The world’s leading container shipping company posts its highest second earnings amid a raging pandemic. Danish shipping giant Maersk recorded a $5.1 billion Earnings before interest, tax, depreciation, and amortization (EBITDA), doubling its performance for the second quarter of 2020, which reached $1.7 billion. Its total revenues also soared to $14.2 billion or 60% from last year.
Helped by a recovering global company and increasing container shipping rates, Maersk is one of a few companies that have fared well even with a raging pandemic. Container shipping rates spiked as demand for commodities returned around the world and a scarcity of containers congesting the supply chains.
In a statement, the firm explains its record-high earnings and its outlook on the subsequent quarters.
Unmet demand for container shipping rises
Maersk has boosted its earnings with skyrocketing container shipping rates – and a forecasted unmet demand for the next quarter will drive rates higher. The global retail industry has struggled to serve an astounding rise in orders but bottlenecks in the supply chain have created slugging turnaround rates. These factors have shored up container shipping rates further.
For instance, when shipping from China to the US, rates now stand more than $20,000 for every 40-foot box. This rate is 500% more than it was one year ago, Freightos, the freight-tracking firm observes.
Søren Skou, CEO of Maersk, says that container shipping is facing a huge “unmet demand” with overall global capacity unable to lift all of this demand. In his interview with CNBC’s “Squawk Box Europe,” Skou explained that this fact is “driving up freight rates.”
In addition, Skou blamed recent congestion and closure for burdening supply chains. Among these are the Los Angeles congestion, closure of the Suez Canal for a week, and China’s port closures. Such closures have decreased global capacity and exacerbated the problem, Skou added.
Maersk upbeat following report
Maersk believes that high demand for shipping containers will continue until at least Q3. Skou explained that businesses are trying to meet strong retail demand while also managing their inventories. Bottlenecks result in very poor inventory-to-sales rations in the US, pushing further demand for containers.
Commenting on its record high Q2 earnings, Maersk reaffirmed their commitment to create “a higher-quality Ocean business with more long-term contracts”, part of this growth originating from their leading Ocean clients. The company added in the statement that their Terminals business has also doubled in profits.
At present, the Danish global shipping titan posts a 23.7% return on invested capital within the 12 months preceding. Moreover, its cash flow and earnings places it at a strong position to close targeted acquisitions and return cash to its shareholders.
It has already announced its acquisition of companies B2C Europe and parcel shipping firm Visible Supply Chain Management, to bolster its eCommerce capacities.
Skou explains in a statement that their outlook for Q3 is robust. The firm will pick up on Ocean’s current momentum to boost its Terminals business well into Q4.