People & Money

Maersk Lifts Profit Outlook for the Second Time, Lays Off 2,000 Workers

While companies around the world have adjusted their yearly profit forecast to account for losses caused by the coronavirus pandemic, Danish integrated shipping company, A.P. Moller-Maersk has raised its profit outlook for 2020.
It has predicted that its third-quarter earnings [before factoring in interest, tax, depreciation, amortization and restructuring costs associated with laying off staff] will amount to $2.4 billion, an increase from the $1.7 billion recorded in both Q2 2020 and Q3 2019. Maersk expects its earnings to be between $7.5 billion and $8 billion for 2020.
This is not the first time Maersk has raised its profit outlook. Back in August, it had put its estimation of year-end earnings between $6 billion and $7 billion, having suspended its earlier $5.5 billion estimates in March at the height of the pandemic-related losses.
Since then, the cargo giant has bounced back and recovered from the effects of the outbreak much faster than most other companies. In fact, its EBITDA predictions for 2020 are already much higher than the $5.7 billion recorded in 2019.
Maersk’s unexpected success has been linked to a rise in freight rates following the relaxation of border closures, improved demand, rational budget management, stimulus packages in Western economies that have supported demand and market alliances made by container shipping groups at the onset of the coronavirus pandemic which have helped them reduce cost.
“A.O. Moller-Maersk is on track to deliver a strong Q3 with solid earnings growth across all our businesses, in particular in ocean, logistics and services,” said the company’s Chief Executive Officer, Søren Skou.
“Volumes have rebounded faster than expected, our costs have remained well under control, freight rates have increased due to strong demand and we are growing earnings rapidly in logistics and services. The outlook for Q4 is solid for the same reasons, and we are therefore able to upgrade our expectations for the full year.”
However, he was cautious of expecting a similar level of growth in 2021, noting the possibility that continued spread of the virus could necessitate another round of lockdowns and the probability for a coronavirus vaccine to fail to curb the spread.
However, despite these earnings, Maersk has confirmed the planned retrenchment of 2,000 members of its staff. This was chalked up to market uncertainty. The massive cutback on staff expenses is connected to the company’s retirement of two of its brands: Damco and Safmarine, and the reduction of staff in Hamburg Süd. The company currently has 80,000 workers.
Maersk’s sister company AP Moller operates the biggest terminal at the Apapa ports.
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