Maersk has been having an eventful week, one that reflects its struggle to re-orientate its strategy.
On Friday (17/08/2018), the Danish shipping giant announced its second quarter results, with its profit warning earlier in the month reflected in the numbers. Although revenue for the entire company (excluding the impact of the Hamburg Sud acquisition) rose by 24% to US$883m, profits measured in terms of EBITDA fell by 18% year-on-year.
Of course, this fall was led by the container shipping division, with it seeing operating profits (EBITDA) in Q2 at $674m, down from $876m in Q2 2017. As the company had warned earlier, the damage to container shipping was done by higher fuel costs.
The rest of the company had a mixed quarter. The container terminals division saw a rise in profits, but the ‘Logistics and Services’ division’s EBITDA was down from $46m in Q2 last year to $28m Q2 this year. Logistics and Services, which includes the freight forwarder Damco, may have had a good three months for its ‘supply chain management’ service, but its volumes and margins in air and sea freight were problematic, with its EBIT conversion ratio falling from 27.5% to 8.4% year-on-year.
Maersk also announced that its efforts to sell its drill rig-ship company, Maersk Drilling, had not succeeded and therefore it was planning to list the company on the Copenhagen NASDAQ next year. As the company stated, the sale “marks a milestone in the business transformation of A.P. Moller – Maersk towards becoming an integrated transport & logistics company as announced on 22 September 2016”, with ‘Maersk Supply Service’ now the only part of the former company still to be sold. The company commented that “the pursuit of a solution” for Maersk Supply “will continue. However due to challenging markets, the timing for defining a solution is difficult to predict.”
Maersk finds itself in a cleft stick. It is struggling to find buyers for hydrocarbon-related assets despite the rise in the price of oil; a rise that is inflicting pain on its shipping business.
The problem that Maersk faces is that whilst the separation of the oil and gas business from the logistics business has progressed, its new strategy which has the transformation of the logistics business at its centre, has not yet delivered higher profits.
Source: Transport Intelligence, August 21, 2018
Author: Thomas Cullen
