COPENHAGEN (Reuters) - Shipping group A.P. Moller-Maersk (MAERSKb.CO), reported a steep drop in third-quarter profit and revenue on Friday and said it would cut at least 10,000 jobs in the face of overcapacity, rising costs and weaker prices, sending its shares tumbling.
Maersk, which controls about one-sixth of global container trade, transporting goods for a host of major retailers and consumer goods companies such as Walmart and Nike, flagged a steeper downturn in demand than analysts and investors had expected.
"The new normal we are now headed into is one of more subdued macroeconomic outlook, and thus soft volume demands for the coming years, prices back in line with historical levels, inflationary pressures on our cost base, especially from energy cost, and also increased geopolitical uncertainty," CEO Vincent Clerc said on an investor call.
The industry invested heavily in new container ships during and after the pandemic to meet strong demand and benefit from record freight rates. A large number of new ships entered the market since the summer with no signs of idling or scrapping, said Clerc.
"If the fourth quarter does not deliver some type of improvements, then I think we're looking at a pretty dire situation in 2024," he said.
Negative revenue growth in the third quarter came mainly from the retail and lifestyle sector, especially in North America, as well as automotive and technology, Clerc said.
Shares in the Copenhagen-based group slid to their lowest level in three years, trading 17.5% lower by 1141 GMT.
Jyske Bank analyst Morten Holm Enggaard said the share price was hit by Maersk saying it would reconsider whether to continue its share buy-back program into 2024.
"The only way we can read it, is that we have to look into something very bad in 2024, and probably worse than what we had expected," said Enggaard.
Maersk said it expects global container volumes in its ocean business, its largest segment, to fall by up to 2% this year, primarily as a result of weak consumer demand and destocking by firms following the scramble for goods in the aftermath of the coronavirus pandemic.
Maersk, which employed 110,000 in January, said it was in the process of cutting its workforce to below 100,000 which will result in savings of $600 million next year and beyond compared to this year.
The company kept its full-year guidance for revenue and operating profit but now expects both to land at the lower end of the range.
Operating profit dropped to $1.9 billion in the third quarter from $10.9 billion a year earlier. Revenues fell 47% to $12.1 billion.