Earlier today in Europe, Danish shipping giant A.P. Moller–Maersk (NASDAQ: Maersk A; NASDAQ: Maersk B) reported a massive increase in second quarter underlying profit and earnings before interest, tax, depreciation and amortization (EBITDA). Revenues also “grew slightly,” the shipping company said.
Maersk today reported slight growth in second quarter revenues to $9.6 billion, “which is on par with last year,” the group said. It added that EBITDA rose by 17 percent when compared with the second quarter of 2018 to stand at $1.4 billion. Underlying profit increased from $15 million in the second quarter of 2018 to $134 million in the second quarter of 2019.
Commenting on the results, CEO Søren Skou said: “The second quarter was a quarter of solid progress. EBITDA was up 17 percent and cash flow improved 86 percent year-on-year, driven by continued recovery in Ocean.”
The group also attributed increased profitability to strong operational performance in its ocean business and also to an average increase in sea freight rates of 1.4 percent along with a volume increase of 1.4 percent.
Unit costs improved by 3.5 percent owing to network improvements that led to better schedule reliability and lower bunker consumption, the group said.
Ocean EBITDA increased by 25 percent over the same quarter last year to $1.1 billion due to enhanced unit costs, utilization and reliability.
Terminals and towage revenues grew by 13 percent compared to the second quarter of 2018 and stood at $957 million.
Logistics and services EBITDA rose to $61 million in the reporting period, up from $52 million in the second quarter of 2018. Revenues of $1.5 billion benefited from an increase in revenues in supply chain management but these were offset by falls in air and sea freight forwarding.
Maersk also gave an update on its transformation strategy.
Describing itself as being “in the middle of a transformation to be a focused and integrated global container logistics company,” the group said its first focus is to digitize customer transactions.
“Maersk Spot, our new product with fixed price and load guarantee, is a good example of that. Since the launch of Maersk Spot in the first quarter of 2019, we are now offering the product on all trade lanes, except in and out of the U.S. By the end of the second quarter we are moving approximately 8,000 FFE [8 percent of spot volumes] per week on this new product. Customers have generally responded positively to the product addressing some of the current inefficiencies in ocean shipping, and efforts are being made to further expand adoption,” the company said.
Maersk’s second focus is on improving operations and increasing the utilization of ships, boxes and terminals, again, through digitalization. The group says that operational performance improvements have helped boost reliability from 70.4 percent in the first quarter of 2018 to 85.5 percent in the second quarter of 2019.
Thirdly, the group wants to make money from digital products such as its “TradeLens,” which connects various groups such as ports, terminals, freight forwarders and so on who use the platform.
“Ocean carriers representing approximately 60 percent of global capacity have now signed up to support TradeLens, which is an important step for the platform to achieve critical mass to significantly change the way the industry operates,” the company announced.
Looking forward, the company envisages a full year EBITDA forecast of about $5 billion.
Main photo: the box ship Mette Maersk; Photo by Maersk