A.P. Moller-Maersk said it had a good start this year with solid increase in earnings in the first quarter, and reaffirmed its earnings guidance for 2019, even as it worried about “considerable uncertainties” from trade tensions and the implementation of the IMO sulfur cap on shipping.
In a release May 24, the Danish shipping and logistics group said it closed the first quarter of 2019 with a 33% increase in earnings before interest, tax, depreciation and amortization (EBITDA) to US$1.2 billion while revenue grew by 2.5% to $9.5 billion compared to Q1 2018. Operating cash flow improved significantly to $1.5 billion and free cash flow was $3.5 billion, including sale of shares in Total S.A.
Profitability in the ocean segment increased, said Maersk, the world’s largest container shipping company. EBITDA grew 42% to $927 million compared to the same period last year, mainly driven by a 3.9% increase in average loaded freight rates and an improvement in total operating cost of 2.8%. Revenue increased to $6.9 billion despite lower volumes which declined 2.2%, impacted by the frontloading seen on the Pacific trades in the fourth quarter of 2018 and weak demand on Latin America and Oceania trades.
The opening of the Moin terminal, Costa Rica and positive underlying volume growth in gateway terminals had a positive impact on terminal profitability in Q1. Terminals & towage reported an increase in revenue to $991 million from $911 million and in EBITDA to $267 million from $244 million compared to same quarter last year.
Logistics & services reported a decrease in revenue in Q1 2019 by 0.5% to $1.4 billion, driven by lower air freight forwarding revenue. EBITDA increased to $51 million from $45 million in Q1 2018.
The strategic transformation also progressed. In the first quarter, Maersk delivered combined synergies of $130 million.
“We made good progress on the transformation, where we have completed the separation of the energy businesses, further integrated our organisation and continued to improve our product portfolio,” said Søren Skou, CEO of A.P. Moller-Maersk.
He said this resulted in a solid cash return on invested capital and delivery of synergies, getting the company closer to its target of $1 billion by end of 2019. “Non-Ocean revenue and gross profit in Logistics & Services grew, but needs to accelerate in the coming quarters,” he added.
Maersk reiterated its guidance of an EBITDA of around $5 billion in 2019, subject to the current risk of further restrictions on global trade and other external factors impacting freight rates, bunker prices and foreign exchange rates.
Said Skou: “We reaffirm our guidance for the 2019 results. We are still facing considerable uncertainties from weaker macro numbers as well as the risk from trade tensions and implementation of IMO 2020.”
“In Q1, volumes on trans-Pacific trade between Asia and North America have shown signs of decline and new tariffs can potentially reduce expected growth in global container volumes by up to 1 percentage point,” he said.
Photo: Hummelhummel
