Brief analysis of Q2 performance of major shipping and logistics companies

Recently, major global container shipping companies have successively announced their financial reports for the second quarter of 2023. Most logistics companies saw reducing revenue and profit in the second quarter compared with the same period of last year and some revised down their forecast for the whole year. 

 

Hapag-Lloyd

As of the first half of 2023, EBITDA's earnings before tax, interest, depreciation and amortisation were $3.8 billion (EUR 3.5 billion) in Hapag-Lloyd and EBIT EBIT was $2.8 billion (EUR 2.6 billion). The group's profit was $3.1 billion (2.9 billion euros). As expected, these results were significantly lower than last year's level.

For the whole of 2023, Hapag-Lloyd confirmed his forecast released on March 2. EBITDA is expected to be $4.3 to $6.5 billion (4 to 6 billion euros) and EBIT is expected to be $2.1 to 4.3 billion (2 to 4 billion euros). However, the ongoing war in Ukraine, geopolitical uncertainty, persistent inflationary pressures and high inventory levels are creating risks that could have a negative impact on forecasts.

 

Maersk

On August 4, A.P. Moller-Maersk (Maersk) released its financial report, which showed that despite a decrease in volume and freight rates due to the ongoing normalization of the market in the second quarter of 2023, the company's performance exceeded expectations. Although the revenue for the second quarter of 2023 declined to $13 billion compared to $21.7 billion in the second quarter of 2022, the pre-tax profit margin remained at 12.4%.

 

Based on the performance in the first half of the year, Maersk has raised its full-year financial expectations, even if market demand weakens further in the second half of the year. The estimated earnings before interest, taxes, depreciation, and amortization (EBITDA) range from $9.5 billion to $11 billion (previously $8-11 billion), and the estimated earnings before interest and taxes (EBIT) range from $3.5 billion to $5 billion (previously $2-5 billion).

 

In the second quarter of 2023, the revenue from the ocean shipping business decreased from $17.4 billion to $8.7 billion compared to the same period of last year, mainly due to the decline in freight rates and volume. Although the volume and freight rates remained stable at a lower level in this quarter, the demand for ocean shipping continued to decline due to significant inventory adjustments in North America and Europe. However, strong cost management partially offset the impact on revenue.

 

 

Maersk has raised its full-year performance expectations for 2023. As shown in the chart below, the projected EBITDA for the year is $9.5-11 billion, the projected EBIT is $3.5-5 billion, and the minimum expected free cash flow (FCF) is $3 billion. The estimated capital expenditure for 2022-2023 is $9-10 billion, and for 2023-2024, it is $10-11 billion.

 

C.H.Robinson

 

On August 2, local time, C.H. Robinson released its second-quarter report and held a conference call with analysts, marking the first appearance of newly appointed CEO Dave Bozeman in an earnings conference.

 

 

Key highlights of the second quarter:

 

*Total revenue declined by 35.0% to $4.4 billion, primarily due to decreases in ocean and truck transportation serviceprices.

 

*Gross profit decreased by 35.9% to $656.7 million.

 

*Operating income fell by 71.8% to $132.6 million.

 

*Adjusted operating profit margin decreased by 2560 basispoints to 19.9%.

 

*Operating cash generated decreased by $40.4 million, to$224.8 million.

 

*Diluted earnings per share (EPS) dropped by 69.7% to $0.81.

 

DHL

In the second quarter, DHL Group's revenue decreased by 16.4% year-on-year to 20.094 billion euros. The pre-tax profit remained roughly the same as the first quarter at 1.693 billion euros, representing a decrease of 27.2% compared to the same period of last year.

 

DHL Global Forwarding, the freight division of DHL, reported a decrease in revenue by 47.7% to 3.57 billion euros, attributed to a decline in freight volume and normalization of freight rates. Gross profit also fell by 30.6% to 958 million euros, while pre-tax profit reduced by 49.6% to 345 million euros.

 

DHL has raised the lower end of its performance expectations for 2023. If the global economic recovers at the beginning of H2 2023, the group expects a pre-tax profit of 7 billion euros. If the recovery occurs towards the end of the year, the company forecasts a pre-tax profit of 6.6 billion euros (previously predicted at 6.5 billion euros). If there is no recovery by the end of the year, the company anticipates a pre-tax profit of 6.2 billion euros (previously predicted at 6 billion euros).

 

ONE

 

In the first quarter of 2023 (April-June), ONErecorded a profit of $513 million, a significant decrease of 91% year on year ($4.986 billion).

 

Outlook for the full year 2023:

*In the post-pandemic era, the container shipping marketis undergoing significant changes, including post-disruption work in theglobal supply chain, changes in consumer behavior, and shifts in tradepatterns due to intensified international tensions.

 

*ONE is making progress in adapting to these majorchanges. However, with continuous fluctuations in transportation demandand trade patterns, the market is expected to undergo further changes,leading to unpredictable and uncertain prospects.

 

*In this situation, it is currently challenging toannounce reasonable business forecasts. Therefore, the full-year outlookfor the 2023 fiscal year has not yet been determined.

