Business, Feature, Freight News, Sea

Maersk Raises 2024 Profit Projections

[ June 5, 2024   //   Gary G Burrows ]

A.P. Moller – Maersk, or APMM, reported that its first quarter 2024 topline fell 13 percent year-over-year to US$12.4 billion, and EBIT slumped 92.4 percent to US$177 million.
However, EBIT re-entered the positive territory (from an EBIT loss of US$537 million in the further quarter of 2023), achieving an EBIT profit margin of 1.4 percent, compared to a 4.6 percent loss in the further quarter 2023 and a profit improvement of 16.4 percent in the first quarter 2023.
As a result, the company has upgraded the lower end of 2024 profit guidance.

Ocean

Segmentally, Ocean volumes increased 7.5 percent year-over-year to 5.9 million 20-foot equivalent units, or TEUs, while freight rates remained 17.5 percent lower year-over-year at US$1,184 per TEU, resulting in an 18.9 percent topline decline year-over-year to US$8 billion.
Nonetheless, Ocean reported its second consecutive quarterly EBIT loss of USD$161 million, following a loss of US$920 million in the further quarter 2023, implying an EBIT loss margin of 2 percent, compared to 12.8 percent in fourth quarter 2023 and a profit of 19.9 percent in first quarter 2023.
While bunker price was constant, bunker consumption increased due to longer diversions via Cape of Good Hope, due to the Red Sea crisis. This increased bunker costs 18.8 percent to US$1.8 billion, of which 2.4 percent pertained to EU Emissions Trading Systems, or ETS, costs).
Diversions via the Cape of Good Hope also resulted in higher network costs, driving operating costs up by 7 percent year-over-year to US$7 billion. Conversely, depreciation related costs fell 19.2 percent to US$1.1 billion due to fleet optimization.

Logistics and Services

Logistics and Services marked a 1 percent year-over-year increase in its topline to US$3.5 billion due to new customer wins and higher volumes across the three sub-segments. But EBIT shrunk 60 to US$54million due to higher operating costs and lower rates for most services offered by the segment. Thus, the segment’s EBIT margin shrunk 2.4 percent year-over-year to 1.5 percent in the first quarter 2024. Despite continuously low margins the management has stated that they will continue acquisitions in this segment, Maersk said.
In contrast to Ocean and Logistics, Terminals revenue increased 14 percent to just under US$1 billion, as volumes increased 9 percent due to strong growth in U.S. West Coast volumes. Operating costs increased 11.2 percent to US$651 million, but higher topline resulted in an EBIT expansion of 44.9 percent year-over-year to US$300 million translating in an EBIT margin of 30 percent vs. 23.6 percent in the first quarter 2023>

2024 Forecast

For the full year 2024, the management expects strong container volume growth toward the upper end of the range of 2.5 percent to 4.5 percent, and expects the Suez disruption to persist until year-end, delaying the negative impact of overcapacity on freight rates.
As a result, the company has upgraded the lower end of 2024 profit guidance, now expecting 2024 EBITDA to range between US$4 billion to US$6 billion, and EBIT to range from flat to US$2 billion. This compared with previously published ranges of US$1 billion-US$6 billion and flat to a US$5 billion loss, respectively.
APMM also updated the free cash flow guidance to US$2 billion loss or higher from a US$500 million loss or higher previously due to improved operating cash flows in the first quarter 2024 vs further quarter 2023 from the previous forecast. They have, however, maintained capex guidance of US$8 billion to US$9 billion for 2023-2024 and US$9 billion and US$10.0 billion for 2024-2025.

Tags: A.P. Moller – Maersk