Maersk Line likely to cut 2011 guidance–analysts
Danish shipping and oil group A.P. Moller-Maersk is likely to cut 2011 guidance for its container business Maersk Line on the back of falling freight rates, analysts said, Reuters reports. Maersk had already cut its forecast for the container shipping business in August due to the global slowdown and rate pressures, and said it expected a "modest positive result" for the division in 2011.
But the lack of any upturn in the market since then could force the company to trim its outlook again.
"Spot rates and lack of consensus about what should happen to rates make it hard to imagine that they will rebound markedly in the fourth quarter," Nykredit senior equity analyst Ricky Rasmussen said.
"And when the market will likely have lower volumes than in the third quarter, Maersk Line could have problems with this guidance," Rasmussen said.
The global shipping industry, which tends to mirror macroeconomic trends, lost billions of dollars in 2009, rebounded in 2010, but this year has been hit by a renewed growth slowdown and increased uncertainty.
Rasmussen said an August-September peak season surcharge had been factored into Maersk's expectation of a 'modestly positive' result for the container shipping division in 2011.
"But I doubt it has been possible to achieve that on the most important routes when you look at the current capacity level," Rasmussen said.
"The way I see it, there will be an outlook adjustment for Maersk Line in the Q3 report," said Sydbank senior analyst Jacob Pedersen.
DOWNTURN PRICED IN
Analysts said Maersk Line had refused to take vessels out of the China-Europe trade lane despite weakness in the market, which could be an attempt to muscle smaller competitors out of that trade.
"When Maersk Line says that, it is the first official signal that they are taking a more aggressive approach to keep and win market shares, and by doing so they will keep freight rates down," Jyske Bank analyst Martin Bo Hansen said.
While that might harm all market operators in the short term, it would benefit the players that would survive the consolidation of the industry which would necessarily follow a period of poor results, Hansen said.
For the group as a whole, A.P. Moller-Maersk has forecast a full-year 2011 result lower than 2010 when it made a net profit of 28.2 billion Danish crowns ($5.02 billion).
Sydbank's analyst Pedersen said he did not expect Maersk's share price to be significantly affected if the company were to cut its outlook.
"The stock has been falling like a stone along with many other shipping and industry stocks this year, so it is definitely factored into the price that they are heading for a difficult time," Pedersen said.
Shares in A.P. Moller-Maersk have lost 36.5 percent of its value so far this year, from 50,510 Danish crowns on December 30 2010, to 33,30 crowns at 1056 GMT on Thursday.
A.P. Moller-Maersk, whose Maersk Line is the world's biggest container shipping company, is scheduled to report third-quarter results on Nov. 9.
A Maersk Line spokesman declined to comment.
But the lack of any upturn in the market since then could force the company to trim its outlook again.
"Spot rates and lack of consensus about what should happen to rates make it hard to imagine that they will rebound markedly in the fourth quarter," Nykredit senior equity analyst Ricky Rasmussen said.
"And when the market will likely have lower volumes than in the third quarter, Maersk Line could have problems with this guidance," Rasmussen said.
The global shipping industry, which tends to mirror macroeconomic trends, lost billions of dollars in 2009, rebounded in 2010, but this year has been hit by a renewed growth slowdown and increased uncertainty.
Rasmussen said an August-September peak season surcharge had been factored into Maersk's expectation of a 'modestly positive' result for the container shipping division in 2011.
"But I doubt it has been possible to achieve that on the most important routes when you look at the current capacity level," Rasmussen said.
"The way I see it, there will be an outlook adjustment for Maersk Line in the Q3 report," said Sydbank senior analyst Jacob Pedersen.
DOWNTURN PRICED IN
Analysts said Maersk Line had refused to take vessels out of the China-Europe trade lane despite weakness in the market, which could be an attempt to muscle smaller competitors out of that trade.
"When Maersk Line says that, it is the first official signal that they are taking a more aggressive approach to keep and win market shares, and by doing so they will keep freight rates down," Jyske Bank analyst Martin Bo Hansen said.
While that might harm all market operators in the short term, it would benefit the players that would survive the consolidation of the industry which would necessarily follow a period of poor results, Hansen said.
For the group as a whole, A.P. Moller-Maersk has forecast a full-year 2011 result lower than 2010 when it made a net profit of 28.2 billion Danish crowns ($5.02 billion).
Sydbank's analyst Pedersen said he did not expect Maersk's share price to be significantly affected if the company were to cut its outlook.
"The stock has been falling like a stone along with many other shipping and industry stocks this year, so it is definitely factored into the price that they are heading for a difficult time," Pedersen said.
Shares in A.P. Moller-Maersk have lost 36.5 percent of its value so far this year, from 50,510 Danish crowns on December 30 2010, to 33,30 crowns at 1056 GMT on Thursday.
A.P. Moller-Maersk, whose Maersk Line is the world's biggest container shipping company, is scheduled to report third-quarter results on Nov. 9.
A Maersk Line spokesman declined to comment.