Ocean container transportation leader A.P. Moeller Maersk reported what was termed mixed Q4 and full-year 2018 financial performance, and a cautious forecast for declining global shipping volumes for 2019.
Highlights of 2018 included:
- Total revenues of just over $39 billion, a year-over-year increase of 26 percent. Full year increase in revenues includes the integration of shipping line Hamburg SUD that was acquired in 2017.
- EBITDA of $3.8 billion, a year-over-year increase of 7.7 percent, primarily burdened by a reported 32 percent increase in bunker fuel not recovered in fuel surcharges.
- Underlying profit from continuing operations of $220 million , a decrease of 38 percent, with a reported loss of $194 million, falling short of analyst expectations.
Management pointed to 2018 as a year of transition with progress made on digital transformation of business processes , allowing shipping customers to book everything online starting early in 2019. Support functions were integrated to include IT, Finance HR Legal and Corporate Communications. Transformation is expected to accelerate in 2019. Cost synergies from the Hamburg SUD acquisition amounted to $420 million in 2018 and total synergies were raised to the amount of $500 million by the end of 2019.
Q4 total revenues were reported as $10.2 billion, equating to a 21 percent year-over-year increase. The number would have been 9 percent if adjusted for Hamburg SUD revenues. EBITDA was reported as $1.1 billion. Average freight rates increased by 9.3 percent during the final quarter on declining volumes, including backhauls. Freight rate increases were primarily attributed to the pre-tariff rush in trans-Pacific movements from China to the United States.
Looking forward, executives expressed concern for potentially lower volumes this year, with an expectation that the global trade tensions to escalate, with the ongoing issues of the UK leaving the European Union and even if the United States and China agree to a new deal. CEO Soren Skou indicated to analysts that Maersk expects global container demand to increase between 1 percent to 3 percent in 2019, below the 3.7 percent increase of last year.
EBITDA is expected to be flat or a slight increase over that of 2018, well below expectations. Management pointed to efforts to deliver greater reliability, more simplicity and visibility and to become the global integrator of container logistics, simplifying customer supply chains.
As Supply Chain Matters has previously noted, Maersk has established a goal of further acquisitions in the logistics services segment in the coming months, particularly to take advantage of augmented technology.
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