Maersk Beats Q1 Forecasts but Warns Trade Will Continue Weak in 2023

Seen as an indicator of both the outlook for the shipping industry and the global economy, A.P. Moller – Maersk reported first quarter results today that reflected the expected dramatic downturn as volumes and rates plummeted starting in 2022 and continued so far into this year. Despite dramatic declines of approximately two-thirds, the company still produced $2.3 billion (EBIT) in earnings which it termed “in line with expectations,” but which beat analysts’ estimates.

Discussing his first quarter since becoming CEO of the shipping and logistics giant at the start of 2023, Vincent Clerc, cited several factors at play that he said created a “radically changed business environment.” He focused on the continuing destocking in Europe and especially in North America which he said contributed to an overall decrease of 9.4 percent in loaded volumes in ocean freight compared to Q1 2022. While the lower volumes contributed to an easing of congestion, he also cited the strong fall in ocean freight rates decreased by 37 percent compared to Q1 2022 and 26 percent compared to Q4 2022, driven by contract and shipment rates on routes from Asia to Europe and North America.

Maersk however reported that the ocean contract negotiation season is proceeding in line with expectations. During the first quarter, the company carried 67 percent of its volumes under contracts, which was largely in line with the previous year. Ocean revenues were down in line with the fall in rates, coming in at $5.7 billion while earnings (EBIT) from ocean were down by nearly three-quarters to just under $2 billion.

“We delivered a solid financial performance in a challenging market with lower demand caused by a continued destocking,” said Clerc in his prepared statement to investors. “Visibility remains low for the remainder of the year and moving through this market normalization, we remain focused on proactively managing costs.”

Maersk reiterated its guidance for the full year saying that it still expects profits of $2 to $5 billion (EBIT) despite the stronger than projected first quarter. The company said that Q1 was expected to be the strongest quarter of the year. The company has previously said that it expects the global ocean container market could range between a decline of 2.5 percent to growth of just 0.5 percent for the full year. 

Clerc said they expect improved demand in the second half of 2023 although at continued lower freight rates. He also said that one of the challenges would be the addition of new capacity in the form of new ships scheduled to be delivered later this year and in 2024. Speaking with The Wall Street Journal he noted that so far they do not see a strong move toward normalization in the markets. Maersk expects he told the interviewer that the destocking would wind down by the end of the second quarter but that trade volumes are still contracting.

“As we adjust to a radically changed business environment, we continue to support our customers in addressing their supply chain challenges,” said Clerc. “We are pleased to note that customers continue to value the integrated logistics solutions and close partnership we provide.”

Other segments of the business showed greater strength in the first quarter. Logistics and Services revenues grew 21 percent driven by the consolidation of acquisitions. The terminal business was also impacted by the falling volumes with revenues down approximately 20 percent.

Clerc however told Bloomberg in an interview that he was pleased to see freight rates stabilize recently. He sees signs of more discipline and rationality in the market giving him hope that the industry will manage its way through the current challenges.