Maersk’s just released second quarter results are complex, showing strong demand in some areas but higher costs in others.
Although in-line with the market up-date Maersk issued a few days ago, the company still saw revenue over the first half of the year fall 7.7% year-on-year and over the second quarter, edge-down 1.7% to US$12.8bn. Profits fell significantly year-on-year, with EBITDA (Earnings Before Interest, Depreciation and Amortisation) down 26% at $2.1bn and EBIT down 40% at $963m. The first half of 2023 was a period of healthy returns, so the comparison should not be overly harsh.
Key to understanding the results is, of course, the trajectory of the ‘Ocean’ shipping business. Here revenue rose 3.8% year-on-year in the second quarter, but also 4.5% compared to the last quarter, which illustrates how container freight rates have continued to climb. Yet profits were down, as EBITDA fell by 38% and EBIT (Earnings Before Interest and Tax) by 61% year-on-year, although up markedly on the first quarter 2024. Maersk said that “rates were up QoQ as additional supply was absorbed by additional capacity requirements from the Red Sea disruption and congestion in key Asian and Middle Eastern ports”. Year-on-year container volumes were up 6.7% and up 5.9% compared to the first quarter 2024 and utilisation is high, yet it appears the costs of operating the new routes are higher still.
The other businesses within Maersk were more stable, with the ‘Logistics & Services’ business seeing revenue up 7.3% year-on-year in the second quarter and EBIT up 9.6%. Unsurprisingly Maersk’s air freight operations seemed to have prospered, with the ‘Transported by Maersk’ unit experiencing 8.4% higher revenue. Fulfilment operations also did well.
The Terminals business seems to be benefitting from the effects of the Red Sea Crisis, with higher volumes combing with congestion driving up prices, resulting in higher revenue, up by 15% and strong profits, with EBIT up by 31%.
The slightly strange message of these results is that Maersk is struggling to make money from higher container freight-rates. These may be high due to the reliance on the Cape of Good Hope route but it appears that the costs of sustaining this operation are also high. This makes the prospects for container shipping even harder to estimate.
Author: Thomas Cullen
Source: Ti
