AMKBY AP Moller Maersk AS (PK)

--Maersk sees lower earnings in year ahead

--Coronavirus epidemic hitting demand and rates

--Vessel work delayed amid Chinese factory shutdowns

By Dominic Chopping

Danish shipping giant A.P. Moeller-Maersk AS on Thursday reported weaker-than-expected fourth-quarter results and warned that earnings this year will be lower than 2019 as coronavirus dampens demand and hits freight rates.

Fear of the virus and the efforts to prevent its spread will see increasing pressure on the supply-demand balance and could dampen 2020 volumes, due to the extension of the Chinese New Year holidays and emergency measures to curb the infection's spread, Maersk said.

"It is still early days to measure the overall impact, however, the weekly container vessel calls at key Chinese ports were significantly down compared with last year during the last weeks of January and the first weeks of February," the company said.

Freight rates are expected to decrease due to dropping demand for containerized goods transport, while the epidemic has led to delays in opening of Chinese shipping yards following the Chinese New Year holidays, which has delayed yard works planned, including some planned installations of scrubbers on Maersk vessels.

Maersk swung to an unexpected net loss in the quarter of $72 million from a profit of $46 million in the year-earlier period. A FactSet analyst poll had expected a net profit of $343 million. Though it said that figures are materially impacted by implementing the IFRS 16 accounting standard and 2019 figures aren't comparable with last year.

Maersk, which is considered a barometer of global trade, reported a revenue fall of 5.6% to $9.67 billion, missing expectations of $9.94 billion, as its shipping unit lowered capacity to adjust to market conditions.

For the full year, Ebitda rose to $5.71 billion, meeting the company's own guidance of between $5.4 billion and $5.8 billion, but it expects to report lower Ebitda this year of around $5.5 billion.

The company's main shipping unit saw revenue fall as volumes dropped 1.8% while freight rates slipped 0.4%. Maersk said it continued to cut its cost base at the unit while lower fuel prices also helped offset some of the weakness.

Volumes were hit in both East-West and North-South routes, amid continued slower growth in the U.S. and front loading of orders in the same quarter last year ahead of anticipated tariffs, lower demand in Europe, continued weak demand in Latin America, and weakened market conditions in West and Central Asia and Oceania.

Maersk said the outlook and guidance for 2020 is subject to significant uncertainties and impacted by the coronavirus, which has significantly lowered visibility on what to expect in 2020.

"As factories in China are closed for longer than usual in connection with the Chinese New Year and as a result of the Covid-19, we expect a weak start to the year," the company said.

The organic-volume growth in its main ocean unit is expected to be in line with or slightly lower than the estimated 2020 average market growth of 1% to 3%.

Accumulated gross capex for 2020-21 is still expected to be $3.0 billion-$4.0 billion.

Maersk declared an unchanged full-year dividend of 150 Danish kroner ($0.14).

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

February 20, 2020 03:43 ET (08:43 GMT)

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