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The world's largest shipping company has 2 dire warnings for the global economy
(Edgar Su/Reuters)
Maersk is warning about two important parts of the global economy.
In its earnings results on Friday, the Danish shipping conglomerate, which is the world's largest, restated its expectation for declines across most of its businesses this year.
And it warned about the damage that changes to US trade policy could cause to the global economy.
"Currently we are challenged by market headwinds, as I started out talking about, in the form of low growth and excess capacity in both our industries and that has led to declining prices and declining revenue," CEO Soren Skou said during the earnings call.
The company said its second-quarter results were unsatisfactory, even though it escaped a loss. Its profit tumbled from $1 billion a year ago to $100 million because of lower prices for oil, freight shipment, and tanker charters.
Changes to US trade policy could join that list. Maersk CFO Trond Westlie said that any policy tweaks could damage global trade, according to Bloomberg.
Republican presidential nominee Donald Trump has proposed negotiating America's trading relationship with China to keep jobs and factories from moving overseas. Democratic presidential nominee Hillary Clinton has said the Trans-Pacific Partnership did not do enough to boost American jobs.
'Significantly below last year'
The company said it outperformed relative to its industries in the second quarter, achieved in huge part by cost cuts. But its updated outlook underscores that its industry continues to be slammed by the declines in commodities and shipping activity.
It expects 2016 profits to be "significantly below last year," at $3.1 billion. Maersk Line, the container-shipping company, also expects results to be worse year-over-year. The container-terminal, drilling, and shipping-services businesses are forecast to decline.
Maersk Oil now expects positive earnings for the year, upgraded from a Q1 estimate for breakeven and the only upwardly revised forecast.
To deal with the industrywide downturn, Maersk is also exploring strategic options that could involve selling some parts of the company. According to Reuters, the company is fighting to keep its No. 1 position as mergers and acquisitions create bigger competitors.
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