A global economic collapse might be on the horizon as AP Moeller Maersk A/S (CPH:MAERSK-B), owner of the world’s largest container shipping company, is powerfully ringing the alarm on international trade growth.
This week, Maersk warned that it has been facing conditions significantly worse than the 2008 financial crisis.
The Danish company rang the bells after reporting an 84% plunge in its 2015 profit.
The rout in both oil prices and container freight rates are severely hurting the shipping-to-oil conglomerate. Oil prices have tumbled more than 80% since mid-2014 on ample supply.
Many of the world’s busiest container shipping routes are struggling amid slowdown in emerging markets and weak growth in Europe. China’s economy, the world’s second-largest, expanded at 6.9% last year, the slowest in 25 years. Europe predicted just 1.5% growth in 2015.
“It is worse than in 2008,” the company’s chief executive officer, Nils Andersen, told the Financial Times. “The oil price is as low as its lowest point in 2008-09 and has stayed there for a long time and doesn’t look like [it’s] going up soon. Freight rates are lower. The external conditions are much worse but we are better prepared.” (Source: “Maersk warns business conditions worse than during 2008 crisis,” Financial Times, February 10, 2016.)
Shares of the Copenhagen, Denmark-based company surrendered as much as 9.3% in intraday trading on Wednesday, following the release of its weak earnings report. The stock recovered some of its losses on Friday, gaining as much as seven percent, but it is still down 41% in the past 12 months.
The company, which is seen as a bellwether for global trade, estimated it grew just zero to one percent last year compared to double-digit growth before the financial crisis. Maersk projects an increase of between one and three percent this year, which is still below its post-crisis estimate of four percent to five percent growth.
Global trade conditions had been “abnormal” last year with imports to Europe, Brazil, Russia, and West Africa all falling, Andersen told the British newspaper.
Maersk posted a $791-million profit last year, versus $5.0 billion in 2014. That compares to a median estimate of $3.7 billion in a Bloomberg survey of 16 analysts. (Source: “Maersk Profit Plunges as Oil, Container Units Both Suffer,” Bloomberg, February 10, 2016.)
For the fourth quarter, the company reported a disappointing net loss of $2.5 billion, as it wrote down the value of its oil assets in Kazakhstan, Kurdistan, the U.K., Angola and Brazil by the same amount.
Adding insult to injury, Maersk said that this year’s underlying profit will be “significantly below” last year’s, an additional sign that the world could be on the verge of an economic collapse.