Maersk cuts profit forecast in 2018 but eyes market recovery

COPENHAGEN (Reuters) – A.P. Moller-Maersk cut its 2018 earnings forecast on Tuesday due to higher fuel prices, although the downgrade was smaller than some analysts had feared, prompting shares in the world's biggest container shipping company to rise.

The container shipping industry has suffered from low freight rates amid a global oversupply of vessels, while Maersk and rivals have warned a global trade war could hit business.

"We continue to encounter very high bunker (fuel) prices, which we have not been able to get fully compensated for in freight rates, leading to an adjustment in our expectations for the full-year 2018," said Chief Executive Soren Skou.

However, the Danish company added spot freight rates had recovered after a significant drop in the second quarter, and its volumes were growing in line with the market.

Maersk is more reliant than ever on the shipping industry after selling its oil and gas business last year, and plans to step up competition to delivery companies UPS and FedEx by expanding in transport and logistics.

The company now expects earnings before interest, tax, depreciation and amortization (EBITDA) of between $3.5 billion and $4.2 billion this year, down from the $4.0-$5.0 billion seen previously.

"Rising fuel prices are really hurting profits in an industry under pressure," Sydbank analyst Morten Imsgard said.

Maersk said it still expected to make an underlying profit this year. Its previous guidance was for an underlying profit above the $356 million achieved last year.

The company, due to publish full quarterly earnings on Aug. 17, said EBITDA stood at $900 million in the second quarter on revenue of $9.5 billion.

Average bunker fuel prices were 28 percent higher in the period compared with a year earlier, while freight rates were 1.2 percent lower, it said.