HMM, CMA CGM Report Sharp Drop-Off in Revenue

File image courtesy CMA CGM
File image courtesy CMA CGM

Published Nov 12, 2023 10:54 PM by The Maritime Executive

Last week, CMA CGM and HMM joined the growing list of container carriers reporting plummeting revenue, and they warned that moderating demand and a surge of newly-built tonnage will weigh on their prospects. 

Flat demand and a surge in supply are driving freight rates back down to the barely-profitable levels seen before the pandemic, returning carriers to familiar (and unwanted) territory: persistent overcapacity. 

CMA CGM's revenue fell by half year-on-year, reflecting the normalization of freight rates. EBITDA dropped by 78 percent, and net income fell by 95 percent to just $388 million. While still a healthy profit by many measures, this is a far cry from the $7 billion the French carrier reported during the industry boom a year ago. 

"The slowdown in the global economy is expected to continue weighing on our industry in the period ahead, but volumes carried are still robust. We remain committed to controlling our operating costs, and are continuing to focus on decarbonizing and digitalizing the supply chain to best meet our customers' needs," said Rodolphe Saade, the chairman and CEO of CMA CGM. 

At Korean carrier HMM, the numbers were similar. In Q3, HMM saw its revenue fall by nearly 60 percent and its net profit dropped by 96 percent, though the firm remained profitable. 

The container carrier gave a bearish forecast: demand is expected to be "under downward pressure with no encouraging sign of restoring desire for consumption." Uncertainty is weighing on demand, HMM said, because of inflation, an economic slowdown and geopolitical tensions. 

To adapt, HMM is following a diversification strategy, focusing less on its core liner business and more on its other segments. It ordered three pure car and truck carriers (PCTCs) in March, putting more capital into a profitable sector. It also added four multipurpose vessels(MPVs) to its orderbook in August, and it chartered out four bulkers on a long term basis in October. 

The two carriers' much-reduced (but widely anticipated) earnings reports echoed the results released by Maersk earlier this month. On November 3, Maersk announced that third-quarter EBIT in its ocean freight segment had fallen precipitously from the $8.7 billion it raked in a year ago, falling to a loss of $27 million. Revenues from shipping were down dramatically from $18 billion in Q3 2022 to $7.8 billion in Q3 2023. Maersk warned of challenging times ahead for the container shipping industry, and it said that it would accelerate cost-cutting and layoffs, warning of a “dire situation in 2024.”