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Freight

Maersk boss warns global trade growth is slowing

The world’s largest container shipping company warned that global trade growth was slowing, raising the prospect of recession. 

Soren Skou, chief executive of AP Moller-Maersk, said there was a tension between still buoyant consumer confidence in countries such as the US and increasing gloominess of business leaders due to trade tensions. 

Maersk on Friday cut its forecast for global container demand — a proxy for trade growth — to 1-2 per cent in 2019 from 1-3 per cent after a relatively weak third quarter, usually the busiest of the year due to the Christmas season. 

“What has happened now is that the trade tensions have really started to impact business sentiment. Business leaders across the world are worried, they’re less confident about the future. Either the consumer wins and things will be better, or the businesses will be right and we’re heading for low growth or even a recession in the next few years,” Mr Skou told the Financial Times. 

Maersk is known as a bellwether on global trade as it transports about a fifth of global sea freight, used for moving everything from clothes and iPads to food and shoes. 

The Danish logistics group broke with tradition to make a forecast in November, rather than this coming February, for next year’s container growth, saying it expected 1-3 per cent. But Mr Skou conceded the risks were to the downside. “The more trade tensions we have the closer we get to recession,” he added. 

However, Maersk itself has managed to buck the negative news on demand in its industry. Last month, it raised its profit forecast for this year from about $5bn for earnings before interest, tax, depreciation and amortisation to $5.4bn-$5.8bn. 

Revenues in the third quarter were flat compared with a year previously at $10.1bn but net profit jumped by almost a half to $520m, significantly ahead of analysts’ estimates. 

Mr Skou said the quarter was a “step in the right direction” but Maersk was still some distance from its long-term target for return on invested capital of 7.5 per cent, reaching 6.4 per cent in the third quarter. 

“We are relatively pleased that we’re able to do well in a low-growth scenario. We’re able to demonstrate that trade tensions don’t need to be a negative for our business,” he said. He added that Maersk was developing cost-cutting plans on “every cost item” as it continued to prioritise profitability and cash flow over revenue growth. 

Shares in Maersk rose 2 per cent on Friday morning, and have now risen by a quarter in the past six weeks as investor fears over the impact of trade tensions on the Danish group have weakened.

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