Maersk stock plunges as shipping giant scraps share buybacks due to Red Sea attacks and cargo market slump

By Louis Goss

A.P. Moller-Maersk shares plunged on Thursday after the shipping giant halted its share buyback plan while warning that continued uncertainty in the Red Sea could worsen a slump in the global shipping market and see it post a loss in the full-year 2024.

The Danish shipping giant set out plans to cut its costs and save cash in the face of high levels of uncertainty around disruption in the Red Sea following attacks on cargo ships in the Gulf of Aden that started in November, as it scrapped plans for a $1.6 billion share buyback initiative.

It's also cutting its dividend payments by 88%.

Maersk said that while the Houthi attacks, including on two of its own ships, had actually benefited its business in 2023 by driving an uptick in shipping rates, the uncertainty still poses a risk to its business in 2024 - especially when combined with a longer-term slump in the market.

Shares in Maersk (DK:MAERSK.B) fell 14% on Thursday having lost 29% of their value over the previous 12 months.

Maersk said it remains uncertain as to the extent to which disruption in the Red Sea will impact its business, as it warned the turmoil could continue across the full-year 2024.

"High uncertainty remains around the duration and degree of the Red Sea disruption with the duration from one quarter to full year reflected in the guidance range," Maersk said.

The Copenhagen shipping company said "significant oversupply challenges," caused by a glut of cargo ships following the end of a boom during COVID-19, will also hit its profits in 2024.

Analysts at JPMorgan, led by Samuel Bland, said they expect the shipping market glut will likely have a long-term impact on Maersk's profits. "At this stage, we presume this over-capacity will continue into 2025," the JP Morgan analysts said.

Maersk forecast a loss before interest and tax of between $5 billion and breakeven, after earning $3.9 billion before interest and tax last year.

In the fourth quarter of 2023, Maersk saw revenue from its shipping segment - which accounts for more than half of its overall sales - drop 46% to $7.18 billion, as a drop in freight shipping rates offset a slight uptick in volumes caused by higher consumer demand.

Sales from Maersk's logistics and services business also fell 8%, to $3.54 billion, due to lower rates in its air and haulage divisions, while the Danish firm's terminals business saw a 2% uptick in revenues to $1.02 billion due to higher shipping volumes.

-Louis Goss

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02-08-24 0433ET

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