Maersk Reports Record Profits From Booming Container Trade
On Wednesday, Copenhagen-based Maersk Group reported the strongest quarterly profit in its history, with earnings driven upwards by strong demand and capacity shortages.
"A.P. Moller - Maersk delivered an exceptionally strong performance in Q1 2021 with record profit for the quarter. The high growth and profitability were driven by solid demand across [the ocean freight division]. Strong demand led to bottlenecks and a lack of capacity and equipment, which drove up freight rates to record-high levels," said Søren Skou, CEO of A.P. Moller - Maersk.
Maersk's EBITDA increased to $4 billion for the quarter, more than double the level it saw a year ago. Volumes were up six percent, freight rates were up 35 percent and bunker fuel prices were down, driving tremendous improvement in Maersk's core container business.
The earnings were exceptionally high, and Maersk expects them to stay that way through the fourth quarter. Global container demand will likely grow by 5-7 percent over the course of the year, mainly driven by U.S. demand for Chinese goods. The profit opportunity is large enough that the number-one container carrier has boosted its full-year EBITDA guidance to a range of $13-15 billion. The high end is nearly 50 percent over the previous maximum guidance of $10.5 billion.
Some of this windfall will go into capital expenditures, and Maersk now plans to spend roughly $2 billion more than previously expected on capex over the course of 2021-22.
“We remain focused on the long-term transformation of A.P. Moller - Maersk, prioritizing customers’ demand for integrated logistics. Our integrator strategy was validated by strong customer support during Q1. As we change the conversations with customers from being short-term transactional to becoming long-term value-based, we lay the foundation for further, stable growth," said Skou.
Maersk will use a substantial part of the remaining funds to accelerate and extend its share buy-back program, returning an additional $5 billion to its investors over the course of the next two years.