Maersk posts record quarter, but warns of shocks to come

Even as it delivered record results for the first quarter of 2022 due to higher freight rates and stronger contracts, Danish shipping line A.P. Moller-Maersk warned on Wednesday that inflationary pressures and falling demand may well shrink margins and slow container shipping volumes for the rest of the year.

Revenue for the quarter between January and March was up 55 per cent year on year to US$19.3 billion (S$26.5 billion) while earnings before interest, taxes, depreciation and amortisation more than doubled to US$9.1 billion for the same period, Maersk reported.

"In Q1, we delivered the best earnings quarter ever in A.P. Moller-Maersk," the shipper's chief executive Soren Skou said in a statement.

Maersk registered growth across its ocean, logistics and terminal businesses, with earnings driven by higher freight rates and by long-term contracts being locked in at stronger levels.

That helped to offset a decline in containers moved as well as a spike in costs. The liner reported a 7 per cent year-on-year drop in container volumes and a 21 per cent spike in operating costs, such as fuel and container handling, in the first quarter.

The liner's earnings were reported before any impairments were made on its stake in Global Ports Investments, which operates ports in Russia. Maersk said yesterday that it is withdrawing from the country this week.

But Maersk warned that slower trade, supply chain disruptions and inflationary shocks as a result of Russia's war in Ukraine and China's Covid-19 restrictions could impact demand and activity for the rest of the year.

The shipping line now expects global container demand to grow by a maximum of 1 per cent this year, compared with 2 per cent to 4 per cent previously, adding that its forecast is "subject to high uncertainties related to the current congestion, network disruptions and demand patterns".

Already, global container demand has declined by 1.2 per cent in the first quarter, compared with growth of 7.7 per cent in 2021.

Maersk added that "key to the outlook for trade is how consumers and businesses react to the elevated uncertainties, higher prices and tighter financial conditions, and in the case of China, to the fallout of zero-Covid-19 policy".

Mr Mick Aw, board member of consultancy Moore Global, said supply chain congestion will drive up freight rates and contribute to upward inflationary pressure.

"We think rates will remain as high and even surpass last year's. Consumers cannot expect a reprieve in costs."

Last week, Apple executives warned that the group could sustain a hit of up to US$8 billion in the current quarter, while Amazon recorded its slowest-ever revenue growth in the first quarter due to a drop in online retail sales.

Chipmaker Intel has forecast weaker-than-expected revenue and profit, while Unilever - the distributor of Dove shampoo and Magnum ice cream - has raised prices for its products by an average of 8.3 per cent.

All four companies blamed their poorer performance on supply chain constraints and soaring costs.