Denmark's A.P. Moeller-Maersk Fourth Quarter Results

Denmark's A.P. Moeller-Maersk is set to release its fourth quarter results on Thursday. Here are the key details:

Revenue Forecast

The shipping giant is expected to report fourth-quarter revenue of $11.49 billion, marking a 36% decrease compared to the previous year. This estimate is based on a consensus from 12 analyst estimates compiled by FactSet.

Earnings Forecast

Earnings before interest, taxes, depreciation, and amortization (EBITDA) are projected to be $1.02 billion for the quarter, significantly lower than the $6.54 billion reported in the same period last year. The company is expected to show a net loss of $571 million, compared to a profit of $4.86 billion in the prior year. These figures are based on a FactSet poll of 11 analysts. The decline in earnings is attributed to a significant drop in freight rates.

Stock Performance

Over the past 12 months, the company's shares have experienced a decline of approximately 19%.

What to Watch

• Macroeconomic Slowdown and Inventory Shifts: Sydbank analyst Mikkel Emil Jensen noted that the ongoing macroeconomic slowdown and changes in inventory management at various companies continue to impact demand. While the Red Sea situation is not expected to have significant effects on 4Q results, longer transit times may have affected volume towards the end of the quarter.

• Transported Volumes: Sydbank predicts a 5% increase in transported volumes for the fourth quarter compared to the same period last year.

• Revenue and EBITDA Outlook: Maersk's main ocean unit is projected to generate $7 billion in revenue for the quarter, with EBITDA expected to fall by 95% to $300 million, according to Sydbank.

Stay tuned for the release of A.P. Moeller-Maersk's fourth quarter results.

The Imbalance Between Supply and Demand in the Container Industry

The container industry is facing a persistent challenge as it grapples with a discrepancy between supply and demand. The problem is exacerbated by the fact that new container ships are being delivered at a time when container demand is weak. As a result, freight rates have been under pressure, creating a difficult environment for the industry.

According to Jensen, an expert in the field, the average freight rate for a standard 40-foot container (FFE) is expected to reach $1,976 in the fourth quarter of this year. This marks a significant decrease of 50% compared to the previous year. Fortunately, there are some positive factors that will contribute to cost savings. Lower fuel prices and fewer network expenses will help alleviate some of the financial strain associated with the current situation.

One of the challenges faced by shipping companies, including Maersk, is the situation in the Red Sea. Due to this predicament, companies have had to find alternative routes, circumnavigating Africa. Unsurprisingly, this has led to substantial increases in freight rates, particularly for shipments between Asia and Europe. Despite the additional costs incurred, Jensen believes that these higher rates will actually offset the expenses. In fact, he suggests that Maersk may have had a more favorable start to 2024 than initially anticipated. Although resolving the conflict in the Red Sea is likely to result in significant declines in freight rates, the timing of such a solution remains uncertain.

Looking ahead, the container industry will not only have to address the current supply and demand imbalance but also face an economic slowdown. Furthermore, record levels of ship deliveries are expected in 2024. These factors will undoubtedly perpetuate the skewed balance between supply and demand in the coming years. In light of this, Sydbank predicts that Maersk will adopt a cautious approach and provide a broad range for its earnings outlook in 2024. Sydbank's analysis suggests that Maersk's Ebitda for 2024 could reach $8.2 billion, with the assumption of a tailwind from the Red Sea throughout the first quarter.

In conclusion, while the container industry continues to grapple with an ongoing imbalance between supply and demand, there are potential cost savings to be gained from lower fuel prices and reduced network expenses. Despite challenges in the Red Sea, increased freight rates may offset the associated costs. However, the industry will still have to contend with a surge in ship deliveries in 2024 and an economic slowdown. Sydbank expects Maersk to take a cautious approach in its earnings projections for the year.

Sydbank Forecasts Dividends for 2023

Sydbank predicts that dividends of DKK600 per share will be distributed in 2023. Furthermore, considering the optimistic outlook for the beginning of 2024, the bank anticipates that Maersk will extend its ongoing buyback program.