Announcing its second quarter financial results, AP Moller – Maersk reported a drop in revenues by 6.5% to $9bn in Q2 2020 from $9.6bn in same period a year earlier, which Maersk said was mainly driven by a volume decrease of 16% in ocean and 14% in gateway terminals, but was partially offset by an increase in freight rates and revenue per move in its terminals segment.
EBITDA increased by 25% to $1.7bn in Q2 2020 compared to $1.4bn a year earlier, primarily driven by an improvement in its core ocean sector, Maersk Line. For the container line business, Q2 2020 EBITDA was $1.36bn up from $1.08bn a year earlier, while revenues contracted to $6.57bn compared to $7.2bn a year earlier with 10% decline in freight revenues.
Volumes in Q2 decreased by 16% year-on-year to 2.9m feu, however, the average loaded freight rate increased by 4.5% to $1,915 per feu. Maersk was able to reduce operating costs by 16% to $5.2bn in the quarter through capacity management, and lower bunker and charter rates.
In Ocean, the lower volumes were partly offset by ‘agile capacity deployment of the global network’ leading to lower costs, together with lower fuel prices and higher freight rates.
In Logistics and Services, profitability increased through cost measures, favourable airfreight contribution and the acquisition of US warehousing and distribution specialist Performance Team, while Terminals and Towage showed their resilience by compensating lower volumes through cost measures.
“As expected, the second quarter was materially impacted by Covid-19 and our focus remained on protecting our employees from the virus, serving our customers by keeping our global network of ships sailing and our ports, warehouses and inland transportation networks operating, and helping the societies we are part of fight the virus,” said CEO at AP Moller – Maersk Søren Skou.
“I am pleased that despite the headwinds, we continued our track record of improving earnings and free cash flow. Our operating earnings improved by 25%, marking the eight-consecutive quarter with year-on-year improvements, driven by strong cost performance across all our businesses, lower fuel prices and higher freight rates in ocean and increased profitability in logistics and services.”
Looking ahead Maersk has reinstated earnings guidance for 2020, suspended in March due to the uncertainties caused by the Covid-19 pandemic. It now expects an EBITDA of $6bn – $7bn for 2020, which is higher than its guidance of $5.5bn prior to suspension.
“The global demand growth for containers is still expected to contract in 2020 due to COVID-19 and for Q3 2020 volumes are expected to progressively recover with a current expectation of a mid-single digit contraction. Organic volume growth in Ocean is expected to be in line with or slightly lower than the average market growth,” Maersk noted.
Maersk cautioned that its guidance was subject to ‘significant uncertainties’ related to COVID-19 and did not take into account the possibility of a second lockdown.