Sustained profits get Maersk thinking about acquisitions

Maersk has opened a second pharmaceutical warehouse at its warehousing and distribution centre in Mszczonów, near Warsaw.

A slide entitled “M&A powers revenue growth” formed an important part of the half-yearly and second quarter results presentation from Maersk yesterday (3/8/2022), alongside another slide titled “Global Congestion Continues”. The latter explained a good deal about the year-on-year 57% revenue increase and the more than doubling of Earnings Before Interest Tax, Interest, Depreciation and Amortisation (EBITDA) from US$4.4bn in Q2 2021 to US$9.598 in Q2 2022 in the ‘Ocean’ container shipping business.

For Maersk, container shipping freight rates continue to rise helped by a shift towards contract business rather than spot market. Average rates were US$4,983 per FFE (forty-foot equivalent unit) a 9.4% increase over the previous quarter and 64% higher than the same period last year. Congestion is clearly still a problem, as loaded volumes are still 7.4% lower than last year, although they have begun to climb compared to last year. Profitability is also being sustained in the face of 69% increase in bunker fuel year-on-year.

Other parts of the business also continue to do well, with EBIT at ‘Logistics & Services’ up 53% and Terminals seeing a recovery from the previous quarters fall, to hit $316m. Again, a good deal of this performance is related to the ability to benefit from congestion, with for example, the Terminals business benefitting from “high storage revenue”.

For the whole company, second quarter revenue rose by 52% year-on-year to $21.7bn whilst EBITDA was 104% higher at $10.3bn. This means that A.P. Moller-Maersk has considerable financial resources it can access, and the message is that it will seek to use these financial resources to acquire businesses. Maersk is busy digesting purchases such as the forwarder Senator International and the contract logistics provider LF Logistics. The question seems to be, what will Maersk buy next? The underlying message from the management appears to be that there will be a continuing emphasis on the Logistics and Services division and that would suggest a sustained focus on forwarding and customer facing logistics businesses rather than, for example, port based intermodal operations. Looking at A.P.Moeller-Maersk’s finances, it would also suggest something quite large.

Source: Transport Intelligence, 4th August 2022

Author: Thomas Cullen