Maersk Is Cutting Costs as Shipping Downturn Lingers.

"A.P. Moller-Maersk is sharpening its focus on cost cutting in what the carrier says is a contracting container shipping market.

The Danish shipping giant upgraded its earnings outlook even as it lowered projections for freight demand, saying it now expects global container volumes to decline between 1% and 4% this year and that it will adjust its operations to slowing business.

"We do not see any sign of an expected volume rebound in the second part of the year," Chief Executive Vincent Clerc said on an earnings call.

The company is the latest container line to report a sharp drop in second-quarter net profit after freight rates and volumes fell. But Maersk's cost cuts helped earnings beat expectations and prompted the company to raise the lower end of its full-year guidance range.

Maersk reported a quarterly net profit of $1.45 billion, down from $8.62 billion in the same period last year, as revenue fell 40% to $12.99 billion. A FactSet consensus had seen net profit at $591 million on revenue of $13.09 billion.

Maersk said its shipping customers continued to reduce inventory in the quarter, particularly in North America and Europe, as the weaker global growth environment weighed on consumer demand, pushing freight rates at Maersk's main shipping unit down 51% from a year ago and volumes 6.1% lower. Revenue in the division fell 50%.

Maersk said retailers are continuing to pare excess inventories in a destocking effort that the shipping line expects to continue through the end of the year. As a result, it now expects global container volumes to fall this year, compared with an earlier projection of minus 2.5% to plus 0.5% growth.

Rival container line CMA CGM recently reported that its second-quarter profit fell 82% to $1.3 billion as container volumes fell at a double-digit pace from the first quarter.

Shipping lines have responded to the demand downturn by reducing capacity, using measures such as canceling port calls and slowing ship speeds.

"We have employed all the tools of dynamic capacity management that we have developed in the previous cycles, and we have also brought out our familiar cost containment playbooks," Clerc said.

Industrywide reports suggest the carrier efforts have halted this year's steep decline in prices, although prices remain far below freight rates in 2022, when a retailer rush to restock inventories swamped shipping capacity and drove up prices." [1]

1. EXCHANGE --- Business News: Maersk Is Cutting Costs as Shipping Downturn Lingers. Chopping, Dominic.  Wall Street Journal, Eastern edition; New York, N.Y.. 05 Aug 2023: B.9.