Maersk 2018 Trading volume for profit

Maersk has released their 2018 results, and judging from the reaction of the investors it did not go down well with share prices dropping 10%.

But it should in that context be remembered that the developments also reflect non-Ocean developments such as the coming de-merger with Maersk Contractors and other elements, notably the investors’ own expectations prior to the accounts.

Looking purely at the Ocean performance, it is a case of glass-half-full or glass-half-empty. There is as yet not really any reasonable peers to compare Maersk to. HMM had a loss of more than 700M USD in 2018, but they have for a long time had, by far, the poorest performance among the larger carriers. ONE still expect a loss of 600M USD, but this is due to integration challenges related to the merger of NYK, MOL and K-Line. None of these two are reflective of a “steady” development in the current environment.

From a volume perspective, organic growth came in at 2.5% for the full year (excluding the Hamburg Süd effect), and for Q4 volumes were actually reduced by 1.1% in Q4 compared to Q4 2017. If a measure of success is the amount of boxes shipped, the glass is clear half-empty and still draining.

But, if the measure of success is profitability, the numbers tell a different story. Maersk has also been curbing its capacity, and overall fleet utilization has been increasing. As a result, the EBITDA margin increased from 10.3% in Q4 2017 to 12.7% in Q4 2018.

Especially the 2nd half of 2018 went much better for Maersk than the first half. The Q1 EBITDA margin was 7.1% - which then increased to 12.6% in Q3 and 12.7% in Q4. A full 62% of the total EBITDA was realized only in the 2nd half of the year.

This indicates that Maersk is improving the underlying performance, focusing on profit optimization for the business they have, rather than volume growth – and that this is working for them.

The worrying sign is their expectation of global demand growth of only 1-3% in 2019. This would result in 2019 once again seeing capacity growth exceed demand growth, and a negative pressure on the freight rates would continue.

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