Danish shipping line A.P. Møller – Mærsk will start its share buy-back programme today (1 December) acquiring up to DKK10 billion (US$1.6 billion) and a maximum of US$1.79 million over the next 15 months.
A share buy-back scheme was considered one of three options available to Maersk as its revenues have exceeded all expectations this year with a repayment of debt and vessel ordering the other options available to the company.
According to a prominent financial analyst, Maersk’s projected full year earnings before interest, depreciation and amortisation (EBITDA) is now projected to be in excess of US$8 billion, whereas earlier this year, in Q1, that figure was expected to be close to US$5 billion.
“What do you do with an extra US$3 billion of income?” asked the analyst flippantly, “You can either de-leverage, give money to shareholders or buy ships,” he answered.
Launching the share buy-back scheme ticks one box, and in its third-quarter results, Maersk announced, “Net interest-bearing debt decreased to US$10.8 billion (from US$11.7 billion end of 2019) by end of Q3, as free cash flow of US$3.0 billion was partly offset by share buy-back of US$696 million, dividends of US$430 million, acquisitions of US$448 million, and a net increase in lease liabilities of US$190 million. Net interest-bearing debt excluding lease liabilities decreased to US$2.0 billion (US$3.1 billion end of 2019).”
If the analyst’s prophecy is to be fulfilled then the final expectation would be an order for vessels and containers. Maersk maintains that no order is likely at the moment, but in his analyst’s call following the release of the company’s Q3 results, Søren Skou did mention replacements needed for vessels in the 10-15,000TEU range, because it is “not cost-efficient to charter vessels this type of vessels.”
In addition, the capital expenditure (CAPEX) budget for the company over the coming two years remains substantial, adding to the US$1.5 billion this year.
“For the years 2021-2022, the accumulated CAPEX is expected to be between US$4.5 billion-5.5 billion with the expectation of a high cash conversion. The previous guidance on accumulated CAPEX for 2020-2021 was between US$3.0-4.0 billion,” said the line in its Q3 reporting.
A Maersk spokeswoman told Container News, “When operating around 700 container vessels we continuously optimise the fleet, replacing older, less efficient tonnage. Since 2018 we have kept our nominal fleet capacity flat at around 4 million TEU and we remain committed to keep it at that size.” The company added that while it expects volume growth in the coming years it does not see a need for growing its overall capacity.
Analysis of the newbuilding market shows that vessel ordering is down 30% in the first nine months of this year compared to orders taken in the same period in 2019. That has left prices at rock bottom, with some unconfirmed prices for a newbuild 15,000TEU vessel as low as US$87 million, which would apparently be below cost. More realistic prices for these mid-range ships are hovering at around the US$100 million mark.
“They can’t go down too much further,” pointed out the newbuilding analyst as that is already at close to cost, last year a similar vessel would have been priced at US$110 million.
It would seem that if Maersk is to order new vessels the time to do it would be now, said the analyst.
“Ships of that size can operate out of Asia through Suez and on to the US East Coast or to the US West Coast through the Panama Canal, they can also call at some of the hub ports, such as Lome, in West Africa, they are very flexible vessels,” he added.
However, as Skou also pointed out at the announcement of the company’s Q3 results, ordering vessels at this time is a very tricky business. Skou has already ruled out LNG as a transitional fuel, and with the acceptance that zero emission fuels are some years away, the only option is to look for a carbon mitigation technology, most likely carbon capture and storage. Watch this space.
Nick Savvides
Managing Editor
