A.P. Moller – Maersk (Maersk) last week reported that it delivered solid financial results for 2023 in line with its financial guidance for the year. While volumes were up across most products and strong cost control helped improve results, rates continued to erode, particularly in Ocean. Revenue for 2023 was USD 51.1bn with an EBIT margin of 7.7% impacted by declining freight rates.
CEO Vincent Clerc said: “2023 was a transitional year following the extraordinary market boom caused by the pandemic. We secured solid financial results despite significantly changed circumstances, and we are well positioned to manage the expected headwinds in 2024. By taking early and decisive measures to enforce strict cost management, we adapted to the new reality. We need to see further progress in the logistics business to align with our targets, as we continue to push our transformation forward and enhance our competitiveness.
“The current market remains one of robust volumes, but while the Red Sea crisis has caused immediate capacity constraints and a temporary increase in rates, eventually the oversupply in shipping capacity will lead to price pressure and impact our results. The ongoing disruptions and market volatility emphasize the need for supply chain resilience, further confirming that Maersk’s path toward integrated logistics is the right choice for our customers to effectively manage these challenges.”
Ocean saw strong schedule reliability and the continued efforts to bring down costs helped ease headwinds from the rapid increase in supply. Financial results were still strong due to robust cost containment but eroded during the year, as continued challenging market conditions resulted in substantially lower freight rates.
Logistics and Services continued to win new business but destocking at the beginning of the year followed by lower rates led to a decrease in revenue. Profitability declined compared with 2022 and an increased emphasis on cost management helped protect margins and reset the cost basis.
Terminals continued the steady performance and secured another very strong year. Despite a decline in storage revenue given the market normalisation, diligent execution on operational excellence, cost control, price increases and utilisation led to Return on Invested Capital (ROIC) of 10.5%, ahead of mid-term targets.
Maersk’s financial guidance for 2024 is based on the expectation that global container volume growth in 2024 will be in the range of 2.5% to 4.5% and that the company will grow in line with the market. It is further expected that the significant oversupply challenges in the Ocean industry will materialise fully over the course of 2024.
High uncertainty remains around the duration and degree of the Red Sea disruption with the duration from one quarter to full year reflected in the guidance range. Front-loading is expected towards the start of 2024.