In this Supply Chain Matters blog commentary we highlight the 2021 financial performance of high profile ocean container carrier A.P. Moeller-Maersk, along with the broader implications.
The much-anticipated formal report of the 2021 financial performance of high-profile ocean shipping container carrier A.P. Moller-Maersk indeed provided exceptional performance.
The former leading global shipping carrier, and now second to Mediterranean Shipping Lines (MSC) by category of global wide capacity, reported a 2021 total revenue increase of 55 percent to $61.8 billion.
EPITA nearly tripled to $24 billion, while free cash flow amounted to $16.5 billion. Such profitability truly meets the descriptor of a windfall, given the level of global wide shipping disruption and service delays that occurred last year.
The carrier’s land-based logistics services including owned terminals recorded an annual revenue of $9.8 billion, a 41 percent year-over-year increase. The majority of this segment’s revenue growth reportedly came from cross selling to the top 200 ocean transportation customers. A total of six businesses were acquired during 2021 within air freight, warehousing and last mile customer fulfillment service areas.
The ocean transportation business segment recorded 2021 total revenues of $48.2 billion, a 65 percent year-over year increase from that of 2020, driven by record high global freight rates.
The carrier’s statement related to financial performance indicates that added profits allow the company to make added strategic investments into decarbonization of shipping operations, added expansion into land-based logistics service by way of acquisitions, combined with “strong” cash distribution to shareholders. The carriers board of directors proposed a more lucrative shareholder dividend rate amounting to approximately $7.2 billion in total allocation, equating to a dividend yield of 10.7 percent vs. a previous 2.7 percent.
What really caught the attention of financial markets was the carrier’s guidance for 2022. Essentially the guidance indicated that the current extraordinary Ocean market situation is expected to continue into Q2-2022, with a normalization expected in the second half of the year. Ocean transport demand is expected to grow between 2 percent and 4 percent during the year, subject “high uncertainties related to current congestion.” Underlying EPIDA was forecasted to grow to around $24 billion.
CEO Soren Skou later clarified on Bloomberg Television: “We are guiding in an environment where we are coming out of a pandemic, and we don’t have much experience with that to be honest. The result will be very similar to the one we had last year, which was record breaking in every dimension.”
In conjunction with today’s disclosure of financial performance, Maersk separately announced intent to acquire U.S. based specialty logistics and trucking services firm Pilot Freight Services for upwards of $1.7 billion. In our previous special edition of Supply Chain Matters This Week in Supply Chain Tech column, we highlighted the details of that announcement.
Drewry, an independent maritime research consultancy, indicated in early December 2021 that container shipping pre-tax profit levels for 2021 could be in a range of $150 billion to as high as $300 billion. In 2021. In 2020, the industry reported $25.4 billion in total profitability.
A final observation seems obvious. In the midst of unprecedented global supply chain materials and transportation disruptions, and amid some of the most unprecedented triple digit ocean freight rate increases driving higher levels of supply chain cost inflation, some have obviously benefited. What occurs in the remainder of 2022 will be barometer of how the shipping and logistics industry fares in the minds of businesses and industry groups. Right now, small and medium sized businesses are at the peril of far larger multinational companies that can contract, and buffer market spot rate increases thru contractual agreements predicated on annual volumes. The notions of what was once described as common carriers available to all seems distant at this point.
Bob Ferrari
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