Denmark’s Maersk Group, the shipping container giant, reported a record net profit of $8.6 billion for the second quarter after contract renewals generated exceptionally strong results at its Ocean division, marking a milestone for the company, according to Alphaliner.
The group now expects third-quarter financials to hit the same level, with normalization not forecast until at least the fourth quarter.
Maersk posted group revenue of $21.6 billion in the period, of which $17.4 billion came from the Ocean division. The shipping activity generated operating profits (EBIT) of USD 8.5 billion, more than double the USD 3.6 billion of the previous year. While Maersk emphasized rapid profitable growth in logistics, the unit only generated $234m in EBIT.
Instead, high shipping contract rates were overwhelmingly the driving factor. Maersk is on track for an average contract rate increase of $1,900 per FEU compared to 2021. This is $500/feu more than expected in the first quarter, with less than $50/feu coming from fuel clauses. higher. Maersk said it was confident contract rates would remain firm.
Going forward:
· The group has already increased its EBIT guidance for the full year from the previous USD 24 billion to USD 31 billion. This new figure is equivalent to 83% of the total total for 2021.
· Around 70% of Maersk’s long-haul volumes are now covered by long-term contracts, of which 28% are multi-year deals.
· Maersk is confident of contract performance, despite convergence of spot and contract rates. Contracts are weighted towards beneficial cargo owners (BCOs), where compliance has traditionally been high, with risk exposure focused on volume rather than price, he says. Meanwhile, it has fewer freight forwarding contracts today, which are now structured differently under “take or pay” terms.
· Expectations for an easing of congestion in the middle of this year have been revised, with a quick resolution of supply chain issues now “unlikely”. The lack of abandoned trucks and containers is causing problems both on the coasts of the US and throughout Europe.
· Following the strong performance of the second quarter, Maersk will increase its share buyback program by USD 500 M/year. It will now spend a total of $12 billion on buybacks between 2022 and 2025.
· Maersk’s logistics business today has an annual revenue run rate of $14 billion, which will increase to nearly $15 billion following the closing of the LF Logistics acquisition, scheduled for this month.
Source: Alphaliner
