Danish giant Maersk, the world’s largest container shipping firm, has posted blockbuster second-quarter results, as ocean rates have skyrocketed amid global supply chain bottlenecks.
Revenue grew 58% to $14.2bn in Q2 and EBIT increased almost five times to $4.1bn.
Earnings before interest, tax, depreciation and amortization (EBITDA) stood at $5.1 billion, up 200% from the $1.7 billion reported in the same period last year. Return on invested capital (ROIC) is now at 23,7% for the past 12 months.
In Ocean, profitability in Q2 was driven by revenue growth to $11.1bn from $6.6bn and EBIT increased to $3.6bn from $0.5bn. The growth came from a 15% rebound in volumes and an increase in average freight rates of 59%, as both long-terms contracts rates with key clients increased and short-term contracts were still impacted by congestions and bottlenecks.
Logistics & Services delivered 38% revenue growth to $2.2bn in Q2 with more than half coming from the top Ocean customers. Demand was strong across all product families and consequently EBIT more than tripled to $153m compared to $42m in the same quarter last year, leading to an EBIT margin of 7.1%.
Also, Gateway Terminals had a strong Q2 with volumes rebounding 24% and persisting high storage income. Revenue increased to $969m from $723m last year, while EBIT doubled to $302m leading to an EBIT margin of 31.1%.
Commenting on the record-breaking performance marking the 12th quarter of successive year-on-year earnings progress, Søren Skou at CEO A.P. Moller – Maersk stated:
“The strong results benefited both from the exceptional circumstances in Ocean, where congestions and bottlenecks continued to drive up rates, and from solid progress in executing on our strategic transformation.”
Container shipping rates are rising as the world economy reopened, while a shortage of containers, saturated ports and too few ships and dock workers exerted pressure on supply chains. Soaring demand and slower turnaround rates have also contributed to the squeeze on transportation capacity driving prices even higher.
While many economists note that a full pass-through of higher shipping fares to consumers will have a marginal effect on headline inflation, Volker Wieland, a professor of economics at the Goethe University in Frankfurt and a member of the German government’s council of economic advisers told Time magazine:
“Even if the order of magnitude is smaller than estimated, the dynamic builds over a year and has significant effects,” he said. “That means there’s a danger we’re underestimating the impact.”
Back to Copenhagen, Maersk earnings in Q3 are expected to exceed the level for Q2 2021, the firm said. Trading conditions for the quarters ahead are, however, still subject to a higher-than-normal volatility due to the temporary nature of current demand patterns, disruptions in the supply chains and equipment shortages.
“The outlook for Q3 is strong and we expect that the current momentum in Ocean will continue into Q4” Skou said in a statement.
The Danish shipping major also announced the acquisition of two parcel shipping companies, US-based Visible Supply Chain Management and Netherlands-based B2C Europe, further expanding its offering across the entire supply chain. The transaction is subject to closing conditions including regulatory approvals and is expected to close in Q4 2021.
A global leader in shipping services Maersk operates in 130 countries and employs roughly 80,000 people.