Maersk Forecasts $31B profit on Surging Freight Rates
Maersk known for its global shipping prowess has set its profit forecast at $31B billion for this quarter. surging sea freight rates, the company has managed to have an organic growth rate of 30%. Soren Skou who is Maersk’s CEO, said that a large portion of the company’s business is tied in contracts. This allows for effective business continuity and profitability even when volumes are weak.
There have been tax concerns on shipping companies in the Euro region. Fair enough, the taxation is based on tonnage and not earnings. This has helped Maersk to safeguard its revenue growth while it does remittances on set tonnage rates. Sea freight rates are expected to normalize in Q4.
Ukraine war effects
Notable has been low consumer confidence in Europe. Ukraine and Russia are big suppliers of driver labor in the European market. The war has deprived the market of this labor because of the drivers’ resort to be at home with their families. The effect of the driver shortage has been congestion in ports which has effectively increased freight rates.
Soreu Skou notes that Maersk’s exit from Russia has had minimal effects on the company’s earnings. He stated that Russia represented 2% of their turnover, which they managed to seamlessly write down.
Imports in US well remain way above pre pandemic levels, which assures Maersk of continued revenue growth and stability. Consumers in US are cited to have savings that have allowed them maintain a shipping services demand that is greater than that of Europe. Skou reckons both short term and medium term targets and projections remain intact and positive.
Maersk’s Expansion Plans
Maersk has closed two acquisitions this year and is set to close a third one this quarter. The company will have no more acquisitions in the near time in a bid to utilize the on boarded capacity. Further, Maersk is not looking to expand as there is a significant amount of its capacity tied in congestion.
The company has bigger plans for Land Logistics that will be propelled by its three acquisitions. The already closed acquisition deals are Pilot Freight Services and Senator International. The third deal, which is at an advanced stage is the acquisition of LF Logistics based in Asia.
Maersk has prioritized investments on the land side acquisition to help grow its off-sea capacity and competitive lead.
Share Buy Backs
The company has added to its share buyback program an annual $500 Million. Maersk will hence have a committed $3 Billion a year for buying back its shares.
Importantly, shareholders have continued to see increasing cash returns. Analysts think that the great returns might have boosted the company’s confidence and appetite to buy back its shares.
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