Maersk Cites Strong Freight Rates Adding $7B to 2022 Profit Forecast
Maersk increased its profit forecast for 2022 based on the continued strength in the global markets and delays in its expectations for a normalization in the markets in the second half of the year. The shipping giant, which reported the largest ever profit for a Danish company in 2021, is on track to dramatically exceed last year’s results, raising its forecast by an additional 23 percent.
A day in advance of releasing its financial results for the second quarter and the first half of 2022, A.P. Moller-Maersk provided an update to the financial markets increasing its forecast for the remainder of the year. The company said that based on the strength of its ocean shipping operations it will report “a financial performance ahead of our expectations ….The strong result is driven by the continuation of the exceptional market situation.”
Revenues for the second quarter are up more than 12 percent versus the first quarter of the year and 50 percent ahead of the year-ago second quarter. Maersk said it will report revenue of $21.7 billion for the second quarter with an equally strong performance in earnings. Operating profits more than doubled to $8.9 billion (EBIT) or $10.3 billion (EBITDA).
“Congestion in global supply chains leading to higher freight rates has continued longer than initially anticipated,” Maersk said commenting on the strong results. While many experts have highlighted declines in freight rates in 2022, Maersk has previously commented on strong demand and the impact of port congestion contributing to the increases in its revenues. In its most recent market commentary, it referenced positive short-term trends including a rebound in volumes from China after the COVID-19 lockdowns and earlier than normal peak demand on routes to the U.S.
As a result of the strengths in the market, Maersk also provided its second update on its forecast for full-year results. Presenting its third set of projections for the year, Maersk increased its profit outlook for the year by $7 billion after having added $6 billion after its first quarter report in May. Maersk originally forecast that 2022 profits would be flat compared to 2021 at approximately $24 billion, but now is expecting $37 billion in profits (EBITDA) up from the forecast of $30 billion in May.
Maersk had previously warned investors that it foresaw a normalization during the second quarter of this year for the ocean shipping markets after nearly two years of strong increases. Despite forecasts by industry analysts that freight rates may have already peaked, Maersk said its news 2022 guidance is based on “a gradual normalization in ocean shipping taking place in the fourth quarter of 2022.”
Last week, Hapag-Lloyd also revised previous forecasts for a slowing in the markets during the second half of 2022. The German shipping company added $5 billion to its projections for 2022 also citing the strength of freight rates. Hapag reported that the average freight rate increased by approximately 80 percent in the first half of 2022 versus the prior year, while also saying that its volume was basically flat year-over-year.
Coming on an overall down day for the stock market, Maersk’s revised forecast drove the stock price up by more than two percent in mid-day trading. The company told investors it will publish its full second quarter results tomorrow, August 3, and it is expected to provide additional details on market conditions and its outlook for the remainder of the year.