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A.P. Moller-Maersk is cutting more jobs due to the tough market environment, with 3,500 positions eliminated this year until 2024
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This is in addition to the 6,500 headcount reduction already realized this year
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Maersk’s third-quarter report revealed profits before taxes dropped from $9.1 billion to $691 million, in line with expectations
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Global container volume growth is forecast to be in the range of -2% to -0.5% for 2023 compared to -4% to -1% previously
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Vincent Clerc, Maersk CEO, highlighted the need to streamline operations and contain costs in response to subdued demand, prices back in line with historical levels and inflationary pressure
A.P. Moller-Maersk is cutting more jobs in response to tough market environment.
The world’s largest container line in a statement said it has already implemented cost-control measures throughout the year reducing the workforce from 110,000 in early 2023 to around 103,500 today.
Recognizing the challenging outlook for the Ocean division, Maersk plans to further reduce its workforce by 3,500 positions, with up to 2,500 positions eliminated in the coming months and the rest extending into 2024.
This will reduce the global workforce to below 100,000 positions, with an expected restructuring charge of US$350 million, up from the initial $150 million announced in February.
The adjustment of the workforce complements the actions taken on cost containment throughout the year. The accumulated effect will bring down Maersk’s selling, general and administrative expenses cost by $600 million for 2024.
Financials
Maersk’s financial results for third quarter of 2023 were in line with expectations in a difficult market environment with rates well off their 2022 peak and tested by increased ocean capacity.
Revenue in the third quarter was $12.1 billion compared to $22.8 billion year-on-year with an earnings before interest and taxes margin at 4.4% impacted by lower freight rates and lower volumes.
Maersk maintains its guidance ranges but now expects to be towards the lower end of the ranges.
“Our industry is facing a new normal with subdued demand, prices back in line with historical levels and inflationary pressure on our cost base. Since the summer, we have seen overcapacity across most regions triggering price drops and no noticeable uptick in ship recycling or idling. Given the challenging times ahead, we accelerated several cost and cash containment measures to safeguard our financial performance. While continuously streamlining our organisation and operations, we remain dedicated to our strategy of fulfilling our customers’ diversified supply chain needs while pursuing growth opportunities across our Terminals business and Logistic & Services,” said Vincent Clerc, CEO of A.P. Moller-Maersk.
Ocean reported a 9% increase in volumes since the previous quarter and a strong cost focus supported an 11% decrease in unit cost at fixed bunker compared to Q3 2022. However, EBIT was negative at $27 million, down from $8.7 billion in the third quarter of 2022, driven by significant pressure on rates, in particular on Asia to Europe, North America and Latin America trades.
Revenue in Logistics & Services was $3.5 billion compared to $4.2 billion in Q3 2022. The segment was impacted negatively by lower prices, especially in the air and haulage market, while volumes were broadly back in line with last year’s level. Increased cost management helped stabilize margins sequentially.
Terminals reported revenue at $1.0 billion compared $1.1 billion in Q3 2022 driven by less demand for storage amid eased global congestion and a 4.1% decline in volume. Results were strong as a combination of price adjustments and cost measures. Return on invested capital increased to 10.3%, exceeding the expectation of above 9% towards 2025.
Meantime, Maersk’s capital expenditures for 2022-2023 is now expected to be around $8.0 billion, a decrease from the earlier estimate of $9.0-10.0 billion. The 2023-2024 CAPEX is projected to be in the range of $8.0-9.0 billion, down from $10.0-11.0 billion.
The company maintains its ranges for the full year 2023 guidance but now expects results towards the lower end of the previously communicated ranges of underlying EBITDA of $9.5-11.0 billion and underlying EBIT of $3.5-5.0 billion. Guidance for free cash flow of at least $3.0 billion remains unchanged.
Maersk now sees global container volume growth in the range of -2% to -0.5% for 2023 compared to -4% to -1% previously. Ocean expects to grow in line with the market.
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