Maersk presented a “subdued market outlook” for the rest of 2023 due to a prolonged and deeper market normalization than expected. Despite a stronger-than-anticipated first half of the year and an increased forecast for the entire year, Maersk confirmed that the recovery in container shipping remains challenging.
Extended Inventory Correction Impacts Third Quarter
The third quarter, usually marked by increased shipments as retailers restock for the fall season and holidays, will not witness the expected growth. Maersk informed investors that the inventory correction, which began in Q4 2022, is now expected to last through the year-end, leading to a downward adjustment of the volume forecast for 2023.
Revised Volume Forecast
Based on the continued destocking, Maersk has revised its volume forecast for 2023. The company now projects a decline in global container volume ranging from 1 to 4 percent for the entire year, compared to the previous estimate of 0.5 percent growth to a 2.5 percent decline.
CEO Vincent Clerc’s Assessment
Maersk’s CEO, Vincent Clerc, described the current report as “bittersweet” in an interview with the Financial Times. While the company performed better than expected in the first half, cost containment measures played a pivotal role in achieving this result.
Clerc confirmed a decrease in both freight rates and volumes, with the market stabilizing at a lower level during the second quarter. The company’s ocean revenues continue to be impacted by lower demand, particularly in North America and Europe, due to significant inventory corrections.
Financial Performance in Second Quarter
In the second quarter, Maersk recorded overall revenues just below $13 billion, with earnings of $2.9 billion (EBITDA), compared to over $10 billion in the previous year. Ocean shipping experienced a substantial decline in revenues, dropping 50 percent from the previous year to $8.7 billion. Revenues for the logistics business were also impacted by continued destocking and weaker consumer demand, as well as low rates.
Raised Full-Year Financial Outlook Despite Challenges
Despite the subdued outlook for the second half of 2023, Maersk raised the lower end of its full-year financial outlook. The company added $1.5 billion to the low-end forecast, projecting earnings between $9.5 billion and $11 billion (EBITDA), with a free cash flow of $3 billion.
Concerns Over Increasing New Ship Deliveries
During the Financial Times interview, CEO Vincent Clerc expressed concerns about the rising number of new ships scheduled for delivery in the next 12 to 24 months. Although Maersk chose not to build ultra-large containerships, the market is witnessing the arrival of a new generation of ships surpassing the 24,000 TEU mark.
Continued Investment in Transformation
Clerc emphasized that despite the short-term market concerns, Maersk will continue investing in its transformation into an integrated logistics provider, as cost focus remains central to the company’s strategy. The introduction of new, environmentally-friendly 16,200 TEU dual-fuel vessels in 2024 is part of the company’s environmental transition program.