Maersk Sees Bleaker Industry Outlook Amid Global Trade Wars
A.P. Moller-Maersk A/S, the world’s biggest container-shipping company, signaled it’s less optimistic about growth in its industry as trade wars dent the economic outlook.
Copenhagen-based Maersk now sees global growth for the sector of 1-2% compared with a previous estimate of 1-3% for this year, it said on Friday. The company predicted growth in its own business may be “slightly lower” than the industry average, but said it will rein in costs to support profits.
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The more pessimistic outlook “reflects the broad-based weakening of the economic environment in all the main economies,” Chief Executive Officer Soren Skou said in the statement. “Negative effects from escalating trade restrictions also weighed on trade growth.”
In an interview with Bloomberg Television, Skou said Maersk has been able to deal with the challenging environment by keeping its costs under control. He also said there’s “more to be done on the cost agenda.”
Shares in Maersk opened about 2.5% higher when trading started in Copenhagen.
“We have been able to more than mitigate the low demand growth scenario by taking cost down and so on,” Skou said. “But obviously for the world and for the global economy it is not good news that we are not growing faster than we are. We will continue as a company to be very disciplined in terms of our capacity deployment and that means we can keep our costs low and therefore we also can continue to grow earnings despite the fact that we are in a very weak growth scenario.”
Kudlow Says Phase One China Deal Down to the ‘Short Strokes’:
White House economic adviser Larry Kudlow said negotiations over the first phase of a trade agreement with China were coming down to the final stages, with the two sides in close contact. Kudlow said a deal was close though “not done yet.”
Maersk raised its full-year profit forecast on Oct. 21. The company said back then that its container-line business had performed better than expected despite weak global trade growth fanned by tensions between U.S. President Donald Trump and China. On Friday, the company said it still sees full-year operating profit, or Ebitda, of about $5.4 billion to $5.8 billion.
Still, amid protracted tensions between the U.S. and China, Maersk said it’s bracing for a “continued slowing in global manufacturing and global export orders.” The company is projecting industry growth of 1-3% for 2020, but said that the “continued weakening of global sentiment, above all in the manufacturing sector, reduces the likelihood of a growth pick-up” next year.
“Aside from the cyclical slowing of the global economy, the main risks to global container demand relates to the U.S.-China trade negotiations. Other risks to the outlook relate to the effectiveness of fiscal and monetary stimuli in major economies, such as the U.S. and China,” Maersk said. “Finally, the outcome of the Brexit negotiations poses a risk to UK and European container trade.”
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