The world’s second largest shipping company wants to lay off more than 10,000 of its employees. Moller-Maersk justifies the huge job cuts with savings due to the declining container trade.
Due to the difficult environment in the industry, the Danish shipping company Moller-Maersk is tightening its costs and cutting around one in eleven jobs. The aim is to reduce the number of employees from 110,000 in January 2023 to under 100,000, the company announced today as part of its quarterly figures presentation. Some of the job cuts have already been completed.
The job cuts are expected to save $600 million next year. Management estimates the associated restructuring costs at $350 million, most of which are expected to be incurred this year. The share buyback program planned for 2024 will also be reviewed.
The economic situation means fewer orders
According to the industry service “Alphaliner”, Maersk is the second largest container shipping company in the world with 685 ships. In front of her is only the Swiss group MSC, which recently joined the port of Hamburg, with 783 ships. The French shipping and logistics group CMA CGM (627), the Chinese state-owned company Cosco (475) and the German shipping company Hapag-Lloyd (259) follow in third to fifth place.
The shipping companies had made record profits in recent years when high demand for consumer goods met global supply chains. This caused freight rates to skyrocket. In 2022, Maersk made a profit of almost $30 billion – an increase of more than 60 percent. Hapag-Lloyd also earned around twice as much last year as in 2021.
But now economic growth is sputtering, causing companies to reduce their inventories instead of ordering new goods. Maersk boss Vincent Clerc spoke today of a slight recovery currently being observed, but he does not expect a major upswing after the end of the year.
Maersk look more pessimistic for the coming years
In addition, the range of ship capacities is now much larger, the company said. The prices for shipping freight by sea are now close to the level of 2019. The Danes therefore expect a subdued business environment for the next two to three years. This year, global container trade will decline between 0.5 and 2 percent.
This means that the assessment is somewhat better than previous forecasts, in which Maersk had spoken of a decline of up to four percent. Nevertheless, the company felt the gloomy industry environment in the past quarter and, against this background, is also more pessimistic about the annual targets it has set itself.
CEO Clerc forecasts that earnings before interest and taxes (EBIT) this year will only be at the lower end of the forecast range of $3.5 to $5 billion. In the third quarter, operating profit fell to just over half a billion dollars, after earning almost 18 times as much in the same period last year. The quarterly result was better than experts feared. Nevertheless, the share recently fell by around eleven percent.