The Q1 2023 results from CMA CGM saw a marked contrast between the performance of CMA CGM’s shipping business and its third-party logistics division. The former saw a crash in both sales and profits, with revenue falling by 40.3% year-on-year and EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) down by 64.3% to US$3bn. This is despite a mere 5% fall year-on-year in the volume of containers handled. At first glance this result looked fairly worrying, however the profit margin of the shipping business remained exceptionally high, with an EBITDA margin of 34.4%, down from an extraordinarily high 57.5% in the same period last year.
In contrast revenue from the ‘Logistics’ business increased by 14.1% year-on-year and EBITDA up 36.9% at US$343m. CMA CGM ascribes much of this increase to acquisitions such as GEFCO and Colis Privé, although it also commented that “the sea and air freight activities were simultaneously returning to normal in line with market dynamics”. This comment might suggest that the freight forwarding businesses of the CEVA business were under pressure, however the whole Logistics business still saw an increase in EBITDA margin from 7.9% in Q1 2022 to 8.9% in Q1 2023. Such a margin in a contract logistics and freight forwarding operation is impressive.
For the whole company Q1 2023 revenue fell 30.2% to US$18.2bn whilst EBITDA was down 61.3% to US$3.4bn. EBITDA margins are slightly less enormous than the same period last year at 27%.
The underlying reasons for the falling trajectory are fairly obvious, as CMA CGM states; “challenging market conditions in the transport and logistics industry. Freight demand continued to slow, spurring a rapid normalization of spot freight rates”. However, CMA CGM is far from being financially troubled and for the moment at least, still sustains high profits. The robustness of such important suppliers ought to inform any assessment of the trajectory of logistics markets such as container shipping.
Source: Ti Insights
Author: Thomas Cullen
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