Copenhagen-based shipping company, A.P. Moller-Maersk A/S, has announced plans to slash at least 10,000 jobs in response to a prolonged slump in the shipping market. The move comes as the company aims to safeguard its profitability in the face of a weakened global trade outlook expected to persist until around 2026.

The decision to reduce headcount by approximately 9% is driven by lower freight rates and heightened competition in marine transport. CEO Vincent Clerc revealed that around 6,500 positions have already been eliminated. The job cuts are expected to bring about cost savings of $600 million, according to a statement released by Maersk on Friday.

Amidst the challenging operating environment, Maersk has also decided to review its 2024 share buyback program and revise its capital expenditure estimates for 2023 and 2024. Although the company had experienced record profits in 2021 and 2022 due to increased demand for consumer goods during the pandemic, combined with limited vessel supply leading to higher freight prices, the container lines industry has witnessed a swift decline in earnings.

Maersk now projects a decline in global container trade of between 0.5% to 2% for this year, compared to its previous forecast of a contraction of 1% to 4%. As a result, the company expects its underlying earnings before interest, taxes, depreciation, and amortization (Ebitda) for 2023 to be towards the lower end of the previously provided range of $9.5 billion to $11 billion.

The announcement from Maersk, however, was met with skepticism from analysts. Citigroup Inc. analysts, led by Sathish Sivakumar, believe that the reduction in capital expenditure and the review of the share buyback program will likely be received negatively. They anticipate that analysts will adjust their full-year earnings estimates for Maersk by mid-single digits.

Goldman Sachs analysts had previously warned of a deeper and longer downturn in the shipping industry than the market anticipates, advising investors to sell Maersk stocks. Bloomberg Intelligence also predicts that it may take until 2025 for Maersk's earnings to show growth amid persistently weak rates.

Recognizing the ongoing challenges, Maersk has proactively sought to mitigate the impact of freight-rate volatility by securing long-term contracts with many of its major customers when rates were higher. Furthermore, the company has broadened its focus to include land-based container logistics, an area with traditionally higher profit margins compared to sea-based operations.

As Maersk takes necessary action to navigate the weakening global trade landscape, investors and industry analysts will closely monitor the company's performance and future strategies.