Maersk revenue up 30% YOY in Q1; ocean volume lagging

 Maersk wants its inland logistics services to grow faster than its Ocean business. ( Photo: Maersk )

Maersk wants its inland logistics services to grow faster than its Ocean business. (Photo: Maersk)

The storied Danish container line A.P. Møller - Mærsk A/S reported strong year-over-year revenue growth of 30% for the first quarter of 2018, but the majority of that came from the integration of Hamburg Süd and the closing of the Maersk Oil sale. Maersk brought in $9.3B to start off 2018. 

Despite growing revenues with a major acquisition and improving the balance sheet by selling off Maersk Oil (which may have actually been poorly timed, given the oil rally that took place after terms were announced), Maersk’s earnings were disappointing. Overall, Maersk lost $239M, a deeper loss than Q1 2017 ($139M). Maersk maintained positive guidance for its 2018 EOY numbers, calling for EBITDA of $4-5B (over $3.5B in 2017), and profits exceeding 2017’s $356M. 

However, Skou warned that “increased uncertainties due to geopolitical risks and trade tensions” could pose threats to global trade and Maersk’s volumes. “We have to admit that the Americans have taken a number of initiatives recently that have caught us by surprise,” Skou said in a Reuters interview. Oil prices are expected to continue rising through 2018, and geopolitical risks like Venezuela’s production collapse, Houthis attacking Saudi facilities, and Iran sanctions will affect the price of Brent crude, especially. As FreightWaves reported yesterday in our coverage of the Hapag-Lloyd earnings call, maritime shippers desperately need container spot rates to gain momentum for the rest of the year to offset their exposure to fuel prices.

Maersk has reorganized its businesses into four buckets: Ocean, Logistics & Services, Terminals & Towage, and Manufacturing & Others. Excluding Hamburg Süd, Ocean reported a revenue increase of 9% on a volume growth of 2.2%, below estimated global demand growth of 3-4%. The maritime container industry experienced another wave of consolidation in 2017, which created significant uncertainty among shippers and allowed maritime carriers to extract higher rates from their customers for the first time in several years. 

Still, Maersk expects to grow its Logistics & Services business disproportionately compared to Ocean, which has been challenged by short term bunker fuel price and rate pressures and a longer trend of slowing container demand. Logistics & Services grew revenue by 6% to $1.5B for the first quarter of 2018, and Maersk said that business was positively impacted by supply chain management and inland haulage. 

Tellingly, the photograph on the cover of Maersk’s interim Q1 report (see above) depicted Maersk’s first block train, which left China’s Hubei Province on October 28, 2017, and arrived on time in northern France 20 days later, after a journey by rail of 6,720 miles. Maersk’s containers never touched a ship, and made the Eurasian journey in roughly the same transit time a ship would take from Shanghai to Rotterdam. The publicity photo on the cover of the report functions as a piece of visual rhetoric supporting Maersk’s new identity as an ‘integrated global container transport’ company and its determination to seek more growth and wider margins on inland logistics services.

Søren Skou, CEO of A.P. Moller - Maersk, referred to this pivot as he explained his company’s four new divisions in a statement. “The new format reflects that we are an integrated global container transport and logistics business focusing on our customers’ value chains, and it allows us to follow our progress, particularly in those parts of the business which are not purely ocean freight, which we need to grow in order to minimize the cyclical part of our business,” said Skou. 

Terminals & Towage reported an 11% increase in revenue (to $911M) and a 41% growth in EBITDA (to $196M). Manufacturing & Others (a dry container factory and a reefer container factory in China, plus another reefer container factory in Chile) posted Q1 revenues of $619M, up over Q1 2017’s $401M, and EBITDA of $17M. 

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