Maersk remains positive as box demand outlook cools

Maersk pointed to multiple positive indicators for the global economy in its second quarter earnings report, including expectations of 2.6% global GDP growth in 2024 and 5-7% growth in container demand over the past year. After outperforming in the first half of 2024, Maersk expects demand to cool in the coming quarters, with a 4-6% growth estimate for 2024. 

Limiting the commercial impacts of that demand growth, an influx of newbuild deliveries brought 10.4% world fleet growth in the year to the end of Q2. While Red Sea diversions soak up much of that added capacity, the group’s results show that the current market strength falls short of even the tail-end of pandemic disruption in Q2 2023.

Second quarter profitability increased at the group compared to the first quarter of 2024, when networks were adjusting to Red Sea diversions, but failed to reach the levels of Q2 2023. EBIT – profit before interest and tax deductions – in the second quarter 2024 was $470m for Maersk’s Ocean segment, recovering from -$161m in the first quarter, but well behind the $1.2bn recorded in Q2 2023.

Lower earnings at Ocean, the largest of Maersk’s three market segments by revenue and EBIT, were driven by higher costs and lower revenue. Container handling costs were up by $165m or 7% on-year and bunker costs rose by $408m or 28.3%; despite cost control efforts and a $54m drop in selling and general costs, total operating costs rose by $505m or 7.8%.

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Fixed for bunkers, unit costs per feu moved slightly lower to $2,367 in the second quarter 2024, but the average bunker price rose by 7.8% or $44 per tonne on-year, and consumption rose by 17.7% to 2.9m tonnes.

The figures were more favourable compared to the first quarter, with higher volumes and freight rates leading to a revenue increase of $361m and operating costs falling by $62m, despite higher bunker costs and bunker volumes.

Ocean freight revenue was $8.4bn in Q2 2024, down from $8.7bn in the same period 2023, but above the $6.7bn reported for the first quarter this year. These weaker revenues compared to Q2 2023 came despite higher loaded volumes, up 6.7% to 3.1m feu, and a higher loaded freight rate, up 2.3% to $2,500 per feu. 

EBIT margin, which measures operating expenses against revenues, was 5.6% for the quarter at the Ocean segment, on track for the company’s target of over 6%. An EBIT margin of -2.0% at Ocean for the 12 months to the end of Q2 2024 shows the significance of last year’s losses, however; Maersk’s EBIT for those 12 months is -$638m, weighed by the -$920m recorded in the fourth quarter 2023, before widespread rerouting to avoid Houthi attacks in the Red Sea. 

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"Our results this quarter confirm that performance in all our businesses is trending in the right direction. Market demand has been strong, and as we have all seen, the situation in the Red Sea remains entrenched, which leads to continued pressure on global supply chains. These conditions are now expected to continue for the remainder of the year,” CEO of AP Møller - Mærsk A/S, Vincent Clerc, said.

Maersk’s Logistics segment reported a 7.3% growth in revenue as increased volumes offset lower low rates, leading to steady growth in earnings compared to the previous and year-ago quarter.

Revenues were also higher at the group’s Terminal segment where a 15% improvement was driven by volume growth and higher utilisation. Higher costs per move were outpaced by higher revenue per move, leading to $353m EBIT for the quarter. 

For the group as a whole, a profit of $833m in the second quarter compared to $208m in the first quarter 2024, and $1.5bn in Q2 2023.