Maersk posts record $18B profit on demand surge, soaring freight rates

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  • Cargo shipping profit last year leaped to an incredible US$18 billion as revenue rose to $61.8 billion
  • Higher ocean freight rates and volume increases on strong global demand fueled growth, while acquisitions in logistics and related services, and rise in storage income in terminals drove EBITDA to US$24 billion 
  • Profitability in ocean transportation increased substantially with revenue of $48.2 billion in 2021
  • The average loaded freight rate increased by 66% to $3,318 per forty-foot container

Maersk delivered record-high earnings of US$18 billion in 2021, an exceptional year of surging demand that led to unprecedented supply chain bottlenecks and steep freight rates.

The Danish container shipping and logistics giant said profit last year compares to $2.9 billion in 2020, while revenue was up 55% to $61.8 billion.

The historic figures were mainly driven by higher ocean freight rates and global demand, volume increases, acquisitions in logistics and related services, and increased storage income in terminals.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in 2021 tripled to $24 billion, and earnings before interest and taxes (EBIT) jumped almost five times to $19.7 billion from $4.2 billion the preceding year, the carrier said in its financial statement. Free cash flow was $16.5 billion.

“Exceptional market conditions led to record-high growth and profitability in A.P. Moller-Maersk, however it also led to supply chain disruptions and severe challenges for our customers,” said group CEO Soren Skou.

As the exceptional market conditions continued, Maersk said it set new records, and the results have enabled it to invest in long-term transformation, digitization and decarbonization, while at the same time providing its shareholders with solid cash returns.

In ocean shipping, profitability increased substantially with revenue of $48.2 billion in 2021 compared to $29.2 billion the previous year, driven by high freight rates due to the ongoing impact from the pandemic that has resulted in disruptions of global supply chains.

The past year has seen container freight rates soaring to previously unimaginable levels and Maersk has moved to lock in rates on long-term contracts, which it has prioritized over spot shipments. Long-term contracts now represent 65% of the line’s volumes compared to 50% a year earlier.

“The average loaded freight rate increased by 66% to $3,318/FFE ($2,000/FFE), primarily driven by long-term contracts renewing at significant higher rates, as well as short-term rates driven by strong demand combined with bottlenecks and congestions driving rate increases,” Maersk said in its annual report.

On East-West trades, freight rates increased by 70%, mainly due to strong demand, vessel and equipment shortages and bottlenecks across the supply chain. The main increases were driven by Asian and European headhaul trades.

The company continued to strengthen its logistics & services business throughout 2021, outperforming the market growth with a revenue increase of 41% to $9.8 billion. EBITDA was $907 million, up from $454 million year-on-year and EBIT increased to $623 million from $264 million a year ago. Furthermore, six businesses were acquired within air, e-commerce, warehousing and fulfillment, and 85 new warehouses opened, improving capabilities and footprint across the product portfolio.

For the terminals segment, profitability continued to grow in 2021, driven by strong volumes and storage income.

Maersk has been investing its huge profits in new acquisitions as it moves to further expand its end-to-end integrated logistics offerings.

It has most recently offered to buy US-based last-mile delivery specialist Pilot Freight Services in a $1.7 billion transaction, and last December initiated a deal to acquire pan-Asian contract logistics company LF Logistics for $3.6 billion. In November 2021, it announced it was buying air-focused freight forwarder Senator International for $644 million.

Maersk expects the current market situation to continue into the second quarter of 2022 and to normalize early in the second half of the year.

Based on these assumptions, it expects an underlying EBITDA of around $24 billion for full-year 2022 and an underlying EBIT of around $19 billion.

Ocean shipping is expected to grow in line with global container demand, which is expected to grow 2% to 4% in 2022, subject to high uncertainties related to the current congestion, network disruptions and demand patterns, said the carrier.

Photo by Wolfgang Fricke