AP Møller-Maersk warned of growing economic risks, including potential stagflation and Chinese factory closures, even as the world’s largest container shipping group by profit reported a record quarter.
Maersk chief executive Søren Skou said the current second quarter was developing very much in line with the first three months, which brought the highest profits in the Danish group’s 114-year history.
But he added: “We assume a slowdown in the second half, a normalization. Visibility is quite low. We mainly see risks building up in the economy, in China with the Covid-19 policy, where they’re using these very tough lockdowns, some downgrades due to a very high oil price.
Maersk, which transports more than one in six containers on the seas and is seen as a gauge of global trade, last week downgraded its forecast for growth in the shipping industry this year to a potential slight decline. .
It also raised its profit forecast for this year to $24 billion in underlying operating profit, up from its February estimate of $19 billion. Skou pointed out that the new forecast was based on a “sharp drop” in freight rates in the second half, so “we have some ability to weather a storm.”
Maersk’s chief executive noted that the warning clouds were gathering for the second half of this year as he pointed out that some economists forecast a recession in the United States towards the end of the year. He said it was “too early” to tell if that was likely to happen.
“We clearly see inflation, and I don’t think it’s temporary,” he added.
“There are a number of factors that suggest we will see less growth in the second half of the year and into the next year,” he said, pointing to falling consumer and business confidence in Europe. and the United States as well as lower Chinese export orders.
Maersk was suffering from negative volumes due to a “breathtaking” sixth week of shutdowns in Shanghai, though it hadn’t yet been dramatic, Skou said. But he added: “What everyone fears is that you get a big spread of Omicron that forces China to shut down factories. We don’t see it yet.
His comments came as Maersk reported first-quarter revenue up 55% to $19.3 billion, while net profit more than doubled to $6.8 billion.
Skou said regulators around the world had investigated the container shipping industry but concluded the high profits were simply due to supply and demand dynamics, although he expects further surveys of this type in the future.
Maersk’s record results came despite operating losses of $718 million from fallout from Russia’s invasion of Ukraine, including the Danish group leaving behind 20,000 containers in Russia and quitting operations logistics and port terminals. It completed its last cargo operation at a Russian port on Monday, Maersk added.
Maersk was continuing its share buyback program and would make other “long-term” acquisitions to grow its growing logistics business, but in the short term it had to digest a series of recent purchases, Skou said.
He added that he doesn’t “see much potential to accelerate the greening” of ships at Maersk, where he is already the industry leader, but is stepping up purchases of electric trucks.