shippers rushed to move product before the U.S.-China trade war escalated
further, but a laundry list of complications in 2019 makes for soft growth
projections. Revenue was up 9.3% year-over-year for the carrier at the end
of 2018, heavily influenced by the acquisition of Hamburg Süd,
which closed at the end of 2017.
- Maersk executives expect shipment
volumes to grow around 2% in 2019, but they offered a strong caveat
that multiple sources of uncertainty could easily throw off those
- “We don’t believe that the China
and U. S. deal will be the last we have heard about trade tensions in 2019
because there’s also clearly an outstanding discussion between Europe and
the U.S.” CEO Søren Skou said.
The U.S.-China trade
war, IMO 2020, Brexit, economic weakness in China … executives on the
carrier’s fourth-quarter earnings call made it clear that due to the shifting
winds of international trade and industry regulation, the path ahead for Maersk
weaknesses, in particular, of China and Europe,” Skou said. He
expects container demand growth to slow this year, though he could not say to
what extent. Plus, the carrier expects a “significant increase in fuel
prices” in the run-up to enforcement of IMO 2020 sulfur standards.
“I think the
guidance reflects the high level of uncertainty around trade, around macro
environment, around the implementation of the IMO 2020 at the end of the year,
the volatility we have seen in fuel price. I mean, these are all factors that
can swing and have a massive impact, as we’ve seen some of them play out in
2018,” added CCO Vincent Clerc.
While analysts sought
assurances that contract negotiating season, currently in progress, was going well, and Clerc confirmed it was, he
added that it’s the shorter lead business that is now a concern as uncertainty
threatens already slim margins.
“I just want to
remind you also that half of our business is actually short-term business that
we renegotiate either monthly or weekly, and that’s really where a lot of the
risk … is going to play out, because it’s a significant part of our business
and it’s an extremely volatile part of the business,” Clerc said.
Logistics and supply
chain services, which Maersk and other carriers are building to diversify
their offering and capture more margin, is not looking great either. Clerc
freight-forwarding revenue “unsatisfactory.”
But it’s not all
despair. 2018 was a transitional year for Maersk, integrating Damco (less
freight forwarding) and Maersk Line under one roof, and integrating Hamburg Süd, and the carrier still
managed improvement in capacity and efficiency.
“We have ended
the year in a much better shape than we ended the previous year. That obviously
means a better environment to start the year into and a better environment to
negotiate contracts into,” Clerc said.
It’s the hazy future that makes last year’s gains cold comfort going forward.