Maersk says it learned a lesson from the financial crash and will not resort to a market-share grab to fill its ships during the pandemic downturn.
The company reported a net profit of $443m for the second quarter, which compares with a profit $154m for the same period of 2019.
This was achieved by a favourable combination of higher freight rates, lower bunker costs and substantial savings from the blanking of more than 160 sailings.
Maersk’s earnings improved at the ebitda level by an impressive 25%, to $1.7bn, despite the impact of Covid-19, which saw group revenue decline 6.5% to $9bn in the quarter. This was due to a liftings slump of 16% across its liner trades and a 14% fall in the number of containers handled at its terminals, .
“I am pleased that, despite the headwinds, we continued our track record of improving earnings and free cash flow,” said CEO Soren Skou.
“Our operating earnings improved by 25%, marking the eighth consecutive quarter with year-on-year improvements, driven by a strong cost performance across all our businesses, lower fuel prices and higher freight rates in Ocean and increased profitability in Logistics & Services.”
Although Maersk’s liner volumes plunged by 16%, to 2.9m teu, in the quarter, revenue earned fell only 8.7%, to $6.6bn, as average freight rates increased by 4.5% to $1,915 per teu, driven by an 8.2% spike in rates on east-west trades.
Latin America and intra-America trades were the most affected by Covid-19, with volumes contracting by 25% and 21% respectively, although Maersk’s average freight rate for north-south trades was still up by 5.2%.
The carrier’s digital Maersk Spot product gained further momentum and now accounts for some 41% of its short-term or spot business.
Maersk recorded a $265m gain from lower fuel costs and $151m in network savings as ships were temporarily taken out of service to mitigate the impact of lower demand.
According to Mr Skou, the success of the aggressive blanking programmes across its networks represented a “structural change” that would be repeated should there be a second wave of the virus and further regional lockdowns.
“Since it has worked so well for us, why should we change it?” he argued.
“In 2009, during the financial crash, the thinking was that if you have a network you had to keep sailing regardless of cost.”
Mr Skou explained that, with fewer strings a decade ago, it was difficult to withdraw capacity, but with consolidation, blanking sailings was less likely to disrupt customer supply chains.
“Back in 2009 we went aftermarket share, but the pandemic has strengthened our resolve and we want to focus on profitability and servicing our customers,” he said.
Maersk’s gateway container terminals reported a 10% decrease in revenue, as box throughput declined by 14%, driven by the impact of Covid-19, but a “strong focus on cost measures” brought a “resilient performance” with an unchanged ebitda of $186m for the quarter.
The group’s logistics business saw revenue on par with the previous year, despite a decline in volume, leading to an ebitda more than twice the level of the previous year, at $97m.
After the suspension of its full-year guidance during the height of the pandemic crisis in March, Maersk is now forecasting an ebitda of $6-7bn, above the $5.5bn guidance given before the virus outbreak.