 

CMA CGM

 

Revenue of CMA CGM in the second quarter of 2023 was $12.289 billion, down 36.9% from last year; profit before interest, tax, depreciation and amortisation was $2.593 billion, down 73.0% year on year; and profit before interest, tax, depreciation and amortisation was 21.1%, down 28.1 percentage points. The group's total net income profit reached US$1.331 billion. As at 30 June 2023, total financial resources, net of debt, amounted to $3.8 billion, a decrease of $1.852 billion compared to December 31, 2022.

 

 

Prospect
Macroeconomic and geopolitical uncertainty and the deterioration of the transport market.

 

The trend at the end of 2022 continued to prevail in the first half of 2023, with market conditions in the transport and logistics industries deteriorating. Macroeconomic forecasts for the second half of 2023 predict a slowdown in global growth due to continuing inflationary pressures, the responses taken by central banks and geopolitical uncertainty. In view of the uncertain demand, the new capacity in the market may affect shipping freight, especially the freight on the east-west line. As shown in the first quarter of 2023, CMA CGM's financial results continued to return to normal. Due to its integrated transport and logistics strategy and financial strength, CMA CGM expressed confidence to make it through this cycle. Given the inflationary environment, CMA CGM said it was particularly vigilant about controlling operating costs.

 

 Kuehne+Nagel

 

Kuehne+Nagel has once again achieved solid results in the challenging market environment in the first half of 2023. Net turnover for the first six months of 2023 was CHF 12.7 billion and EBIT was approximately CHF 1.1 billion and CHF 860 million. The group conversion rate, that is, the ratio of EBIT to group gross profit, remained at a high level of 24%.

Mason

 

On the evening of July 21, Mason announced preliminary financial results for the second quarter of 2023 and provided business updates.

 

DB

 

DB Schenker generated 10.1 billion euros ($11.2 billion) in revenue in the first half of 2023, down 29% from the first half of 2022. Operating profit (EBIT) fell 48% to 626 million euros ($695 million), compared with 1.2 billion euros in the first half of 2022. However, DB Schenker's performance is still significantly better than the last data in the pre-epidemic era in 2019, when half-year income was 8.5 billion euros and EBIT was 238 million euros.

 

DB's adjusted revenue fell 11% to 25 billion euros in the first half of 2023 (compared with about 28 billion euros in the same period in 2022). Operating profit (adjusted EBIT) in the first half of 2023 was 331 million euros, down 62% from 876 million euros in the first half of 2022. This included DB Schenker's operating profit of 626 million euros in the first half of 2023, meaning that apart from DB Schenker, DB is still losing money.
 

Overall, DB said it expected "a significant operating loss for the full year", although it was better than initially thought, with a loss expected to be just under 1 billion euros. And while the sale of DB Schenker would help reduce DB Group's debt, retaining DB Schenker would mean that DB's full-year operating loss could be halved.

 

Evergreen Shipping, Cosco Shipping Holdings and OOCL

 

Company	Performance
Evergreen Shipping	Evergreen Shipping realized cumulative operating income of NT$134.21 billion (about US$4.39 billion) in the first half of 2023, down 61.2% from the same period of last year. In terms of quarterly revenue, Evergreen Shipping posted operating revenue of NT $67.38 billion (US$2.21 billion) in the second quarter, down 61.5% from a year earlier and up 0.9% from the first quarter. In June 2023, Evergreen Shipping's operating income reached NT$22.13 billion (about US$720 million), down 63.3% from a year earlier and 3.4% from a month earlier. In short, Evergreen Shipping's monthly revenue rebounded in March after falling below NT$20 billion for the first time in February, rose modestly in April and May, and fell slightly in June.
Cosco Shipping Holdings	On July 4, Cosco Shipping Holdings issued a performance forecast. According to the company's preliminary estimates, the company realized profit before interest and tax (EBIT) of about 24.69 billion yuan in the first half of 2023, a decrease of about 74.10% compared with the same period of last year, and a net profit of about 19.66 billion yuan in the first half of year, a decrease of about 74.40% year on year. Among them, the net profit attributed to the shareholders of the listed company was about 16.551 billion yuan, a decrease of about 74.47% on annual basis; the net profit belonging to the shareholders of the listed company after deducting non-recurrent gains and losses was about 16.5 billion yuan, a decrease of about 74.42% on the year.
OOCL	OOCLs total revenue for the second quarter ended June 30, 2023 decreased by 62.6% from the same period of last year to US$1.979 billion. The total carrying capacity increased by 1.3%, and the carrying capacity increased by 8.7%. The overall carrying rate decreased by 5.9% on the year, and the overall average income per TEU decreased by 63.0% compared with the second quarter of last year. OOCL announced that its first-half revenue was US$4.15 billion, down 60.2% year on year, due to a 59.8% drop in average revenue per TEU in the first six months, as the overall transport volume of its four main trade routes stabilized and freight rates fell sharply. OOCL currently did not disclose any profit or loss figures.