News / Maersk enjoys 'reasonable' first quarter, but there's rougher sea ahead

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After a solid first quarter performance, Maersk says it expects container volumes to contract by up to 25% in second quarter.

The substantial reduction in demand is due to the pandemic and ensuing consumer lockdowns, with the financial implications expected later in the year, said chief executive Soren Skou today.

Notwithstanding the expected downturn in the second quarter he said Maersk’s liner pro-forma result for April had been “reasonable”, benefiting from a halving of fuel costs and its “agile capacity management protection strategy” on freight rates.

After cancelling 90 sailings in the first quarter, Maersk said it would blank more than 130 voyages in the next quarters to match supply with the collapsing demand.

The company recorded a net profit of $197m in the first quarter, compared with a loss of $69m in the same period of 2019, while group turnover edged up $0.3% to $9.6bn, “driven by ocean”, it said.

Indeed, despite a 3.2% decline in liftings, to 6.1m teu across Maersk’s liner network, revenue increased by 3% to $7.23bn, resulting in its average freight rate jumping 5.7% to $1,000 per teu.

Mr Skou said the $107 per feu average rate improvement reflected Maersk’s “flawless execution” of its strategy to achieve compensation from customers for the initial 22% hike in IMO 2020-compliant bunker fuel.

East-west volumes had taken the biggest percentage hit, down almost 6%, year on year, to 2.8m teu, while north-south volumes declined 2.6% to 1.9m teu.

The east-west trades are also likely to see the biggest dip in volumes in the coming quarter, but there is also concern regarding potentially large contractions on some north-south trades where economies are dependent on higher oil prices.

Speaking during Maersk’s investor and analyst presentation this morning, Mr Skou said: “We are in the middle of a pandemic storm, but we will weather the storm. The transformation of AP Møller-Maersk from a diversified conglomerate to becoming a focused, integrated and digitised global logistics company continues to be validated also in this quarter, as we are serving our customers, connecting and digitising their supply chains, while also growing earnings and free cash flow in difficult circumstances.”

He said Maersk was “not pursuing market share”, but claimed business was being won, as customers “were focusing even more on reliability and a trusted partnership in these extraordinary times”.

Landside, Logistics & Services – which excludes the Damco freight forwarder – saw an improved ebitda of $68m, compared with $48m the year before. Terminals & Towage, including APM Terminals, saw a revenue decline of 9.3% to $911m, while ebitda improved by 2.6% to $276m, despite flat throughput of 2.8m teu at the APMT gateway terminals.

Given the uncertainty surrounding a recovery from the pandemic, Maersk’s guidance for 2020 remains suspended.

“Looking into the second quarter, visibility remains low as a result of the Covid-19 pandemic,” said Mr Skou, and he conceded there was “no visibility on what our customers will do as yet”.