AP Moller – Maersk reports its best ever profit of $30.9bn for 2022, but expects to make less than a fifth of that this year as the container shipping market softens.
Increased revenue
Maersk reported a consolidated EBIT of $30.86bn in 2022, up from $19.74bn in 2021. Revenues for 2022 were up 32% at $81.5bn compared to $61.79bn a year earlier.
“2022 was remarkable in more than one way. While we report the best financial result in the history of the company, we have also taken the partnerships with our customers to a new level by supporting their supply chains end to end during highly disruptive times,” commented Vincent Clerc, CEO of AP Moller – Maersk.
Expected normalisation
However, the stellar results are not going last with a year-on-year decline in fourth quarter earnings in 2022 prefacing a much larger than drop that is expected in 2023. Maersk noted that “expected normalisation” kicked in for its ocean (container shipping) business towards the end of the year.
In Q4 2022 Maersk reported a $1.5bn drop in EBIT to $5.1bn compared to $6.5bn in the same period a year earlier.
The drop in Q4 profits resulted from its container shipping business with an EBIT of $4.8bn in Q4 2022 compared to $6.3bn in Q4 2021. Maersk said the decrease was “Driven by lower volumes and lower freight rates on shipment rates on routes from Asia to Europe and to North America together with higher costs related to bunker, container handling and network”.
Looking ahead to 2023 and Maersk’s full year guidance at the top of its range is lower than its profitability in Q4 2022 alone. The Danish company is giving a full year guidance of an EBIT of $2bn – $5bn.
“Guidance for 2023 is based on the expectation that inventory correction will be complete by the end of the first half leading to a more balanced demand environment. 2023 global GDP growth is expected to be muted and global ocean container market growth to be in a range of -2.5% to +0.5%,” Maersk said. Maersk added that it expected its growth to be in line with the market.
Looking at its container shipping business in 2022 Maersk said it, “continued to deliver on the strategic transformation, maintaining a stable level of long-term contracts”. Its annual report showed that the percentage of contract versus spot business had actually declined slightly in 2022 to 30% spot and 70% contract compared to 29% spot in 2021 and 71% under contract.
There is an expectation from some market watchers that given the sharp plunges that have been seen in spot rates shippers may hold back more volumes from annual contracts this year gambling on lower spot rates.
Maersk’s future strategy is based around growing its logistics and service business to become an integrator, and it has made number of high-profile logistics related acquisitions including LF Logistics and Senator. The LF Logistics acquisition added some 3.1m sqm of warehousing space across 198 facilities, and overall Maersk’s warehousing capability has more than doubled to 7.1 sqm.
Speaking at media briefing in Singapore this week Ditlev Blicher, President of Maersk Asia – Pacific region, said that were around 40% complete on the journey to become an integrator, commenting, “We’re still building capability”.
Despite notching up impressive 47% revenue growth for its logistics and services business to $14.4bn in 2022, the sector still only accounts for 17.7% of Maersk’s total revenues last year. Organic growth from logistics was 21% which the company said primarily came from its top 200 customers.
Maersk CEO Clerc said, “As we enter a year with challenging macro-outlook and new types of uncertainties for our customers, we are determined to speed up our business transformation and increase our operational excellence to seize the unique opportunities in front of us.”
