Providing further evidence of the exceptional market conditions for the container shipping industry, A.P. Moller- Maersk reported that preliminary unaudited financial results for the fourth quarter of 2021 are ahead of expectations prompting the shipping giant to once again increase its forecast for the full year. Maersk, which was already on track for record profits, the largest ever for any Danish company, increased its profit forecast by nearly five percent and free cash flow from operations by more than 13 percent.
The shipping and logistics company reports that the fourth quarter results were driven by an 80 percent improvement for its average freight rates during the quarter versus the year ago. The strong freight rates more than offset a four percent decrease in ocean volumes during the fourth quarter. Total revenues in the fourth quarter reached $18.5 billion which exceeds the $16.6 billion in revenues for the third quarter, which was the company’s thirteenth quarter in a row with year-on-year earnings progress. As a result, Maersk said it will report earnings of $8 million (EBITDA) or an underlying EBIT of $6.8 billion for the fourth quarter.
“The strong result in the quarter reflects the continuation of the exceptional market situation within ocean caused by the global disruptions to the supply chains, which have led to further increase in container freight rates,” Maersk writes in its trading update. “Consequently, given the strong performance in Q4 2021 the preliminary full-year figures for 2021 will exceed our previous guidance.”
Maersk had previously increased its guidance for the full year in August 2021 when it added $5 billion after having already increased from its original projection of $8.5 to $10.5 billion for 2021 profits. In today’s update the company raises its profit forecast to $24 billion (EBITDA) which will be $1 to $2 billion ahead of the previous forecast. Cash flow, which the company is using to make acquisitions for its strategy to become a global logistic provider, is now forecast at $16.4 billion for the year up $1.9 billion from the previous guidance.
Maersk CEO Soren Skou told investors in November 2021 that he expected market conditions to continue well into 2022. He pointed to labor shortages at major ports, including the U.S. and U.K., as well as the shortage of trucks to move the containers, predicting that the fourth quarter of 2021, as well as the first quarter of 2022, would continue the same financial performance.
Maersk’s forecasts are demonstrative of the strength of the industry with all the major carriers reporting strong financial performances. Industry analysts at Drewry forecasted that the industry will report about $190 billion in operating profit for 2021 with the expectation that the strengths would continue to drive financial results in 2022. An analysis of the industry in the Washington Post yesterday pointed out that the profits of the shipping lines for 2021 would exceed the combined earnings of technology giants Apple and Microsoft.
Despite the upward revision to its forecast, shares of A.P. Moller – Maersk were trading down by as much as 4.5 percent on Friday in an overall down day for the stock markets. Maersk said it will release its 2021 results on February 9 and provide its updated outlook for the first quarter and full year 2022.