Maersk warns no end in sight to supply chain crisis as profits soar

Maersk said there was no end in sight to the global supply chain crisis as the world's largest container shipping group enjoyed the most profitable quarter in its 117-year history and made a $1 billion (€860m) push deeper into air freight.

Chief executive Soren Skou said that congestion outside ports such as Los Angeles and Long Beach was getting worse as retailers and manufacturers struggled to keep up with surging demand after the Covid-19 pandemic.

“The ports are not working as well as they should do, so we can’t discharge containers as fast as we would like. It’s hard to see exactly when the situation will improve. Our customers are dealing with super high customer demand, and on top of that they have very low inventory.”

Maersk had a bumper third quarter, almost quintupling its operating profits to $5.9 billion, more than it has made in any year since 2014.

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A sharp increase in demand following the initial shock of Covid-19 has led to surging container freight rates, while labour shortages at some ports has meant long delays in unloading cargo.

Mr Skou said the number of ships waiting outside LA/Long Beach had risen from about 60 a month ago when he last visited to about 80 currently. “What we really need in Long Beach is more longshoremen and, most importantly, more truckers.”

Maersk is spending more than $1 billion to expand its small air freight offering, buying Senator International, a German freight forwarding company that is strong in air cargo, and adding five new aircraft for itself in purchases and leasing in the next three years. It already operates 15 aircraft in its Star Air subsidiary.

Mr Skou, who has been vocal about the need for shipping to become carbon neutral quicker than official targets, defended the move into aviation, saying it would be customer demand not Maersk’s push into air freight that would decide how much cargo was transported by aircraft.

Efficiency

He said the current goal of the International Maritime Organisation to cut emissions by 50 per cent by 2050 was “frankly, very unambitious” and wanted the industry to focus on increasing energy efficiency as well as decarbonisation.

He added that Maersk would look to build up its contract logistics business outside of the US, where it is already strong, as it seeks further acquisitions.

Maersk’s revenues in the third quarter rose two-thirds from the same period a year earlier. It had already boosted its profit guidance for this year for the third time in September, and on Tuesday announced it would extend its share buyback programme by $5 billion for 2024 and 2025.

The Danish group added that it expected the fourth quarter of this year and first three months of 2022 to be equally strong as its record third quarter, meaning both should deliver earnings before interest, tax, amortisation and depreciation of about $6 billion-$7 billion.

Mr Skou said he expected more customers to take long-term contracts with Maersk, increasing the stability and predictability of its earnings. – Copyright The Financial Times Limited 2021