Maersk’ profits fall but the company is not that pessimistic


Maersk’s latest results are another example of the “normalisation of global demand and supply” after the crises of 2020-2023. As Maersk commented, this has resulted in “significantly lower profitability of the three main businesses compared to Q1 2022, particularly in Ocean, where the profit was lower due to lower volumes and freight rates”.

The core ‘Ocean’ container shipping business saw a sharp reverse in terms of revenue, falling by approximately a third to US$9.87bn in Q1 2023 as compared to Q1 2022. The fall in profits was even sharper, with Earnings Before Interest and Tax (EBIT) down from US$7bn in Q1 2022 to US$1.969bn in Q1 2023. Unsurprisingly such lower sales and profits were driven by a 9.4% drop in the number of containers handled and a 37% fall in freight-rates as compared with the first quarter of last year. Utilisation of ship capacity was down 5% year-on-year to 88%.

The ‘Logistics & Services’ business apparently escaped the downturn in demand. Revenue was up 21% year-on-year and profits fell only modestly. In part this was due to the effects of previous acquisitions, with underlying business volumes falling. Maersk said that air freight business performance was “impacted by lower rates” but this seems to have been balanced-out by gains of new business.

The Terminals business saw volumes handle fall by 9.5%, with storage of containers “dropping close to pre-pandemic levels”. However, the business is still profitable with its operational profit margin at a respectable 23.6%.

For the whole company revenue fell by 26% year-on-year for the quarter whilst EBIT fell from US$7.3bn in Q1 2022 to US$2.3bn in Q1 2023. Maersk’s expectation is that things will not continue to get worse, rather the expectation is “that inventory correction will be complete by the end of H1, leading to a more balanced demand environment.”

Source: Ti Insights

Author: Thomas Cullen

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