Maersk raises profit forecasts for third time this year as supply chain hit persists

AP Møller-Maersk has lifted its annual profit forecasts for the third time this year due to prolonged supply chain disruption, as the world’s second-largest container shipping group said a “normalisation” in the market would take longer than expected.

The Danish shipping and logistics group said on Tuesday that it anticipated its full-year profits would be about a quarter higher than previously forecast, adding that a “gradual normalisation” in freight rates was now more likely in the fourth quarter rather than the middle of the year.

Maersk raised its full-year forecast for underlying operating profits to about $31bn, from $24bn previously. It expects underlying earnings before interest, tax, depreciation and amortisation (ebitda) to reach $37bn this year from an earlier prediction of $30bn.

The sharp increase in forecasts came as it released figures from its second-quarter results a day earlier than expected, with revenues climbing 50 per cent to $21.7bn from the same period a year earlier. The group’s underlying operating profits more than doubled to $8.9bn in the quarter.

Maersk has been consistently surprised by how long supply chain woes have lasted, raising its earnings forecasts multiple times both this year and last as the group sets new records for profitability and revenue.

Regulators have asked questions about the boom the container shipping industry is enjoying, but Maersk and rivals say it is down to a mismatch between supply and demand, especially following the early waves of the Covid-19 pandemic in 2020 when consumer spending online surged.

Tuesday’s upgrade to Maersk’s profit forecast was its third this year, after three in 2021, and three in 2020. Its initial guidance for operating profit this year was $19bn, in line with its record performance in 2021, but has now been lifted by almost two-thirds to $31bn.

The entire industry has reaped the benefit of surging freight rates as companies have been forced to pay record amounts to transport their goods. Maersk has used its bumper profits to bulk up its land-based logistics business as it aims to reduce its dependence on container shipping.

Maersk, which lost its crown as the biggest container shipping company by capacity to privately owned Mediterranean Shipping Company in the past year, is still the most profitable in the industry and the most visible due to its stock market listing.

Maersk also raised its expectation for free cash flow this year to more than $24bn, from $19bn previously and $15bn at the start of the year.

Companies worldwide have struggled to get enough goods to sell to consumers or use in their factories as they reacted to both a surge in demand and a desire to build up inventories and move away from just-in-time supply chains.

Economists are becoming more worried about global economic growth as central banks significantly raise interest rates in an attempt to curb rampant inflation while European countries are braced for the fallout from trying to cut their dependence on Russian energy after Moscow’s full-scale invasion of Ukraine.

Maersk is expected to say more about how it sees developments for the rest of the year on Wednesday when it releases its full second-quarter results.