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Maersk faces sharp Q3 profit decline and job cuts

Containers are seen on the Maersk's Triple-E giant container ship Majestic Maersk as it sails in the Strait of Gibraltar towards the port of Algeciras
Containers are seen on the Maersk's Triple-E giant container ship Majestic Maersk as it sails in the Strait of Gibraltar towards the port of Algeciras

COPENHAGEN: Shipping group A.P. Moller-Maersk reported a sharp decline in third-quarter profit and revenue on Friday, announcing plans to cut at least 10,000 jobs in response to overcapacity, rising costs, and weaker prices, causing its shares to plummet.

Maersk, a major player in global container trade with a significant role in transporting goods for retail giants like Walmart and consumer brands such as Nike, surprised analysts and investors with a more significant downturn in demand than anticipated.

CEO Vincent Clerc expressed his views on the challenging economic landscape, stating, “The new normal we are now headed into is one of more subdued macroeconomic outlook, and thus soft volume demands for the coming years, prices back in line with historical levels, inflationary pressures on our cost base, especially from energy costs, and also increased geopolitical uncertainty.” The industry had invested heavily in new container ships during and after the pandemic to meet robust demand and benefit from record freight rates. Clerc noted a surplus of new ships entering the market since the summer with no signs of idling or scrapping. He expressed concern, saying, “If the fourth quarter does not deliver some type of improvements, then I think we’re looking at a pretty dire situation in 2024.” Negative revenue growth in the third quarter was primarily attributed to challenges in the retail and lifestyle sector, especially in North America, as well as struggles in the automotive and technology sectors, according to Clerc.

Maersk’s shares in the Copenhagen-based group reached their lowest level in three years, trading 17.5 per cent lower by 1141 GMT. Jyske Bank analyst Morten Holm Enggaard suggested that the share price decline was due to Maersk reconsidering its share buy-back programme for 2024, indicating concerns about the future outlook.

Maersk anticipates a decrease of up to 2 per cent in global container volumes in its ocean business, its largest segment, primarily due to weak consumer demand and destocking by firms following the rush for goods in the aftermath of the coronavirus pandemic.

The company, which employed 110,000 people in January, is in the process of reducing its workforce to below 100,000, aiming for cost savings of $600 million next year and beyond compared to this year.

While the company maintained its full-year guidance for revenue and operating profit, it now expects both to land at the lower end of the range.

In the third quarter, operating profit plummeted to $1.9 billion from $10.9 billion the previous year, and revenues tumbled by 47 per cent to $12.1 billion. — Reuters

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