Maersk: Record results, but “dark clouds” warningWritten by Nick Blenkey
Container shipping and logistics giant A.P. Moller – Maersk (Maersk) today again reported record results, but analysts seemed to be more focused on CEO Søren Skou’s cautionary words about dark clouds on the economic horizon and the company’s share took a hit of about 5.5%, at the close of trading in Copenhagen.
Maersk reported higher third quarter earnings in all its three main businesses—Ocean, Logistics & Services and Terminals—compared to the same quarter last year. Revenue increased by 37% to $22.8 billion, and both EBITDA ($10.9 billion) and EBIT ($9.5) billion increased around 60% compared to third quarter 2021.
FREIGHT RATES HAVE PEAKED
“Our third quarter result was another record and the 16th quarter in a row with year-on-year earnings growth. Ocean freight rates, which have driven the exceptional results we have delivered in 2022, were again up both year-on-year and compared to the second quarter,” said Maersk CEO Søren Skou. “However, it is clear that freight rates have peaked and started to normalize during the quarter, driven by both decreasing demand and easing of supply chain congestion. As anticipated all year, earnings in Ocean will come down in the coming periods. Our overall transformation momentum remained very strong as we continue to grow our Logistics business rapidly. For the first time, revenue in Logistics exceeded $4 billion in one quarter, and we expect to continue to outgrow the market in Logistics based on new customer wins.”
“With the war in Ukraine, an energy crisis in Europe, high inflation, and a looming global recession there are plenty of dark clouds on the horizon,” said Skou. “This weighs on consumer purchasing power which in turn impacts global transportation and logistics demand. While we expect a slow-down of the global economy to lead to a softer market in Ocean, we will continue to pursue the growth opportunities within our Logistics business. As a trusted partner, we are ready to support our customers in rethinking their supply chain needs through what is likely to be a period of a more volatile business environment.”
Demand for logistics services moderated across global supply chains in third quarter 2022, says the company. Supply-side bottlenecks continued to pose challenges, but Maersk sees signs of easing as demand slows and COVID 19-related restrictions in China diminish. Freight and charter rates declined in third 2022 relative to the previous quarter as the expected normalization gained momentum through the quarter. Global container volumes are estimated to have declined by 3% year-on-year in the third quarter, while global air cargo volumes, measured in CTKs, dropped by 9% in July/August (IATA). As a result of slowing economic activity, global container demand is expected to contract by between 2% and 4% in 2022.
Maersk confirms its full year guidance for an underlying EBITDA of around $37.0 billion, an underlying EBIT of around %$31.0 billion and a free cash flow above $24.0 billion.
Capex guidance for 2022-2023 remains unchanged at $9.0-10.0 billion.
There’s much, much more in Maersk’s full third quarter report.