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Maersk Cautions That Supply-Chain Congestion Could Worsen — Update

By Dominic Chopping

 

A.P. Moeller-Maersk AS said Wednesday that continuing Covid-19 lockdowns in China could worsen global supply-chain congestion while Russia's invasion of Ukraine has added to bottlenecks.

Maersk, which moves 17% of the world's shipping containers on its vessels, has previously said lockdowns in China would hit trucking services and could increase transport prices mainly due to disruption caused by warehouses shutting down and disruption to transportation to and from ports.

"While the impact in 1Q is limited, it may worsen the congestion environment in coming quarters as the situation develops," Maersk said in a statement.

Speaking on business channel CNBC, Chief Executive Soren Skou said the company is currently losing a couple of percentage points of volume from China port congestion, while the main problem is on its land side operations due to the Covid lockdowns.

The Danish shipping giant last month pre-released some first-quarter earnings figures and raised full-year guidance, noting that supply-chain disruptions had continued to send container freight rates higher.

In its report Wednesday, the company said that net profit rose to $6.78 billion in the first quarter from $2.72 billion, against the $7.08 billion seen in a FactSet poll.

Revenue at its shipping unit rose 64%, driven by higher freight rates caused by bottlenecks and congestion across global-supply chains. Freight rates in the quarter rose by 71% on the year while shipping volumes slipped 6.7%.

Maersk added that it will withdraw completely from doing business in Russia and has started a process to divest its 31% stake in Global Ports Investments which operates six terminals in Russia and two in Finland.

It will also exit its two warehouses in Russia, a cold storage facility in St. Petersburg and an inland terminal in Novorossiysk, while its Svitzer unit will divest its Russian operation that provides towage services in Sakhalin.

The financial impact of the Russia-Ukraine war on first-quarter earnings before interest and tax was $718 million.

Looking ahead, Maersk confirmed its recently upgraded guidance for 2022 underlying earnings before interest, taxes, depreciation and amortization of around $30 billion, underlying EBIT of around $24 billion and free cash flow above $19 billion.

Maersk expects conditions in its shipping unit to normalize early in the second half of 2022 and global container demand is seen at minus 1% to plus 1% in 2022.

Capital expenditure guidance for 2021-22 was maintained at $7.0 billion and for 2022-23 Maersk still sees capital expenditure at $9.0 billion to $10.0 billion, driven by intensified growth in its logistics and services business as well as environmental, social and governance investments.

 

Write to Dominic Chopping at dominic.chopping@wsj.com

 

(END) Dow Jones Newswires

May 04, 2022 04:21 ET (08:21 GMT)

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