Maersk Reports Record-Setting $24 Billion Profit for 2021
Calling 2021 an exceptional year, A.P. Moller – Maersk reported year-end results producing the expected records, including the largest profit by any shipping company and the largest ever profit for any Danish company. The company is continuing to use 2021’s exceptional results to make acquisitions in the logistics sector, while also saying that it expects the current market situation to persist into the second quarter. They are projecting that by mid-year to see more normalized operations after the overheated market created by the pandemic.
The results are staggering by any measure. Total revenues were up 55 percent to $61.8 billion with earnings tripling to $24 billion (EBITDA) and free cash flow from the operations reaching $16.5 billion. Specifically, from the ocean business, Maersk reported revenues were up 65 percent driven mostly by high freight rates.
Although the results were largely as projected a few weeks ago by Maersk, the stock market welcomed the news driving Maersk’s stock price up more than seven percent in inter-day trading. Shareholders are going to share in the record results with Maersk proposing a seven-fold increase in its dividend for 2021 to a total payout of $7.3 billion to shareholders.
While saying that market conditions were continuing into the start of 2022, Maersk said that its expectation for the ocean business is for two to four percent growth in the current year, which would be in line with global demand. They noted that ocean shipping remains subject to a high level of uncertainty ranging from the current port congestion issues to network disruptions and demand patterns from shippers.
The expectation is that a normalization will occur early in the second half of 2022. This led Maersk to issue guidance that earnings in 2022 would be flat versus 2021 and while still substantial that they would see a decline in free cash flow to above $15 billion for the year. Analysts, however, are more optimistic with the average earnings forecast of $26 billion, up nearly 10 percent, according to The Financial Times.
The 2021 results underlined several significant changes in the business trends. The company said it had made a significant effort to prioritize contracted volumes in 2021. They reported that long-term contracts represented 65 percent of the business up from just 50 percent a year earlier.
The company continues to use the strong results in 2021 to accelerate its efforts to expand the logistics and services business with its strategy to become a full-service logistics provider to customers. They completed six acquisitions within air, e-commerce, warehousing, and fulfillment in 2021. In addition, they opened 85 new warehouses. Nearly a quarter of the company’s revenues came from the logistics businesses in 2021.
Continuing its expansion of the logistics business, Maersk also announced that it has agreed to the acquisition of a U.S.-based big and bulky freight company that it believes will add new services, especially in e-commerce while also complementing the earlier acquisitions. The intended acquisition of Pilot Freight Services, headquartered in Pennsylvania, is valued at $1.68 billion. The company has 87 locations in North America, as well as international offices in the Netherlands and Spain. Maersk said the completion was subject to regulatory review and is expected to be close by the second quarter of 2022.