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Some good news: the ebit margins of ocean carriers improved in 2019, according to an Alphaliner survey, with just two out of the top 10 lines that publish their results recording negative operating profits.
“The carriers’ financial results were positively impacted by higher freight rates and lower bunker fuel prices,” said the consultant.
It noted that average contract rates, as published by the China Containerized Freight Index (CCFI), a composite of spot and contract rates, were 0.6% higher last year than in 2018, while bunker prices were 6.5% lower.
Maersk, the largest carrier by capacity with a fleet of 4.2m teu, achieved an ebit of $1.72bn from revenue of $38.9bn for an operating margin of 4.4%.
However, CMA CGM, ranked fourth with a capacity of 2.6m teu, produced a better operating margin, 4.7%, achieved from revenue of $23bn and an ebit of $1.1bn.
Cosco/OOCL, with a combined fleet of 2.9m teu, reported an ebit of $960m, earned from $21bn of revenue, to give the Chinese carrier an operating margin of 4.6%.
Propping up the carrier league table was ninth-ranked South Korean carrier HMM, currently with a fleet of 414,000 teu but with an orderbook of some 400,000 teu, with a negative ebit of $295m from turnover of $4.1bn, to give an negative operating margin of -7.2%.
Eighth-ranked Taiwanese carrier Yang Ming, 600,000 teu, but with an orderbook of 198,000 teu, showed an negative ebit of -$2m on revenue of $4.8bn to record a zero operating margin.
According to Alphaliner data, last year’s average operating margin of 2.2% for the top carriers was an improvement on the average of -1.3% for 2018, and better than the 2% achieved by carriers in 2017, which was effectively a recovery period in the aftermath of the Hanjin Shipping bankruptcy-induced chaos of 2016.
However, the ebit numbers for last year were also skewed by new IFRS 16 (international financial reporting standards) accounting regulations, which came into force on 1 January 2019. Its effect was to remove leasing expenses, including container and charter vessel hire, from the ebit level and, instead, account for the cost as an interest expense further down in the balance sheet.
Alphaliner noted, for example, that pre-IFRS 16, CMA CGM’s 2019 ebit earnings would have dropped from $1.1bn to $749m, and its operating margin decline to 3.2% from 4.7%.
Moreover, its impact on the bottom line of carriers that charter a high percentage of their fleet and lease much of their equipment, resulted in CMA CGM, Zim, HMM and Yang Ming recording net losses in 2019, the consultant added.