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Investing.com — A.P. Moller – Maersk (CSE:MAERSKb) stock rose on Tuesday as the Danish shipping giant raised its full-year guidance after a blowout first quarter for its container shipping unit.
Maersk raised its free cash flow guidance for the year by a massive $4 billion, predicting that the squeeze on freight rates would continue at least through the middle of the year. The stock, which has underperformed this year on expectations that the extraordinary conditions created by the pandemic would fade, was up 5.4% by 5:45 AM ET (0945 GMT).
Maersk said it now sees free cash flow of $19 billion this year, up from an earlier forecast of $15 billion. Adjusted earnings before interest, taxes, depreciation, and amortization will be around $30 billion rather than the $24 billion initially forecast.
Maersk issued its new guidance along with preliminary figures for the first quarter which were well ahead of its expectations due to what it called “the continuation of the exceptional market situation within Ocean,” its core shipping business.
It noted that the division had increased its freight rates 71% from the first quarter a year ago. Volumes were down 7%, as the boom in manufactured goods eased due to the end of U.S. and European winding down their pandemic-related income subsidies to households.
As a result of the price surge, it now expects weaker demand for containers over the whole year than first thought. Maersk sees total global container demand growth as essentially flat, having earlier predicted growth of some 3%.
The Danish company said it still expects the seaborne trade business to normalize early in the second half. However, that will depend in large measure on China’s ability to master the current wave of Omicron-variant COVID-19. A month-long lockdown of Shanghai has led to increased congestion at China’s largest port, although the consultancy Four Kites noted that shippers have been able to mitigate that effect by using other ports such as Ningbo.
