Container Shipping: Volume Growth Calms, Rates Remain High | Article

How the Big Three Container Carriers Fared

CMA-CGM

CMA CGM recorded a strong increase in revenue and EBITDA for fiscal year 2021. During the year, the company achieved revenue of $56.0 billion, up from 78% year-on-year, and EBITDA of $23.1 billion, up 278% year-on-year, with a margin of 41.3% (vs 19.4% in FY 20). According to CMA CGM management, the financial performance reflects extremely strong demand conditions.

In 2021, CMA CGM’s Shipping division recorded a strong increase in its unit revenue, with volumes shipped of 22.0 million TEUs, up 5% year-on-year, and revenue per TEU transported of 2,055 $, up 79.5% year-on-year, with significant rate increases on the Transpacific, Asia-Northern Europe and Latam routes. Unit revenue was also supported by higher contract rates. The increase in maritime rates more than offset an increase in unit costs, which was linked to supply chain congestion (handling and handling, transport, logistics), higher charter costs and a higher fuel consumption. In 2021, CMA CGM’s unit costs increased by 18.2% year-on-year. The company’s Logistics business also showed improvement in 2021, with revenue up 46.9% year-on-year and EBITDA up 43.6% year-on-year.

CMA CGM noted that disruptions to global supply chains continued to limit the effective capacity of the global fleet in early 2022 and that the company is closely monitoring developments related to the Russian war in Ukraine as it has suspended all bookings to and from Russia. , Ukraine and Belarus. According to CMA CGM, congestion peaked in December 2021, while the company is still waiting for evidence of improvement so far this year. This year has started strong, with momentum broadly in line with trends seen in 4Q21, but with growing macro and geopolitical uncertainty. The company expects the industry backdrop to continue to be supportive due to limited new ship deliveries in 2022, combined with strong demand. The risks highlighted by CMA CGM are cost inflation, including high energy prices, and worsening geopolitical risks. Management expects Q122 EBITDA to be in line with Q421. The company also expects a higher proportion of contract revenue at favorable rates to support performance over the medium term.

CMA CGM aims to maintain its investments at a high level, with total gross investments of $4.8 billion for FY21, including gross marine investments of $3.5 billion and $1.1 billion for aircraft, terminals and others and $0.2 billion for logistics. The total capital budget for FY22 is $4.5 billion, including shipping capital expenditures of $3.2 billion, including newbuild backlog and the purchase of new build vessels. used ($2.3 billion), fleet maintenance and modernization ($0.5 billion), and substantial increases in the container fleet, as well as $1.0 billion for aircraft, terminals and others and $0.3 billion for logistics. Additionally, the 2022 M&A budget is $5.4 billion, including $3.0 billion for shipping, $1.7 billion for logistics, and $0.7 billion for aircraft. and terminals. Free cash flow after gross capex was $14.8 billion in FY21.

As a reminder: (1) uncertain macro and geopolitical environment; (2) a good start to the year, in line with 4Q trends; (3) backlog and contract pricing to support 2022 performance; (4) strong balance sheet and abundant liquidity; (5) significant investment plan for 2022, with a limited distribution rate.

Hapag-Lloyd

Hapag-Lloyd had a strong 2021, with revenue of $26.4 billion, up 81% year-on-year, and EBITDA of $12.8 billion, up 317% year-on-year, with a respective margin of 48.7% (vs 21.1% in FY 20). In FY21, the company shipped 11.8 million TEUs, flat (+0.3%) year on year, and freight rates of $2,003 per TEU, up 79, 6% over one year. Hapag-Lloyd noted that the main drivers of this strong performance included a significant improvement in freight rates resulting from very strong demand for goods exported from Asia. The increase in profits and margins was achieved despite higher transportation spend (up 17% YoY) due to higher bunker prices (+25% YoY) and freight rates. chartering, as well as increased demurrage and storage costs. Free cash flow was $10.9 billion in fiscal 2021, bringing the company’s net debt down from net debt of $5.5 billion to YE ’20 at the end of 2020. net cash position of $2.5 billion in YE ’21, despite distributing dividends of $0.8 billion during the year.

Since 2021, the company has been offering its customers multi-year fixed-price contracts in order to secure allocation and increase efficiency. The freight rate is fixed for the duration of the contract, avoiding fluctuations in market prices, as in the last two years, with some overbooking (up to 10%) allowed in order to ensure use of the allocation agreed. Compensation is also envisaged in the event of non-provision of contractual capacity.

Hapag-Lloyd said it had a very strong start to the year and expected this positive earnings trend to continue in the first half of 2022. The company also said it expected the constrained situation of global supply chains is easing in the second half. this year which should then lead to the beginning of the normalization of results. According to Hapag-Lloyd, it is targeting an EBITDA range of $12 billion to $14 billion, while this forecast is subject to material uncertainty, particularly in relation to the war in Ukraine and the continuing Covid-19 pandemic.

According to the company, while demand is expected to remain robust, capacity inflow will increase from 2023 onwards due to increased order activity and a substantial backlog at the end of 2021.

With regard to the outlook for 2022, Hapag-Lloyd management expects volumes transported to increase slightly over the course of the year, with bunker costs rising sharply, freight rates rising moderately and an EBITDA similar to that of the previous year.

Maersk

In 2021, AP Moeller-Maersk (APMM) achieved a record financial performance, with revenues of $61.8 billion, up 56% year-on-year, and underlying EBITDA of $24.0 billion , up 189% year-on-year, with a respective margin of 38.9% (vs. 20.9% in FY20). In fiscal 2021, APMM had free cash flow of $16.5 billion, compared to $4.6 billion the prior year. The company’s main operating segments include ocean, logistics, services and terminals, of which ocean (i.e. shipping) is the most significant. In FY21, the Ocean segment generated revenue of $48.2 billion, up 65% year-on-year, and EBITDA of $21.4 billion, up 227% year-on-year annual, with a respective margin of 44.4%. Last year, the division’s loaded volumes increased by 3.6% year-on-year, while the freight rate increased by 66% and the price of bunkers per ton increased by 30% year-on-year.

At the end of 2021, APMM had cash of $21.5 billion and net cash of $1.5 billion.

In terms of outlook for 2022, APMM expects a solid first half, followed by a normalization of its Ocean business at the start of the second half. The company expects its shipping business to grow in line with global container demand by +2% to +4% in 2022, subject to uncertainties related to current congestion, network disruptions and other external factors .

APMM also reiterated its adherence to its 2021-2025 roadmap, in particular by achieving cross-selling synergies between its Ocean and Logistics & Services segments. This strategy is also supported by the company’s ongoing mergers and acquisitions activity.

Based on these assumptions, the company expects underlying EBITDA of approximately $24 billion, underlying EBIT of $19 billion and free cash flow in excess of $15 billion.

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