Maersk reported third quarter results today emphasizing strong business performance across all its operations while highlighting the “times of high volatility and low visibility” for its customers. The company confirmed a strong financial performance outlined in its preliminary figures earlier in the month saying it was driven by its Ocean segment while also seeing good performance in Logistics & Services and Terminals.
Maersk as the second largest publicly traded container shipping company continues not only to provide insights into the overall strength of the sector but is seen by many as a bellwether for the global economy. The company continues to play a significant role in global trade and CEO Vincent Clerc reiterated its commitment to maintain its position in the shipping market. In August, Maersk outlined its fleet renewal strategy to maintain a capacity of around four million TEU. The company has fallen to a distant second behind MSC Mediterranean Shipping Company and risks ceding second largest to CMA CGM Group as the French carrier moves for with aggressive expansion. Maersk is focused on its partnership with Hapag-Lloyd and the new Gemini Cooperation as its strategy to respond to the changing market.
“Our Ocean team responded to the recurring network disruptions with high agility by leveraging our hub terminals and investing in capacity and equipment to mitigate the supply chain impact on our customers while optimizing unit costs,” said Clerc describing the third quarter of 2024. He highlighted that Ocean’s profitability improvement was driven by the higher freight rates as well as positive volume growth, culminating in a 41 percent increase in revenue. This strength helped Maersk to offset higher bunker consumption and overall operating costs due to the Red Sea diversions, resulting in an increase in earnings (before interest and taxes) to $2.9 billion.
Overall, the consolidated results achieved revenues for the group of $15.7 billion up 30 percent for the quarter. The group reported earnings (EBIT) of $3.3 billion up from $532 million a year ago. For the fourth time this year, Maersk has raised its full-year forecast to now reflect an expected operating profit of between $5.2 and $5.7 billion (EBIT). It projects $3 billion in free cash flow from operations in 2024.
Maersk emphasizes its continued rigorous focus on cost controls, productivity gains, and efficient asset utilization. Clerc told investors that more of the ocean shipping is happening on short-term contracts but more of the overall business is also on contracts. High freight rates and positive volume growth were cited although Clerc said speaking to the Financial Times the company had been surprised by the strong market demand combined with the unpredictability.
He thinks the industry has factored in the capacity growth as new vessels are delivered from the record orderbook, while he is focusing on trade issues. He told the Financial Times he expects “intensified trade tensions,” and points to an imbalance between Chinese exports and the flow of goods to Europe versus the U.S. Like many, Maersk is closely watching for the outcome of next week’s U.S. elections and its potential impact on trade.
Near term, driven by the continued strength in consumer spending, Maersk forecasts continued strong demand while saying that it expects the disruptions from the Red Sea to continue “well into 2025.” The diversions have helped to soak up any excess capacity and indeed Maersk and Hapag are rumored to have recently placed large orders in China for new containerships.
