Maersk has recorded the best quarter in its history, reporting a net profit of $2.7bn for the first three months of the year, compared with $209m for Q1 20.

The Danish transport and logistics group attributed “around $2bn” of the result to the “extraordinary market conditions”.

And Maersk’s profit for the period could have been even higher if it had filled its ships with more cargo from the lucrative spot market.

Nevertheless, the first-quarter result is just $2m short of its earnings for the whole of 2020, and Maersk said today it expected these market conditions to “continue well into Q4”.

Group revenue was up 30%, to $12.4bn, mainly driven by a 35% increase in freight rates on its liner trades to an average of $1,331 per teu, on a volume increase of 5.7%, to 6.4m teu.

Maersk’s average revenue per teu compares, for example, with OOCL’s $1,525 for Q1, as the carrier sought to focus away from spot and short-term business and on to annual and multi-year contracts.

Chief executive Soren Skou explained that it had now finalised more than 80% of its long-term contracts and expected to increase its volume from this business by around 20%, to 12m teu, across its liner services.

The contract increases obtained so far will add some $550 per FFE for the line this year, and Mr Skou said many deals had been done for longer periods.

“We have signed up more than one million FFE at multi-year contracts, ensuring predictability and stability of our earnings,” he said, adding that, for the multi-year contracts, the first year was agreed at a fixed rate with rates for the second and third years index-linked.

The 1m multi-year deals have been signed with Maersk’s 500 largest customers and Mr Skou said he was “very confident” that shippers would honour their volume commitments when spot rates eventually fell.

“We want to be less dependent on the short-term market,” he explained.

Following the Suez Canal blockage, Maersk decided to “temporarily suspend” its spot and short-term contract bookings from Asia, leaving many forwarders and NVOCCs, which typically fix on shorter-term contracts for three-month periods, scrambling for alternatives and forced to pay rival carriers’ much higher FAK rates.

The carrier did row back on this decision for certain trades and customers, but it left many shippers with short-term contracts no option but the spot market to cover their commitments.

Maersk’s gateway terminals business also reported a strong Q1 performance, with revenue improving 24% compared with the year before, to $915m, “led by higher volumes and storage income”, while operating profits increased 52%, to $323m.

“We have successfully turned around our terminals business and have become a much better operator,” said Mr Skou.

Logistics & Services saw its turnover jump 42%, to $2bn, which Maersk said was “mainly driven by organic growth, but also with growth from the acquisitions of Performance Team and KGH Customs Services”.

Operating profits from Maersk’s logistics operations leapt 380%, to $139m, and the company will use some of its windfall profits from liner services for more inorganic growth M&A activity, which Mr Skou intimated could be revealed during its Capital Markets Day next week.

“I am quite proud to present the best quarter ever for AP Møller Maersk,” he said.

Source: The Loadstar