First quarter operating profits go up 23% yoy to $1.5 billion
Maersk had a financially strong start to the year. Despite the COVID-19 pandemic’s profound impact on global trade the company kept momentum in its strategic transformation and demonstrated robustness to weather the crisis.
Søren Skou, CEO of A.P. Moller Maersk said: “In the first quarter of the year, A.P. Moller - Maersk again delivered profitable growth. Operating earnings increased by 23% year-on-year, and cash return on invested capital increased by 3.5 percentage points to 10.5%.
"The strong results were made during a quarter with sharp fuel cost increases derived from the industry’s switch to low-sulphur fuel and on the backdrop of a contraction in global trade due to lockdowns in most regions.
"From the beginning of the COVID-19 crisis our focus has been on the health and well-being of our employees, on supporting our customer’s businesses and the societies we are part of.”
EBITDA improved 23% to $1.5 billion compared to Q1 last year and the EBITDA margin increased to 15.9%. Revenue increased slightly to $9.6 billion, despite lower volumes and mainly driven by Ocean.
Product offerings also expanded in line with the strategy of supporting customer’s supply chain end-to-end. The acquisition of Performance Team, a US-based warehouse and distribution company, and a cold store construction in St. Petersburg, Russia were completed during Q1.
Furthermore, the usage of digital services increased significantly as customers benefitted from the convenience of managing their supply chains remotely. The Maersk app for example experienced an 86% increase in usage.
The suspension on full year guidance for 2020, announced on 20 March, remains, as the COVID-19 pandemic continues to lead to material uncertainty in the coming quarters.
Søren Skou noted: “Looking into Q2 2020, visibility remains low as a result of the COVID-19 pandemic. We continue to support our customers in keeping their supply chains running, however as global demand continues to be significantly affected, we expect volumes in Q2 to decrease across all businesses, possibly by as much as 20-25%.
"2020 is a challenging year, but as we proactively respond to lower demands and show progress in our transformation and financial performance, we are strongly positioned to weather the storm.”
The global market growth in demand for containers is expected to contract in 2020 due to COVID-19 (previously between 1-3% growth). Organic volume growth in Ocean is expected to be in line with or slightly lower than average market growth.
The accumulated guidance on CAPEX for 2020-2021 on USD 3–4 billion is unchanged, with steps being taken to reduce CAPEX in 2020.