In previous years Maersk’s profits recovery was delivered by the superior efficiency of its networks. This year it was reliant on its aggressive asset utilisation and focus on profitability in a strong market.
The FY2020 results saw revenue edge-up 2.2% to $39.7bn but earnings before interest, tax, depreciation and amortisation (EBITDA) jump by 44% to $8.2bn.
Maersk is candid why this is. In its statement, the company said, “While the demand surge in the second half of year created supply chain bottlenecks, including vessel and container shortages, and led to higher rates that contributed approximately $1.5bn to results”.
The core ‘Ocean’ container shipping business saw the number of containers carried fall over the year from 13,296 forty-foot equivalent units in 2019 to 12,634 forty-foot equivalent units in 2020, yet it was the margin on those containers carried that delivered the profits. Over the same period, average freight rates for a forty-foot unit rose from $1,853 in 2019 to $2,000 in 2020. That said, the fourth quarter numbers describe a changing market with “exceptional demand surges from recovery especially in China-US trades” leading to “headhaul volumes increasing by 4.6% driven by a 19% increase in North America and lower volumes on North-South”. The result was profit margins firming from 15.4% in FY2019 to 22.4% in FY2020. For the whole year EBITDA was $6.5bn.
At the ‘Logistics and Services’ division revenue increased to $6.9bn as compared to $6.3bn in 2019 “driven by supply chain management, airfreight forwarding, intermodal”. EBITDA more than doubled at $454m. It is not clear why profit margins rose so much, presumably due to the boom in airfreight chartering and the ability to exploit the boom in container freight rates. The terminals business saw robust demand fall-back through the year but recovering in the fourth quarter, yet margins hardened through the year and EBITDA was up at $1.2bn.
This all-round robust performance has strengthened Maersk’s financial position. No longer burdened by debt it has the resources to make acquisitions or possibly invest aggressively in its fleet. It does not seem that the company is focussed on returning profits, so some sort of move appears likely. What it does depends on its strategic vision.
Source: Transport Intelligence, February 11, 2021
Author: Thomas Cullen
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)