Maersk launches $1.6bn share buyback after raising forecast

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AP Moller-Maersk is launching a $1.6bn share buyback after the world’s largest container shipping line upped its profit forecast for the third time since the coronavirus pandemic.

The Danish shipping and logistics group has benefited from a far stronger than expected rebound in freight rates as companies in the US and Europe struggle to keep up with consumer demand.

Soren Skou, Maersk’s chief executive, told the Financial Times that it had received queries from Chinese and US authorities about record freight rates but dismissed their concerns. The head of rival CMA CGM said this week that Chinese authorities had pressed him to keep a lid on prices.

Mr Skou said: “It’s not uncommon that authorities ask what is going on when you see very rapid movements in price. We’re not feeling any pressure. It’s a question of supply and demand.”

His comments came as Maersk increased its earnings before interest, tax, depreciation and amortisation by 39 per cent to $2.3bn in the third quarter compared with a year earlier, even as revenues fell 1 per cent to $9.9bn.

Maersk said it expected full-year profit to be $8bn-$8.5bn, up from its previous forecast of $7.5bn-$8bn. It suspended its initial guidance in March of $5.5bn earnings before interest, tax, depreciation and amortisation owing to coronavirus, before reinstating it in August as $6bn-$7bn.

The company is reaping the rewards from record shipping freight rates as demand recovers after the initial shock of the Covid-19 pandemic.

The Danish group went through one of the most dramatic transformations in European industry as it jettisoned several energy businesses, including its oil unit to France’s Total, in a move to focus on shipping.

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Analysts expect it to use its growing war chest not just on share buybacks but to expand its land-based logistics business as it seeks to offer customers a door-to-door service.

“We continue to be on the lookout for acquisitions that can help us grow our landside logistics business,” said Mr Skou.

Maersk said the share buyback would take place over the next 15 months and would mean it had distributed about three-quarters of the $4.5bn it received from selling shares in Total back to its own investors. The first $500m of share repurchases will start next month.

Its main Ocean business — which includes Maersk Line, the world’s largest container shipping company — increased ebitda by 39 per cent to $1.8bn in the third quarter despite a 4 per cent decline in volumes. It was helped by the higher freight rates as well as lower fuel prices and consumption.

Mr Skou said part of the success was down to Maersk’s strategy of creating a network-sharing alliance with competitor MSC and acquisition of Hamburg Süd, not just to “tailwinds” from rates and fuel prices.

He credited the larger network from the alliance with MSC as meaning Maersk coped much better with Covid-19 than the similar shock from the global financial crisis. In 2009, it maintained capacity but cut prices, whereas in 2020 it rapidly cut back on sailings and has now seen rates soar.

Mr Skou dismissed concerns from some that alliances could be anti-competitive.

“We have a long history of demonstrating the benefits of alliances, that the cost efficiencies flow to our customers. We have no expectation that the authorities would act against the alliances,” he said, adding that such a move would be bad for companies transporting goods.

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He stressed the rapid increase in freight rates was a “very short-term issue” due to both shippers and shipping companies scrambling to return to normal after the shock of lockdowns in the second quarter.

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