Maersk upgrades guidance after strong second quarter

7th Aug 2024 10:00

(Sharecast News) - Maersk reported a significant improvement in its second-quarter financial performance on Wednesday, driven by strong volume growth across all of its business segments.

The Danish shipping giant said its EBIT margin jumped to 7.5% from 1.4% in the first quarter, reflecting a return to profitability across its core operations.

It said the positive results were supported by robust performance in the ocean, logistics and services, and terminals segments.

The ocean segment saw strong volume growth, particularly in Asia exports, driven by increased freight rates amidst heightened supply chain pressures.

While the ongoing crisis in the Red Sea and the rerouting of ships south of the Cape of Good Hope continued to elevate operating costs, the segment's profitability improved significantly compared to previous quarters, though it remained below the levels seen in the same period last year.

Logistics and services also experienced solid growth, with a 7% year-on-year increase in volumes.

That growth, coupled with improved asset utilisation and effective cost management, led to enhanced profitability both sequentially and compared to the prior year.

The segment made notable progress in addressing customer implementation challenges in the North American ground freight business, further bolstering its financial performance.

Maersk said the terminals segment delivered one of its highest EBITDA levels ever, driven by significant revenue growth per move in North America, which was supported by higher tariffs and storage fees.

Although costs per move increased slightly, effective cost management ensured that profitability remained strong.

In light of the positive developments and the continued impact of supply chain disruptions caused by the situation in the Red Sea, Maersk upgraded its financial guidance for 2024.

The company said it now expected underlying EBITDA to be between $9bn and $11bn, up from the previous forecast of $7bn to $9bn.

Underlying EBIT was projected to be in the range of $3bn to $5bn, a substantial increase from the earlier estimate of $1bn to $3bn.

Additionally, free cash flow was expected to exceed $2bn, and capital expenditures for 2024 to 2025 were now forecast to be between $10bn and $11bn, reflecting ongoing fleet renewal efforts.

"Our results this quarter confirm that performance in all our businesses is trending in the right direction," said chief executive officer Vincent Clerc.

"Market demand has been strong, and as we have all seen, the situation in the Red Sea remains entrenched, which leads to continued pressure on global supply chains.

"These conditions are now expected to continue for the remainder of the year."

Clerc said the company had invested in additional equipment in all of its businesses to adapt to the situation and continue supporting customers through the disruptions.

"As we look ahead, our focus remains on leveraging organic growth while exploring opportunities for value-accretive acquisitions particularly in Logistics.

"We will maintain tight cost control and high asset utilisation, and further execute on our fleet renewal programme."

At 1037 CEST (0937 BST), shares in Maersk were down 2.39% in Copenhagen at DKK 10,425.

Reporting by Josh White for Sharecast.com.