News / 'Strong' Q3 for Maersk as it prepares for alliance launch – but no bid for GXO

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Maersk has ruled out bidding for GXO, as it revealed strong Q3 earnings this morning. It also predicted little to no disruption for customers as it rolls out the Gemini network next year.

The group finished the quarter (see charts below for more detail) with ebitda of $4.8bn and ebit of $3.3bn, “which on a year-to-date basis, puts us more or less on the same level as last year”, said CEO Vincent Clerc in an earnings call with investors.

“Compared with last year, however, we of course find ourselves in very different circumstances, and look into a very different final quarter for the year.”

Noting “strong” results more than 30 times in the call, Mr Clerc explained: “Much change has happened in ocean this past quarter … This benefit of higher freight rates, combined with continuous strong volumes, has delivered substantially higher profit, with an ebit of $2.8bn. We expect the third quarter to mark the strongest quarter of the year, as rates have peaked in July and have partially normalised and stabilised, for now.

“Amid strong market demand driven by the peak season in Asian exports and the Red Sea re-routings, our volumes delivery remains strong in the third quarter, demonstrating the agility of our ocean network and operations.”

He added that customer wins boosted organic growth “well above the market, at 11%”, while contracted volumes rose to 75% in the third quarter.

“The higher number of contractual volumes compared with 2023 reflects the significant increase in short-term contracts, driven by our customers’ need for predictability in a free-trade environment that has been characterised by a high degree of volatility in 2024.

“As a result, we now expect the share of contract volumes for the full year to be around 75%, as well.”

Mr Clerc ruled out bidding for GXO, but added: “M&A will continue to be a part of the roadmap. We continue also to have a view that organic first is our approach to growing logistics.

“Our view is that bolt-on is good for us, but maybe more towards the larger size … because of the work that goes into doing such an integration, you might as well do it for something that is meaningful for the strategic progression of your business and the capabilities that you have.”

Mr Clerc said there were attributes Maersk may look for in a bolt-on acquisition.

“The first one would be regional. Most of the M&A activities we have had so far have had their base in North America and in Asia Pacific. So for us to reinforce the offering in Europe would make sense.

“We have also a lens that is through verticals.

“We are very focused … on retail, lifestyle, FMCG; a lot of the consumer-facing verticals, and we’d have an interest in moving more towards industrial verticals and … specific capabilities or product lines that that may be interesting that we don’t have today, like we did with ecommerce some years ago with Pilot.”

Maersk also denied there would be disruption to customers as it rolls out the Gemini network in February.

Acknowledging that the change “is a pretty big undertaking”, Mr Clerc pointed out that under the 2M alliance, it redeployed its network about eight times – although those changes were “not as radically different”.

“But I just want to say that these significant redesigns are something that we’re used to doing. What we have to do is move straight into the Gemini network. Because it is such a big undertaking, you cannot take one mid-step, stay there for a few months, and then take the next step.

“We have a week where we agree this is the last week where we sail on 2M, and then the following week is the first week where we sail on Gemini. With respect to disruptions, I think it’s going to be very minor … past that first week or two of transition – we expect an orderly transition.”

Calling the current network “a spaghetti bowl of things that are very intertwined”, he explained that Gemini would be “much more simple”, with fewer port calls and “cleaner” rotations.

“If you have a disruption in one port, it doesn’t get transmitted into the network the way it does today, but it gets contained into its module. And that’s how you can really produce a significant uplift in reliability.”

The second advantage, he explained, would be “the complete integration between ships and terminals in the hubs”.

“The fact that we have invested in the last three years significantly in having complete co-location and harmonisation of processes, technology and teams, also organisation between our hubs and our ocean network, means that we can ensure connectivity in the hubs with a level of quality that would be impossible if it wasn’t in-house, within the same team.”

He added that “a completely aligned operational philosophy with our partner in Gemini, which is focused on quality and that actually doing it right the first time, with high quality, is going to be cheaper than operating a network with 50% reliability.”

The carriers have run “a lot of tests” to be able to confirm 90% reliability”, and are “pretty confident” of the outcome. Customers won’t be charged more – yet.

“I don’t think that customers will be willing to pay more for higher reliability without having seen what they’re getting. We need to deliver the quality … and then we can see how much value that creates for customers.”

Meanwhile, the Maersk group sees resilience in market demand, at least up until Chinese New Year, with a “pretty solid view on how volumes will develop on ocean and air”.

In ocean, profitability increased substantially in Q3, driven by higher rates. Ocean reported an ebit of $2.8bn, but loaded volumes increased by just 0.3% compared with Q3 23. However, the average freight rate increased 54% year on year, and was 29% higher than in Q2 24.

Costs rose, owing to the Cape of Good Hope re-routing, with bunker costs up 14% and total operating costs up 6.7%, while asset utilisation was at 96%. Revenues rose by $3.2bn, to $11bn, while ebitda was up $2.9bn, to $4bn. Ebit increased by $2.9bn, to $2.8bn.

Maersk’s logistics and services division, which saw revenues rise 11%, to $3.9bn, includes warehousing, LCL and airfreight. In air, volumes decreased by 2.4% from Q3 23 and were 4.8% lower than Q2 24, at 80,000 tonnes.

“The decline in volume was mainly driven by an improved customer mix effect,” said Mr Clerc.

The terminal division reported its highest-ever revenue, of $1.18bn, with volumes up 8.4%, driven by North America and Asia.

“Overall, we saw strong business performance across all our segments, as reflected in our financial results,” concluded Mr Clerc, and added: “But if not more important is the good underlying momentum we have shown so far in operational groundwork to improve the underlying quality of our business.”

You can see the full results here