- Profit guidance downgraded
- Trade tensions to blame
- Demand for research products ‘high’
Shares in Clarkson (CKN) sank 10% to £29.65, a 52-week low, after the global shipbroking leader warned profits for 2025 could be down more than 25% year-on-year.
In a bleak AGM trading statement, the shipping services specialist pinned the blame for the earnings alert on global trade tensions stoked by the Trump administration and the weaker US dollar.
The warning was not unexpected however, since Clarkson had flagged a slow start to the new year back in March, when management outlined concerns over the global shipping market and an increasingly uncertain geopolitical outlook.
TRADE WAR VICTIM
Since Clarkson warned of a slow start to 2025 at the 2024 full-year results (10 March), the US Administration has introduced extensive global tariffs and issued a further announcement relating to fees on Chinese vessels entering US ports.
In addition, the greenback has weakened against most global currencies.
As a result, ‘uncertainty arising from the potential of a global trade war has escalated’, bemoaned Clarkson, adding that US dollar spot negotiations in broking year-to-date are running 7% lower than anticipated at the time of the results.
The FTSE 250 constituent, which earns the bulk of its broking revenue in US dollars, warned that should exchange rates remain at current levels through to the end of 2025, this would shave £9.5 million from expected profits.
25% PROFIT DOWNGRADE
Steered by CEO Andi Case, Clarkson now believes that at current exchange rates, underlying pre-tax profit for 2025 will land somewhere between £85 million and £95 million.
At the lower end of the range, that implies a 25%-plus plunge on last year’s £115.3 million profit for Clarkson, a recent addition to Nick Train’s Finsbury Growth & Income Trust (FGT) which has delivered an impressive 22 years of consecutive dividend growth.
Clarkson reiterated that its 2025 results will be weighted toward the second half and insisted that its market position, flexible cost base, forward order book, cash generative business model and strong balance sheet provide resilience.
‘The group, which has successfully navigated the challenging markets seen during the global financial crisis, the Covid-19 crisis and Brexit, continues to be very well placed to navigate periods of macroeconomic uncertainty,’ stated Clarkson.
The company insisted it is helping clients to navigate these ongoing complexities ‘by providing the expertise, data and insights to enable them to make the right decisions for their organisations.’
Clarkson also insisted that demand for its research products is currently high ‘as clients seek trusted advice during the current market turbulence.’
TERRIBLE TIMES
Volatile maritime market conditions and pressure on global charter rates have also impacted Clarkson’s shipbroking rival Braemar (BMS), a provider of expert investment, chartering and risk management advice to the shipping and energy markets that warned on profits in March.
AJ Bell investment director Russ Mould commented: ‘It’s a terrible time to be a shipping broker as companies around the world rethink how much goods they want or need to send to the US.
‘While the tariff landscape continues to change, Trump gave enough hints well ahead of Liberation Day that he would get tough so there was stockpiling ahead of the event and now there’s the likelihood that we’ll see a slowdown in global shipping activity.
‘Clarkson says broking rates in its industry are now 7% lower than forecast on 10 March and unfavourable exchange rates make matters worse. It all points to a potential profits miss for the company and the shares have fallen as a result.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
