Maersk, which had previously guided an EBITDA of around US$5.5bn for 2020, has suspended this guidance due to the uncertainties and lack of visibility related to the global demand for container transport, caused by the COVID-19 pandemic.
The outbreak of the coronavirus has severely impacted the global transport market and supply chains, leading the shipping and logistics company to pause its guidance, pending more clarity on the market development and financial implications.
The remaining part of its 2020 guidance of volume growth in its ocean business is expected to be in line or slightly lower than the market growth.
A high cash conversion ratio and accumulated CAPEX for 2020-21 of between US$3-4bn is reiterated, but measures will be taken to reduce CAPEX for 2020, noted the Danish company.
Søren Skou, CEO A.P. Moller – Maersk, said: “Because of the current situation with high uncertainties related to global container demand due to the COVID-19 pandemic and the measures being taken by governments to contain the outbreak, we have chosen to suspend our 2020 full year guidance on earnings but will as soon as we have more clarity return with an outlook for 2020.
“Ensuring the health and well-being of our employees and supporting our customer’s needs remain our number one priority.”
Based on preliminary figures for Q1 2020, the company expects EBITDA before restructuring and integration costs for the quarter to be around US$1.4bn.
This figure is negatively impacted by weak volume development but mitigated by the implementation of Maersk’s IMO 2020 strategy, it added, both in terms of cost reduction initiatives and fuel price recovery.
Skou pointed out: “During the first two and a half month of 2020 we have executed well on our IMO 2020 strategy for how to manage the extra cost involved with the IMO mandated switch to low-sulphur fuel oil from January 1.
“We have effectively mitigated a part of the extra cost through good procurement, blending and manufacturing fuel ourselves and we have implemented rate increases to recover the actual fuel price increase from customers. We consequently expect to deliver a Q1 2020 which is better than Q1 2019, despite declining volumes across our businesses, driven by the COVID-19 pandemic.”