A.P. Moller - Maersk (Maersk) will be pursuing growth in its Logistics unit amid an expected slowdown in its Ocean business.
Søren Skou, CEO of A.P. Moller - Maersk, made the comment as the global shipping line delivered strong results in the third quarter which was driven by higher earnings in its three main businesses; Ocean, Logistics & Services and Terminals.
Maersk reported that revenue increased by 37%, and both EBITDA and EBIT increased by around 60% compared to the same Q3 period in 2021 — noting that "growth in Logistics and Ocean contract rates above the previous year were the main drivers of improved performance."
Ocean freight rates have peaked, expected to soften
"Our third quarter result was another record and the 16th quarter in a row with year-on-year earnings growth. Ocean freight rates, which have driven the exceptional results we have delivered in 2022, were again up both year-on-year and compared to the second quarter. However, it is clear that freight rates have peaked and started to normalize during the quarter, driven by both decreasing demand and easing supply chain congestion," Skou said.
"As anticipated all year, earnings in Ocean will come down in the coming periods."
The Maersk chief noted that the "overall transformation momentum" of the shipping line also remained "very strong" as it continue to grow its Logistics business rapidly.
"For the first time, revenue in Logistics exceeded US$4 billion in one quarter, and we expect to continue to outgrow the market in Logistics based on new customer wins," Skou added.
Maersk's revenue for Q3 increased to US$22.8 billion, as EBITDA increased to US$10.9 billion and EBIT also rose to US$9.5 billion. For the period, Maersk's profit was US$8.9 billion for Q3 and US$24.2 billion for the first nine months.
Skou said with the war in Ukraine, an energy crisis in Europe, high inflation, and a looming global recession there are plenty of "dark clouds on the horizon."
Focus on Logistics growth cited
"This weighs on consumer purchasing power which in turn impacts global transportation and logistics demand," he said.
"While we expect a slow-down of the global economy to lead to a softer market in Ocean, we will continue to pursue the growth opportunities within our Logistics business," the Maersk chief added.
In Ocean, Maersk reported that revenue increased over the quarter to US$18 billion and EBIT rose to US$8.7bn mainly driven by significantly higher freight rates on contract and shipment on routes from Asia to Europe and to North America, partly offset by a decrease in volumes and by higher costs related to the bunker, container handling and network.
In Logistics & Services, Maersk said it continued to invest in its portfolio and capabilities.
During the period, the acquisition of LF Logistics was completed, the intended acquisition of Martin Bencher Group was announced, and the warehouse, distribution centre and cold storage footprint were significantly expanded with 21 incremental facilities across key markets like Latin America, Europe and India.
Maersk said revenue in Logistics grew 60% to US$4.2bn and EBIT increased to US$258 million mainly due to added revenue from acquisitions and higher volumes.
In Terminals, revenue grew to US$1.1 billion and EBIT increased to US$357 million, mainly driven by higher volumes and prices as well as the completion of the divestment of the Terminal's share in Global Ports Investments in Russia.
Global container demand seen to contract in 2022
Maersk noted that demand for logistics services "moderated across global supply chains" in Q3 2022 as supply-side bottlenecks continued to pose challenges — although it noted that there are signs of easing as demand slows and COVID-19-related restrictions in China diminish.
It added that freight and charter rates declined in Q3 relative to the previous quarter as the "expected normalisation gained momentum" through the quarter.
"Global container volumes are estimated to have declined –3% year-on-year in Q3 while global air cargo volumes, measured in CTKs, dropped by 9% in July/August (IATA). As a result of slowing economic activity, global container demand is expected to contract between –2 and –4% in 2022," Maersk said.
Moving forward, Maersk confirmed its full-year guidance for an underlying EBITDA of around US$37.0 billion and an underlying EBIT of around US$31.0 billion.
"Given the unfolding economic slowdown, which is also expected to continue into the coming year, APMM has lowered its outlook for the growth of 2022 global container demand to between –2/-4% decline from previously the lower end of the +1-/1% range," it added.
