In recent times, the global shipping industry has been in a state of flux, with port congestion, rising freight rates and geopolitical conflicts intertwining to create challenges and opportunities that the industry cannot ignore. As a global shipping giant, Maersk is experiencing and anticipating that this complex situation will have a profound impact on its operational and financial performance, and has significantly raised its full-year 2024 earnings guidance.
In its latest trading update, Maersk said that container freight rates will rise further due to strong demand in the container market, impacted by increased congestion in Middle Eastern and Asian ports, and disruptions caused by the Red Sea crisis. (For more details on the related impacts, see ‘Global Containerised Freight, “a mess in the making”!’)
Thanks to this, Maersk raised its full-year 2024 underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to between $7bn and $9bn, and operating profit (EBIT) to between $1bn and $3bn, significantly higher than the previous estimates of $4bn to $6bn and -$2bn to $0bn.
Maersk said, ‘This development is gradually building up and is expected to contribute more to the company's financial performance in the second half of 2024.’
Additionally, Maersk mentioned in its trading update that the company now expects free cash flow of at least $1bn, a significant positive change from its previous estimate of at least -$2bn.
Earlier on Monday, Maersk said that its vessel schedules have been significantly delayed due to heavy terminal congestion, particularly in Mediterranean and Asian ports. The congestion has led to longer waiting times in some ports, affecting Maersk's ability to maintain a regular schedule.
Frequent missile and drone strikes by Yemen's Houthis in the Red Sea and Gulf of Aden region since November last year have forced shipping services to detour around the Cape of Good Hope, which has not only lengthened voyage distances, but also led to soaring freight rates Industry experts have warned of the knock-on effects of such detours, which include congestion at ports and shortages of containers and capacity.
However, Maersk warned that the market trading environment remains volatile due to uncertainty over the situation in the Red Sea and uncertainty over future supply and demand. The interim results report for the second quarter of 2024, expected to be released on 7 August, will shed further light on the impact of this complex situation.
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