Shipping Firm, Maersk says there will be a Significant Decline in Demand this Year.

Maersk which happens to be the world’s largest shipping firm has beat its second-quarter profit expectation and expects that demand will pick up in the third quarter. But it warned of a significant decline in demand as the year goes on.

The company was hit negatively following a sharp drop in volumes during the second quarter as revenue fell from 6.5% as against the same period with that of last year, the reason for this could easily be attributed to the coronavirus pandemic which brought the economy to a halt and disrupted a lot of economic activities.

A 25% rise was reported by the company in the second-quarter earnings before interest, tax, depreciation, and amortization (EBITDA), which resulted in $1.7 billion, outstripping the $1.575 that was expected by analysts in a Refinitiv poll.

The Danish Company, which is seen as a leader in global trade, now has a projection for 2020 EBITDA to be between $6 billion and $7 billion, more than its initial guidance of $5.5 billion which it gave in March.

Søren Skou, Maersk's CEO said, “The continued improvement in operating results was driven by strong cost performance across all of our businesses, lower fuel prices and higher freight rates on Ocean and increased profitability in Logistics & Services.”

As revenue fell it was said to be caused by a decrease of 16% in the company’s ocean division and 14% in gateway terminals, which the company said was “partially offset by increased freight rates and increased revenue per move in Terminals.

In the earnings report, Skou said, “As a result of the lock-downs, closed borders and travel restrictions around the world, we experienced significant problems in relieving our seafarers when their contracts expired, a persistent issue of serious concern to us, which we are proactively addressing,”

There was an increase of 3.6 percentage points to 12.5% on Cash Return on Invested Capital (CROIC).

Skou said the earnings report and balance sheet indicated that the company was well-positioned to financially and strategically come out stronger of the crisis.