Maersk fears Covid relapse as Q2 volumes hit revenues

Improving third quarter volumes cannot be relied upon according to Maersk, with the uncertainty around whether there will be a Covid-19 relapse, causing a second wave, and leading to another decline in demand, said the Danish giant in its Q2 interim report.

Container demand is expected to sequentially and gradually improve in the third quarter, according to Maersk, but at this stage, it is not possible to be precise about the development due to the uncertain impact of the pandemic on global economies.

The spread of the Covid-19 pandemic had a marked affect on Maersk’s business in the second quarter, as container volumes were hit hard by the slumo in demand. The global container trade declined by around 10% in the last quarter, but Maersk’s box volumes, decreased by 16% in Ocean and 14% in gateway terminals. the decline in volumes led to a 6.5% drop in the company’s Q2 revenue.

“We, despite the headwinds, continued our track record of improving earnings and free cash flow,” said Søren Skou, CEO of A.P. Møller – Maersk.

Earnings before interest, tax, depreciation and amortisation (EBITDA) increased to US$1.7 billion and the EBITDA margin climbed from 14.1% in 2019 Q2 to 18.9% this year. Additionally, cash flow from operating activities increased to US$1.9 billion from US$ 1.2 billion), while free cash flow saw a noteworthy gain to US$1.1 billion from US$270 million in the same quarter last year.

Although the total fleet of A.P. Møller – Maersk has decreased by 57 vessels and around 245,000TEU since the start of the year, the Copenhagen-based carrier remains the largest shipping company in the world.

Source: A.P. Møller – Maersk

Maersk fleet consists of 305 owned and 346 chartered vessels, of which 29 ships with an overall capacity of 248,000TEU, which represents the 6.4% of the fleet, were idle, mainly due to retrofit of scrubbers and capacity adjustments.

The continued focus on improving returns showed further results with a cash return on invested capital (CROIC) and ROIC, added Maersk in its announcement. In the last 12 months, there has been an improvement of 12.5% from 8.9% on CROIC and 4.7% from 1.4% on ROIC.

“The focus on a strong 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 transformation,” highlighted the company.

Source: A.P. Møller – Maersk
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