Despite lower container demand, A.P. Moller-Maersk reported improved profitability across the business in the third quarter, while Hapag-Lloyd achieved good results in the first nine months of 2019 due to higher transport volumes and better freight rates.
Maersk reported improvement in earnings before interest, tax, depreciation and amortization (EBITDA) of 14% to US$1.7 billion in the third quarter compared to a year ago, primarily driven by increases in ocean and terminals & towage, said a company release.
Revenue decreased slightly by 0.9% to $10.1 billion, as the increase in logistics & services and terminals & towage with ocean on par was offset by a decline in manufacturing & others, mainly due to the exit from the dry container business and lower revenue in the reefer segment as well as the divestment of bulk activities originally acquired from Hamburg Süd.
“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 & Services,” said Soren Skou, group CEO.
“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 ocean improved 13% to $1.3 billion, reflecting the focus on profitability through capacity management and operational performance which mitigated lower freight rates and modest volume growth in the third quarter of 2.1%. Revenue was $7.3 billion which is on par with the same period last year.
Terminals & towage reported an increase in EBITDA to $313 million and an increase in revenue of 5.8% to $986 million in the third quarter. In gateway terminals, the increase in EBITDA of 33% to $261 million was driven by a volume growth of 9.2%, which contributed to higher utilization, combined with stronger cost efficiency.
Logistics & services progressed with gross profit up 13% to $336 million following increased activities in intermodal and warehousing & distribution, however partly offset by lower revenue in air and sea freight forwarding. The improved gross profit led to an increase in EBITDA of 34% to $94 million.
“I am pleased with the progress on the transformation of A.P. Moller-Maersk. We are making progress across multiple fronts including our digital transformation and growth in our land-based logistics products and terminals business,” said Skou.
Non-ocean revenue increased 3.7% in the third quarter 2019, driven by strong growth in the gateway terminals and growth within the strategic integrated parts of logistics & services such as intermodal and warehousing.
The group now expects EBITDA for 2019 in the range of $5.4 billion to $5.8 billion, from the previously communicated $5 billion 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% to 2% for 2019 compared to an expected market growth of 1% to 3% previously.
Hapag-Lloyd EBIT rises significantly
For Hapag-Lloyd, earnings before interest and taxes (EBIT) in the first nine months of 2019 significantly increased to EUR643 million ($711 million) from EUR299 million in the first nine months of 2018.
The group net result rose substantially to EUR297 million from EUR13 million in the comparative period last year. EBITDA surpassed EUR1.5 billion from EUR812 million year-on-year. The EBITDA increase of EUR699 million includes a positive effect of about EUR341 million caused by the new reporting standards IFRS 16.
Revenues rose to about EUR9.5 billion, up from EUR8.5 billion the year before. The transport volume rose by 1.2% to 9,011 TTEUs from 8,900 TTEUs in the first nine months of 2018, and the average freight rate climbed by 4.2% to $1,075 per TEU from $1,032 per TEU a year ago. Transport expenses increased by 3.5%, in particular due to a slightly higher average bunker consumption price and a stronger average US dollar exchange rate against the euro.
“We have achieved a very respectable result after nine months: Despite geopolitical tensions and trade restrictions, we benefitted from higher transport volumes and better freight rates and also kept a close eye on our costs. And the same holds true for our strategic goal of becoming number one for quality,” said Rolf Habben Jansen, CEO of Hapag-Lloyd.
For the full financial year 2019, Hapag-Lloyd expects an EBITDA in the range of EUR1.6 billion to EUR2.0 billion and an EBIT in the range of EUR0.5 to EUR0.9 billion.
“Based on the business development in the first nine months of 2019, it can currently be assumed that EBITDA and EBIT will be in the upper part of the guided ranges,” said the company.
Photo courtesy of Maersk