World’s Largest Container Shipping Company Reports Higher Second Quarter Profits

Maersk, the world’s largest container shipping company, posted a sharp increase in second quarter profits as traffic congestion and bottlenecks continue to drive up shipping rates.

The company on Friday reported earnings before interest, taxes, depreciation, and amortization (EBITDA) of $ 5.1 billion, an increase of 200% from the $ 1.7 billion reported in the same period last year. . Revenue increased nearly 60% to $ 14.2 billion.

Container shipping rates have skyrocketed as the global economy rebounded from the Covid-19 pandemic and demand for commodities recovered, while a container shortage exerted pressure on supply chains. More recently, a combination of growing orders from retailers and slower turnover rates due to the Covid-19 outbreaks in several countries has pushed prices up even more.

“Currently in container transport we do have unmet demand. The global capacity is not able to meet all the demand and this is what drives freight rates up,” Skou told CNBC’s “Squawk Box Europe” Friday.

“At the same time, of course, we had traffic jams in Los Angeles, we closed the Suez Canal for a week, we have one of the biggest ports in China closed for more than a week in the last quarter, and it takes our market capacity, which adds to the problem, so to speak. ”

Tariffs from China to the United States, for example, hit new records above $ 20,000 per 40-foot box, up more than 500% from a year ago, according to the Freightos freight tracking company.

Skou said companies are trying to meet strong retail demand while also building up their inventories, as evidenced by extremely low inventory-to-sales ratios in the United States, which is contributing to the strong demand for containers which is expected. continue at least into the next quarter.

“We continue to build a better quality Ocean business with longer term contracts, a fast growing and profitable Logistics business with more than half of the 38% growth coming from the best Ocean customers, and a Terminals business creating value, which doubled its profitability during the quarter, ”Skou said in a statement accompanying the results.

Maersk’s return on invested capital is now 23.7% over the past 12 months, and Skou said the company’s earnings and cash flow will allow it to make targeted acquisitions while returning capital. money to shareholders.

The Danish giant also announced Friday the acquisition of parcel shipping companies Visible Supply Chain Management and B2C Europe, as part of its plans to expand its e-commerce capabilities.

“The outlook for the third quarter is strong and we expect Ocean’s current momentum to continue into the fourth quarter, which will also benefit our terminals business,” Skou said in the statement.

Maersk on Monday raised its guidance for 2021 to underlying EBITDA of between $ 18 billion and $ 19.5 billion, with expected free cash flow of at least $ 11.5 billion.