AMKBY AP Moller Maersk AS (PK)

By Costas Paris and Dominic Chopping 

A.P. Moeller-Maersk A/S is facing a weak year as the coronavirus outbreak takes a toll on shipping volumes and freight rates after broader market conditions sent the Danish shipping giant to an unexpected fourth-quarter loss.

The world's biggest container ship operator, said Thursday it has canceled dozens of sailings out of China since late January as factories there were closed for an extra week after the Lunar New Year and struggled to resume production.

Maersk Chief Executive Soren Skou said in an interview that quarantines and travel restrictions aimed at containing the spread of the virus have had "a huge impact" on China's export volumes. "But it's also hurting import volumes with not enough truck drivers to move things around," he said.

Maersk has dropped more than 50 sailings from China ports since late January, part of the larger retrenchment of shipping services in and out of a country that is an anchor of global trade.

In the quarter ending in December, Maersk swung to an unexpected net loss 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. The company said that the results were hurt by implementing a new international accounting standard for leases and 2019 figures aren't comparable with last year.

Maersk, which is seen as 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.

It said the outlook for 2020 is subject to significant uncertainties and affected by the coronavirus, which has significantly lowered visibility on what to expect in the short term.

"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.

Maersk's stock was down 3.9% to 8,228 Danish kroner in trading Thursday on the Copenhagen Stock Exchange.

For the full year, Maersk's earnings before interest, taxes, depreciation and amortization 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 a lower figure this year of around $5.5 billion.

The company's main Maersk Line 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. following the front-loading of orders in the same quarter last year ahead of anticipated tariffs. The company pointed to lower demand in Europe, continued weak demand in Latin America, and softer market conditions in West and Central Asia and Australia.

The Maersk loss followed Hapag-Lloyd AG's release of earnings earlier this week that showed the German carrier's Ebitda rose 40% in the fourth quarter from the year before to $526 million. Hapag-Lloyd said its revenue and average freight rates both deteriorated in the final three months of 2019, however.

Shipping data group Alphaliner said in a report this week that carriers had pulled a total of 1.67 million containers of capacity from China services since the start of the Lunar New Year holiday. Container lines have lost a total of $1.5 billion in business since then, the report said.

"As the trade war between the U.S. and China began to show signs of thawing, coronavirus came out of nowhere and has created huge uncertainty and a bearish outlook for the liner business in the short-term," said Jonathan Roach, a container analyst on Braemar ACM Shipbroking.

Shipping executives and analysts expect global supply chains to be disrupted well into the second quarter as emerging economies in Asia heavily depend on China for manufactured goods.

Maersk declared an unchanged full-year dividend of 150 Danish kroner ($21.68).

Write to Costas Paris at costas.paris@wsj.com and Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

February 20, 2020 14:10 ET (19:10 GMT)

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