Maersk’s EBITDA is up 39% in the third quarter to US$2.3 billion year-on-year despite a decline in revenue
EBITDA from container shipping rose 25.4% to $1.8 billion compared to the same period last year even with lower volumes
EBITDA from logistics and services expanded to $131 million, up from $91 million in 2019
Group EBITDA for 2020 will likely range from $8 billion to $8.5 billion, an upgrade from the previous guidance announced last month
The Danish transport group in a statement on November 18 said it improved its profitability across the business and delivered strong free cash flow in the third quarter despite the COVID-19 pandemic badly affecting global economies.
Group earnings before interest, tax, depreciation and amortization (EBITDA) grew 39% to US$2.3 billion in the third quarter year-on-year despite revenue decreasing 1.4% to $9.9 billion compared to the same quarter in 2019.
Maersk attributed the performance increase to cost control, capacity management, focus on customer offerings with increased uptake of digital services, and some demand recovery compared to the second quarter.
“Despite COVID-19 negatively affecting activities in most of our businesses, our disciplined execution of the strategy led to solid earnings and cash flow growth in Q3,” said group CEO Soren Skou.
“At the same time, we managed to further integrate and simplify the organisation in Ocean & Logistics, we closed the acquisition of KGH Customs Services and continued the integration of Performance Team, supporting our strong financial performance in Logistics & Services.”
The ocean division was the main performance driver for this quarter, said Maersk. Despite container volumes decreasing 3.6%, shipping improved profitability by $511 million to $1.8 billion, reaching an EBITDA margin of 25.4%.
This was achieved on the back of “a continued agile capacity deployment, lower costs and a temporary spike in short-term freight rates due to a sudden demand pick-up on some routes.”
Providing solid support was logistics & services, which benefited from significant demand in supply chain management and intermodal transportation.
Third-quarter revenue from logistics and services grew 11% and profitability increased by 44%, achieving an EBITDA of $131 million, up from $91 million in 2019, despite restructuring costs of $40 million.
In terminals & towage, meanwhile, “our effort to become a world-class operator enabled us to continue to expand margins and grow earnings, despite lower volumes and revenue,” said Maersk.
Revenue from this unit in the third quarter is $976 million, below $999 million the previous year, while EBITDA went up to $315 million from $104 million last year.
Citing the current momentum across the business, Maersk said that as announced a few days ago, EBITDA for 2020 will likely range from $8 billion to $8.5 billion from the previous guidance of between $7.5 billion and $8 billion announced last month.
Global demand growth for containers is expected to contract by 4% to 5% in 2020 due to COVID-19.
Organic volume growth in container shipping is now expected to be slightly below the average market growth from previously in line with or slightly below the market.
“Our progress in earnings and in our transformation allows us to look confidently past the extraordinary 2020,” Skou said. However, the company is also “well aware of the high level of uncertainty the pandemic and associated lock downs continue to pose in the coming quarters,” he added.
Photo courtesy of Maersk