Maersk focuses on profitability as revenue slips

Maersk delivered improved profitability across its businesses in the third quarter of 2019, outweighing a 0.9% drop in revenue to US$10.1bn.

Earnings before interest, tax, depreciation and amortization (EBITDA) improved 14% to US$1.7bn in the quarter, reflecting an increase in EBITDA margin to 16.5%.

Søren Skou, CEO of A.P. Moller – Maersk, said: “While the global container demand, as expected, was lower in Q3 due to weaker growth in the global economy, A.P. Moller – Maersk continued to improve the operating results.

“We delivered strong free cash flow and a return on invested capital of 6.4% as a result of strong operational performance in ocean, higher margins in terminals and solid earnings progress in logistics and services.

“The strong performance for the quarter combined with our expectations for the rest of the year, led to the recent upgrade of our earnings expectations for 2019. We will continue our focus on profitability and free cash flow in Q4 and into 2020.”

EBITDA in Maersk’s ocean segment improved 13% to US$1.3bn and the EBITDA margin increased to 17.4%, owing to capacity management and operational performance which mitigated lower freight rates and modest volume growth in Q3 of 2.1%. Revenue was US$7.3bn which is on par with Q3 last year.

Non-Ocean revenue increased 3.7% in Q3 2019, driven by strong growth in the gateway terminals and growth within the integrated parts of logistics and services such as intermodal and warehousing.

The terminals and towage segment reported an increase in EBITDA to US$313m and an increase in revenue of 5.8% to US$986m in the third quarter.

In gateway terminals, the increase in EBITDA of 33% to US$261m and a margin of 31.7%, was driven by a volume growth of 9.2%, which contributed to higher utilisation, combined with stronger cost efficiency.

Logistics and services progressed with gross profit up 13% to US$336m following increased activities in intermodal and warehousing & distribution, however partly offset by lower revenue in air and sea freight forwarding.

Maersk now expects EBITDA for 2019 in the range of US$5.4–5.8bn, from the previously communicated US$5bn range.

The organic volume growth in ocean is now expected to be slightly below the estimated average market growth, which is now expected to be in the range of 1-2% for 2019 compared to previously an expected market growth of 1-3%.

The carrier’s guidance is maintained on gross capital expenditures (CAPEX) of around US$2.2bn and a high cash conversion (cash flow from operations compared with EBITDA).

CAPEX for 2020-2021 accumulated for the two years is expected to be US$3-4bn.

The guidance continues to be subject to uncertainties due to the weaker macroeconomic conditions and other external factors impacting container freight rates, bunker prices and foreign exchange rates.