High rates in sea and air transport have shot up the financial performance of global logistics operators. Increases of several hundred percent were not uncommon in the first quarter.
Although there are no audited results for Q1 yet, Danish operator A.P. Moeller – Maersk has decided to adjust its full-year guidance. The company does so on the basis of extremely optimistic preliminary results for the first months.
‘Consequently, given the result in Q1 2021 and the exceptional market situation now expected to continue well into the fourth quarter of 2021, the full year guidance for 2021 has been revised upwards with an underlying EBITDA now expected in the range of $13-15bn (previously 8.5-10.5bn) and underlying EBIT expected in the range of 9-11bn (previously $4.3-6.3bn),’ reads the company’s announcement.
For Q1 2021, Maersk reported revenues of $12.4bn with operating profit before tax (EBIT) of $3.1bn, according to preliminary estimates. Earnings before interest, tax, depreciation and amortisation (EBITDA) is estimated at $4 billion. As a comparison, the results for the first three months of 2020 were $9.6 billion in revenue, $1.5 billion in EBITDA and EBIT of 552 million, respectively.
Maersk explains that the exceptional market situation is due to the surging demand leading to bottlenecks in the supply chain and equipment (containers) shortage.
Maersk has also increased its forecasts for other indicators. At the end of the year, the group’s cash flow is expected to be at least $7bn against an earlier target of $3.5bn. The Danish operator is also planning a significant increase in capex. The cumulative capex guidance for 2021-22 has been raised to around $7bn (previously 4.5-5.5bn). The money is primarily to be used to acquire additional containers and improve service quality in the Ocean division to improve service reliability in this segment.
Other global players are also adjusting their guidance
Another Danish logistics operator DSV Panalpina also boasted a successful start to the year. Group revenue increased by 23% from DKK 27.3bn in Q1 2020 to DKK 33.6bn at the end of March 2021. EBIT also rose to DKK 3bn (a year-on-year increase of 95%!) and net profit at DKK 2.3bn was 600% higher year-on-year (!!!).
As a consequence, DSV Panalpina has also adjusted its forecasts for the full year 2021. The group now expects an operating profit (EBIT) of DKK 11.25-12bn (previously DKK 10.5-11.5bn). However, the Group stresses that this forecast does not include the benefits of the Global Integrated Logistics acquisition just announced.
Not only the Danes can boast a great first quarter of the year. Swiss company Kuehne + Nagel improved its revenue by 22.8% compared to Q1 2020, reaching 6bn Swiss francs.
However, it was the group’s profits that saw a major boost: in the first few months of this year, EBITDA soared by more than 61% year-on-year and EBIT by as much as 134%. The group’s net profit rose by as much as 128.8% from 139m to 318m Swiss francs.
Ships and aircraft boost results
The sea logistics and air transport divisions were instrumental in the Swiss group’s significant growth in earnings. The former had revenues of 2.4bn francs (up 39% year-on-year). This accounted for approximately 40% of the group’s total revenue. The segment’s operating profit also made a significant jump, from 79m francs in Q1 2020 to 206m in January-March 2021.
The segment’s excellent performance was driven by high consumer demand (especially in the US) combined with a favourable market situation for the operator, i.e. high container rates with their limited availability, the company explained. Interestingly, volume growth was 2% (1.1 million TEUs), confirming that rate increases were the driving force behind the strong performance of ocean freight forwarders and shipowners.
The air logistics division recorded a year-on-year increase in revenue of more than 51% in the first three months of 2021. Revenues for this segment reached 1.65bn francs. As with sea transport, the operating profit of the air division more than doubled from 71m francs to 163m francs at the end of March 2021.
As the Swiss operator points out, Q1 saw volume growth in this transport segment for the first time in two years. Cargo volumes transported increased by 16% in the past quarter, reaching 433,000 tonnes.
Back to normal on the roads
Although the road transport division has not grown as impressively as sea and air logistics, positive signals are also coming from this segment. According to Kuehne + Nagel, the first quarter of this year indicates a return of service capacity in Europe to last year’s level.
Segment revenue increased by 0.8% to 870m francs, however, with a significant increase in EBIT (up 41.2%) to 24m Swiss francs.
Photo credit @ Maersk