Maersk Sees Improved Cargo Volume But Still Plans Job Cuts
In the latest sign of recovery in the global shipping markets, A.P. Moller – Maersk reported that volumes were rebounding faster than expected, causing it to raise its earnings outlook for the remainder of 2020. The company, however, remains cautious about the outlook for 2021 while also moving forward with job cuts as part of its planned consolidation and restructuring of operations.
While ocean volumes were down three percent in the third quarter, Maersk noted that volumes were ahead of forecasts and coupled with cost reductions contributed to improved results. The company reported that revenues for the quarter would reach $9.9 billion with earnings of $2.4 billion (EBITDA) before the costs related to the restructuring.
Maersk also provided additional details on the impact of the restructuring of operations announced in September. The company said it expects to reduce its workforce by approximately 2,000 employees in the ocean and logistics operations. Previously the company had announced it would integrate Safmarine into the Maersk brand and the Damco brand’s Air and LCL (Less than Container Load) offering will be combined with Maersk’s logistics and services products. Maersk said it expects to take a $100 million restructuring charge in the third quarter related to these steps and the resulting layoffs.
“A.P. Moller - Maersk is on track to deliver a strong Q3 with solid earnings growth across all our businesses, in particular in Ocean and Logistics & Services. Volumes have rebounded faster than expected, our cost have remained well under control, freight rates have increased due to strong demand and we are growing earnings rapidly in Logistics & Services,” said Søren Skou CEO of A.P. Moller – Maersk. “The outlook for Q4 is solid for the same reasons, and we are therefore able to upgrade our expectations for the full year.”
Given the near-term improvements in the business, Maersk also raised its outlook for full year earnings to the range of $7.5 to 8.0 billion before charges. That is an increase from the prior guidance of $6 to $7 billion in earnings (EBITDA).
Maersk, however, cautioned that the outlook for 2021 remains uncertain due to the pandemic, the potential for future lockdowns, and an expected slowing of government stimulus packages.