Maersk sees leap in profits from shipping yet invests in last-mile


As the entire Maersk group sees higher profits powered by the booming container shipping sector, the company continues its diversification by buying into ‘last-mile’ e-retailing logistics.

Perhaps it is not surprising bearing in mind the market conditions, however, the company’s results released on Friday (August 6) show that the first half of the year saw a 183% year-on-year rise in Earnings Before Interest and Depreciation and Amortisation (EBITDA), to $9.1bn on a revenue increase of 44%, to $26.7bn. The second quarter saw an even greater increase in EBITDA of 198%, although these numbers are flattered by the conditions in same period last year.

As has become familiar over the past few quarters, Maersk’s numbers have been driven by the condition of the container shipping market, with the ‘Ocean’ business “impacted by the continuation of the exceptional market conditions driving up both long-term and short-term freight rates as a strong rebound in demand led to equipment shortage and bottlenecks.” Even though the volume of freight is still not back to the levels of 2019, half-year revenue was up by a third year-on-year to $20,550m whilst EBITDA exploded, trebling to $7,844m. The key was the fact that average freight rates rose by 59% in gross terms and even after stripping out the considerable increase in bunker fuel prices, were up by 49%. Maersk commented that the rate rises were “driven by long-term contracts renewing and short-term freight rates due to higher demand combined with bottlenecks and congestions.” It is also worth noting that it was headhauls that disproportionately drove demand and that the shortage of containers has resulted in “low reliability”.

The other businesses within Maersk also did well, with the ‘Terminals and Towage business seeing EBITDA increasing for the half-year by more than 50% to $803m.

However, the results were also notable for affirming Maersk’s strategy of expanding into other areas of business with the purchase of two e-retail logistics services providers. The US-based Visible Supply Chain Management and the Netherlands based B2C Europe both offer fulfilment, and last-mile services are in the process of being bought by Maersk for $838m and $86m respectively. They will, in the words of Maersk “deliver on our integrator vision” enabling Maersk to develop “its offering with both e-commerce fulfilment and e-delivery capabilities, enabled by an e-commerce tech platform”.

The two acquisitions are somewhat removed from the business of container shipping, illustrating the degree to which Maersk is committed to the broader vision of end-to-end logistics capability on its customers’ supply chain. It is an aggressive move, yet Maersk has said that it will continue to acquire logistics companies. At least as long as the container shipping market is as strong as it is at present it will have the capital to do so.

Source: Transport Intelligence, August 10, 2021

Author: Thomas Cullen