Container Rates Rise Due to Disruptions
Higher freight rates have more than compensated for modest increases in container volumes, leading to improved revenue and profits for A.P. Moller-Maersk in the third quarter. The ocean segment recorded revenue of $15.8 billion for the quarter ending September 30, up from $12.1 billion in the same period last year. The Copenhagen-based parent company of Maersk reported earnings before interest and taxes (EBIT) of $2.8 billion, recovering from a loss of $27 million attributed to disruptions caused by attacks from Yemen-based Houthi rebels in the Red Sea.
Additionally, cargo was rerouted to U.S. West Coast ports to avoid a potential strike by longshore union workers that briefly halted container operations at East Coast ports in early October. The attacks prompted carriers to navigate vessels around the Red Sea, resulting in longer journeys around Africa’s Cape of Good Hope. Maersk reported a year-over-year increase of 14% in bunker fuel consumption, contributing to a 6.7% rise in total operating costs, which were reflected in a 54% increase in average freight rates that peaked at the start of the third quarter.
Despite these rate increases, Maersk, the second-largest container carrier, saw its loaded volumes rise only 0.3% compared to the same quarter in 2023, falling short of the estimated global growth rate of 4%-6% year-over-year. Lars Andersen, CEO of Vespucci Maritime, noted on LinkedIn that Maersk’s fleet expanded by 2.3% over the past year, which has been insufficient to meet the increased demand for weekly capacity caused by the Red Sea crisis, resulting in a decline in the company’s market share of loaded volumes.
Maersk experienced a 3.1% drop in volumes on east-west routes, while intraregional services saw a 7.6% increase. The ocean operating EBIT margin stood at 6.4% over the past 12 months, surpassing the company’s full-year 2024 target of 6%. Maersk has revised its earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance for 2024 to between $11 billion and $11.5 billion, up from a previous estimate of $9 billion to $11 billion, and EBIT expectations increased to $5.2 billion to $5.7 billion from $3 billion to $5 billion. Free cash flow is projected to reach $3 billion, an increase from $2 billion.
In the Logistics & Services division, quarterly revenues rose 11% due to ongoing volume growth across most products. The company opened its largest logistics park in the Middle East, located in Jeddah, Saudi Arabia, and added a new Boeing 777F aircraft to its fleet. Year-over-year growth in this segment totaled 2%, below the company’s 10% target. Supply chain volumes rose by 21%, and First Mile volumes increased by 9.6%, while airfreight saw a 2.4% decline.
The Terminals segment achieved record revenue and volume levels, aided by a 20% increase in cargo processed at the ports of Los Angeles and Port Elizabeth, New Jersey. EBITDA reached its highest level since Q1 2022 at $424 million. The company adjusted its outlook for the segment’s return on invested capital for 2024 to 13%, up from 9%. Overall, the EBIT margin stood at 21%, and the EBITDA margin was 30%.
