Maersk lifts profit forecast on higher shipping volumes
AP MOELLER-Maersk raised its full-year profit forecast after the company’s container-shipping line, the world’s largest, said earnings are rising because of higher freight volumes and lower costs.
Earnings excluding discontinued operations, impairment losses and divestment gains will total $4.5bn compared with a previous forecast of $4bn, Copenhagen-based Maersk said yesterday in a statement. The stock rose the most in a year after the company said it is planning its first share buyback.
Maersk Line, which transports about 15% of the world’s containers, has been battling industry overcapacity after a boom in ship orders that coincided with the global recession triggering the worst price slump since containerisation became global in the 1970s.
The unit also raised this year’s forecast, saying net operating profit after tax will “significantly” exceed last year’s $1.5bn, versus a previous forecast of a figure “above” that level.
“It’s impressive that Maersk Line can continue to lower costs,” Jesper Langmack, head of investments at Copenhagen-based pension fund PFA, which owns about $450m of Maersk stock, said in an e-mailed statement. “It’s certainly positive news that Maersk chooses to launch this share buyback. It’s a good signal that management constantly seeks to create value for shareholders.”
Maersk jumped as much as 5.6%, the steepest intraday gain since August 16 last year and was trading up 4.7% in Copenhagen. The stock has risen 20% this year, compared with a 2% advance in the Stoxx Europe 600 Index.
The firm will buy back shares for about $1bn in the next 12 months as Maersk’s capital structure is “almost too strong,” CEO Nils Smedegaard Andersen said in a Bloomberg Television interview. It will be the first “formalised” buyback in the company’s 110-year history, and it will not reduce dividend payments, he said.
“We find it highly positive that they show clear commitment to return on capital and distribution of this to shareholders through share buybacks and dividends,” Frode Moerkedal, an analyst at RS Platou Markets, said in a report to clients, reiterating a buy recommendation on the stock.
Supply and demand in the container market will continue to be unbalanced in the short and medium term because some shipping lines are still “too aggressive” in adding capacity, Mr Andersen said.
Second-quarter earnings before interest, tax, depreciation and amortisation rose 9% to $3.09bn, beating the $3.05bn median estimate of four analysts surveyed by Bloomberg News.
Maersk Line’s net operating profit after tax increased 24% to $547m. Volume expanded 6.6%, while costs fell 4.4% in the quarter.
Maersk said its oil unit, which posted a $1.7bn writedown on its Brazilian assets last month, will report an underlying profit this year in “line with” last year’s $1bn, compared with a previous forecast for declining earnings.