News / Maersk 'cash-and-dash' strategy rolls on as it targets 70% contract business

Photo: Maersk

A net profit of $6.1bn in the final quarter concluded what Maersk CEO Soren Skou said was “a remarkable 2021” for the Danish company.

Maersk’s full-year net profit came in at $18bn, compared with $2.9bn the year before, and Mr Skou said he expected earnings to be similar for 2022.

But he added that the first half could be stronger than H2 as “normalisation” returned to global supply chains.

Mr Skou said Maersk had “not yet seen any change in the demand picture”, but he expects spot rates to fall in the second half , albeit not to pre-pandemic levels, as supply chain disruption eases.

He said Maersk envisaged around 70% of its long-haul volume being under contract by the end of the year, up from 46% pre-pandemic, of which 3m teu a year would be covered by multi-year contracts of three to five years.

Meanwhile, today’s announcement of its intended $1.68bn acquisition of US-based trucking group Pilot Freight Services boosts Maersk’s integrated logistics aspirations for serving its core 200 large-volume contract customers across its networks.

Turnover for the group in Q4 was $18.5bn, compared with $11.3bn for Q4 20, for a full-year total of $62bn, 55% higher than 2020.

Ocean contributed $48.2bn, an increase of 77%, supported by an 83% uplift in the container line’s average revenue of $1,659 per teu, as higher contract rates kicked in. Loaded volumes were down 4% in Q4 on the same period of the previous year, to 6.5m teu, but for the year were ahead by 3.6% at 26.2m teu.

Across its networks Maersk is forecasting growth of between 2%-4% for this year. It increased its vessel capacity by 7.5%, to 4.3m teu, and added over 700,000 teu to its container pool last year to cope with demand and mitigate port and landside congestion.

Nevertheless, the capacity and equipment investment was mainly targeted at Maersk’s contracted business, and thus small and mid-sized freight forwarding customers will see no benefit.

Maersk’s CCO Vincent Clerc explained the strategy regarding serving the forwarding sector: “As we keep our fleet constant at 4.3m teu and increase the allocation we are giving our long-term customers, it means that by default we are reducing the footprint we have with freight forwarders to what will be, in 2022, somewhere between 25% and 30%.

“The profitability level is obviously very high at the moment on the short-term market, because they are the ones paying the spot market rates today, but we are investing in a long-term, more sustainable business and therefore we have made the decision to forfeit some spot opportunities to really invest in the long-term relationships that truly integrated logistics presents for us,” he added.

Maersk said that, on average across all services both head and backhaul, it increased its contract rates by $500 per teu last year and anticipates obtaining a further $400 per teu uplift this year.

Mr Skou said the traditional contract seasons were “out of the window, and have been for the past 18 months”, in answer to a question on contract timing for Asia to Europe and the US.

Meanwhile, Maersk’s burgeoning logistics and services division grew its Q4 revenue by 38% – of which 58% came from the top 200 ocean customers – for a Q4 ebit of $137m and a full-year ebit of $460m.

Terminals & towage, which henceforth will be reported separately, saw Q4 revenue increase by 22%, to $1.3bn, and by 23% for the year, to $4.7bn, driven by increased volumes and storage revenue.