Maersk’s Integrator Strategy Faces Skepticism Amid Commercial Risks

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  • Maersk’s ambitious plan to position itself as “the integrator of container logistics” by combining shipping, port terminals, and logistics services is facing skepticism from investment bank Bernstein.
  • The strategy, involving over $8 billion in M&A investments since 2020, is viewed as flawed by Bernstein.

Despite Maersk’s substantial investments exceeding $8 billion in an M&A spree since 2020 to support this end-to-end logistics strategy, concerns about its feasibility and potential commercial risks are raised.

Competitive Advantage and Commercial Relationships

Bernstein’s latest research study on Maersk questions the anticipated competitive advantage derived from integration. The bank also expresses worries about the strategy straining commercial relationships with forwarders, a segment that traditionally represents about 50% of container shipping volumes.

Performance Below Targets

The research suggests that Maersk falls below the group’s Logistics & Services targets of achieving 10% organic growth and a 6% EBIT margin.

CEO’s Perspective and Investor Concerns

Maersk’s CEO, Vincent Clerc, emphasized the need to diversify revenue streams towards more stable areas of the supply chain during the annual results presentation for 2023. However, Bernstein remains unconvinced about the benefits of combining a forwarder/logistics service business within the same group, particularly in terms of enhancing investor value.

Analyst’s Perspective on Value Addition

Alex Irving, Bernstein’s equity research analyst and director, European transport, questions the value-adding potential of integrating logistics and services. While acknowledging the reduced volatility in group earnings, Irving emphasizes the importance of identifying synergies between businesses for true value addition.

Outlook for Container Shipping

In addition to skepticism about the integrator strategy, Bernstein projects a challenging outlook for Maersk’s core business of container shipping.

Oversupply Challenges and Financial Projections

The sector faces significant oversupply, with the fleet expected to expand by 10% in 2024 and 5% in 2025. This substantial oversupply, coupled with modest demand growth, is anticipated to compress earnings. Bernstein suggests that Maersk’s alternative strategy of prioritizing logistics service M&A might carry too-high commercial risks, potentially making it challenging for the company to meet its growth and margin targets.

Loss Projections and Divergence of Opinions

Amid these challenges, Bernstein expects Maersk to be loss-making in the current year, projecting a loss of $2 billion to $3 billion. This projection contradicts the consensus view that anticipates earnings to rise in 2025, highlighting the divergence of opinions on Maersk’s strategic direction and its implications for financial performance.

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Source: The Loadstar

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