Danish giant AP Moller-Maersk has issued a profit warning in the face of increased rate uncertainty and rising fuel costs.
Maersk follows rival Hapag-Lloyd in bracing investors for a lower profit this year, with the action continuing a difficult period for Copenhagen-listed giant.
It is already battling to complete a major strategic shift in full public view and posted a disappointing first quarter performance in May.
The company, often seen a a barometer for global trade, has also been targeted by short sellers given the growing nervousness around a trade war.
Maersk still expects to remain in the black this year and its stock was trading up on the update with analysts taking a positive stance on the update.
Maersk had stuck by its previous forecasts after its first quarter numbers fell short.
The owner of the world’s largest container line had been forecasting a profit for 2018 above the $365m booked in 2017. Today, that projection was reset to simply a forecast for “a positive underlying profit”.
It has also dropped its core operating profit expectations from $4bn to $5bn to a range of $3.5bn to $4.2bn.
Analysts note that this is still in line with the $3.7bn consensus. This creates a different picture to the Hapag-Lloyd profit warning, which led to a major resetting of market expectations.
Soren Skou, chief executive of AP Moller, said: "We delivered good progress in Q2 on revenue, volumes and unit cost across our business, and results improved from a weak Q1.
"Spot freight rates have restored after a significant drop in Q2, and volumes are growing in line with market.
"However, we continue to encounter very high bunker prices, which we have not been able to get fully compensated for in freight rates, leading to an adjustment in our expectations for the full-year 2018."
Herman Hildan and Frode Morkedal of Clarksons Platou Securities said: "The profit warning today is not as bad as one could have feared after the Hapag-Lloyd guidance last month.
"Importantly, second quarter figures are also better than expected due to underlying improved unit costs."
Maersk said its 2018 outlook had been subject to increased uncertainties impacting container freight rates, bunker prices and rate of exchange due to geopolitical risks, trade tensions and other factors.
"Based on the outlook for freight rates for the rest of the year and continued high bunker fuel prices, AP Moller-Maersk adjusts its expectation for the 2018 result," it added.
Shares in the company crashed by more than 7% after the warning was issued today. However, they rebounded quickly and were up almost 5% at DKK 8,806 each at the time of writing.
Espen Landmark Fjermestad and Peder Nicolai Jarlsby of Fearnley Securities say the company’s second quarter guidance was better than feared.
“It’s not often we see stocks climb on profit warnings, but in this case it has been largely oversold on the bad news,” they said.
Analysts told TradeWinds it is unusual to see a larger cap company like Maersk experience such volatility.
However, the upturn in the share price is likely to reflect the company's guidance for improving rates after the end of the quarter and the fact the fresh EBITDA guidance is aligned with consensus.
"We have highlighted the importance of an increased cost focus for the company to restore its market leading performance and today’s news provides some comfort," said DNB Markets analysts led by Nicolay Dyvik.
"As consensus is close to new mid-range guidance, we believe we could be at the end of the downward estimate revision cycle after negative news on higher bunker costs and trade wars should be reflected in current pricing."
