Despite significant falls in volumes due to the impact of the COVID-19 pandemic, Maersk managed to improve profitability across all its business segments during Q2 2020, via capacity deployment adjustments and cost mitigation initiatives.
Revenue decreased by 6.5% to US$9bn, driven by a volume decrease of 16% in ocean and 14% in gateway terminals.
However, earnings before interest, tax, depreciation and amortisation (EBITDA) improved to US$1.7bn, which is higher than expectations had been in June of a figure slightly above US$1.5bn.
Søren Skou, CEO of A.P. Moller – Maersk, said: “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.
“We despite the headwinds, continued our track record of improving earnings and free cash flow. Our operating earnings improved by 25%, marking the eighth 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.”
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, favorable airfreight contribution and the integration of performance team, while terminals and towage proved resilient as cost measures compensated for lower volumes.
The Danish company noted that the focus on cost and capital allocation discipline will continue, and more additional cost and structural measures across the business will be taken to offset the negative impact of COVID-19 and fund the next stages of the company’s transformation.
Maersk has now reinstated its full-year guidance for 2020, expecting EBITDA to be between US$6-7bn, before restructuring and integration costs, provided there is not a material second lockdown phase. The guidance is also subject to uncertainties related to freight rates and bunker prices.
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 the ocean business is expected to be in line with or slightly lower than the average market growth.
The accumulated guidance on gross capital expenditures excl. acquisitions (CAPEX) for 2020-2021 is still expected to be US$3-4bn, with steps being taken to reduce CAPEX in 2020.