Maersk reports operating loss for shipping division, warns 2024 could be ‘dire’
Danish transport group AP Moller-Maersk reported a USD 27 M oper- ating loss for its container shipping division in the third quarter, and said conditions were likely to be ’dire’ in 2024 unless the fourth quarter showed a notable improvement.
Revenues for the group’s Ocean division fell 56% to USD 7.9 bn while EBITDA was down 88% at USD 1.1 bn. However, the operating result after depreciation and amortisation (EBIT) slumped to a loss follow- ing the ‘accelerated pace’ of new tonnage supply, which wiped out the impact of a 5% y-o-y volume increase.
Q3 marked the fourth consecutive quarter of significant freight rate declines for Maersk, with a sequential decrease of 14% in the latest quarter. Maersk said this trend was expected to continue given the growing supply-demand imbalance in the Ocean market and as con- tract rates continue to converge toward shipment rates. Maersk is currently undergoing its annual contract negotiations.
Share price drops sharply on news
Following the release of the results, Maersk’s share price dropped 17% on Friday and closed Monday night at DKK 10,200, its lowest level since October 2020. The group is now focusing on cost contain- ment.
At a group level, Maersk remains profitable, posting operating profits of USD 538 M and net profits of USD 554 M. However, logistics activ- ities missed their midterm targets with organic revenue growth down -14% versus a target of +10%. Logistics profit margins were 3.7% versus a target of >6%.
Other potentially worrying news for the group was a potential review of its long-term share buyback programme, which started in 2021 and to date has involved the repurchase of stock valued at DKK 40 bn. Halting this programme in order to preserve financial headroom in a bad market would likely be seen by investors as a significant negative sign