Shipping Firm Moller-Maersk Issues Growth Warnings For 2019 Due To Trade War

Economic growth could be hampered by the continuance of the acrimonious trade war between the two largest economies of the world into current year, warned Danish shipping group and one of the largest shipping companies in the world Moller-Maersk as it announced its financial performance for the fourth-quarter wherein the earnings were in line with the expectations of the markets and analysts.

The company reported its earnings before interest, tax, depreciation and amortization (EBITDA) at $1.12 billion for the last three months of 2018 which was more than the $1.07 billion that was being expected by analysts according to a pool conducted by Reuters.

The not so encouraging results and the warnings for growth in 2019 resulted in the shares of the company dropping by more than 9 percent following the announcement of the results. The company said that its EBITDA would likely to be around $5 billion for the current year when it is calculated according to the International Financial Reporting Standards (IFRS).

“Although we had a challenging start to 2018, looking at our financial performance, we increased earnings despite significantly higher bunker fuel prices and lower than expected container volume growth in the second half of 2018,” Soren Skou, CEO of Moller-Maersk, said in a statement on Thursday. “However, profitability needs to improve,” he added.

For analysts, traders and investors, the results announced by the largest container shipping company in the world is generally considered to be a global barometer for trade. Therefore the results of the company and its warnings for the current year assume importance given the long drawn trade war that is ongoing between the United States and China, the two largest economies of the world and there are chances that it would become more acute and acrimonious if the current round of talks between the trade representative of the two countries fail to arrive at a trade agreement. If the two countries are not able to come to a satisfactory agreement by March 1, the US would increase tariffs on Chinese goods worth $200 billion which it had deferred for a three month period \to allow teh two sides to come to anb agreement on trade.

“Maersk’s guidance for 2019 is subject to considerable uncertainties due to the current risk of further restrictions on global trade and other factors impacting container freight rates, bunker prices and foreign exchange rates,” the company said Thursday.

The company which formally was into a number of business verticals, is now undergoing a restructuring process and is completely focused on transport and logistics business. In this regards, the shipping company now is also looking at rivalling some of the top delivery companies such as UPS and Fedex.

(Adapted from CNBC.com)

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