French carrier CMA CGM has been hit hard by a significant decline in financial profits during the second quarter of the year, reporting a group net income of just USD 1.3 billion. This represents a staggering 82% drop from the same period last year, translating to a loss of USD 6.2 billion. The figures were also lower than those in the previous quarter, indicating troubling times for the shipping giant.
Container shipping activities alone showed no respite for the company in Q2 compared to Q1. Revenues plummeted by 50% year-on-year, amounting to only USD 8.4 billion. Moreover, the shipping EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) fell by a massive 75% to USD 2.2 billion.
The root cause of this dramatic decline can be traced to low freight rates, which accounted for almost all of the loss. Despite handling higher volumes in Q2 compared to Q1, with a staggering 5.6 million twenty-foot equivalent units (Mteu), CMA CGM saw the average rates plummet to USD 1,491 per teu, down from USD 1,767 in Q1 and a substantial decrease from USD 2,850 just a year ago.
In line with other carriers, CMA CGM pointed out the challenging conditions in the East West trade routes. However, it highlighted that volumes remained relatively buoyant on the North South lines. The company’s diversification into different trade routes proved advantageous compared to competitors such as ONE, which also reported unfavorable results for the same period.
While the second quarter brought a rebound in liftings for CMA CGM, the outlook for the second half of 2023 remains concerning. Macroeconomic forecasts suggest sluggish global growth, and the arrival of new capacity in the market is expected to further weigh down freight rates, particularly in the East West routes.
To counter the normalization of shipping conditions and the ongoing challenges in the industry, CMA CGM is planning a transformation into a broader transport and logistics group. The company aims to leverage its early mover advantage in eco ships and expand into logistics activities.
Despite this long-term vision, current logistics revenues stand at USD 3.8 billion, showing no significant change from the previous year. Logistics EBITDA reached USD 356 million, representing a modest 4.7% increase year-on-year. However, the recent confirmation of the acquisition of Bolloré Logistics, pending regulatory approval, holds the promise of significantly strengthening the group’s logistics activities.
With the shipping industry grappling with difficult market conditions, CMA CGM is exploring avenues for growth and diversification. The company’s management remains cautiously optimistic about navigating these turbulent waters and positioning itself for a more stable future in the logistics landscape.
Sources: Alphaliner, CMA CGM