Last week, A.P. Moller Maersk, operator of the largest global ocean container transport fleet completely surprised the global investment community by raising its profit forecasts for the remainder of the year. The carrier reported that its fiscal Q2 group profit fell 11 percent among a consensus forecast for a 30 percent drop, according to a poll of Reuters equity analysts. The company attributed the unexpected positive results to a 15 percent average reduction in its costs for bunker fuel along with aggressive cost-cutting in operations. The carrier indicated a 13 percent decline in the average costs for shipping a forty-foot equivalent container. Maersk CEO issued an optimistic outlook for the remainder of the fiscal year, forecasting an additional $400 million in profits over previous  guidance along with a statement indicating stability in earnings.

Shippers are probably all too aware that Maersk and other ocean carriers pushed through some rather hefty transportation rate hikes in June, raising rates on the Asia to Europe route by a reported 174 percent, matching similar increases by other carriers.  The Maersk Line division actually delivered operating profits of $439 million, significantly exceeding equity analyst average forecasts for $99 million in profits. That was before the current rate increases show their true effect, which will be in the upcoming pre-holiday global transport and stocking period as Asian produced goods make their way to other global markets for holiday consumption.

Supply Chain Matters has consistently opined that the obvious signs of global transportation structural shifts are appearing in many transport segments, and that the industry that was taxing shippers for ill-timed decisions for acquiring new capacity or not adequately responding to shippers desires for more economical yet predictable global transport movements.

This latest earnings surprise from the global leader in container movement calls into question as to how dire the financial situation really is.  While carriers should be expected to be able to have stable balance sheets and reasonable profits, the initiation of constant volatility and/or unpredictability in transport rates does not help industry supply chains meet their goals for cost efficiency, reduce in-transit inventory and service reliability. The again, maybe we should be praising Maersk and the industry for a positive financial response to the industry challenge.

We are curious to see how shippers weigh-in on this.  Share your views.

 

Bob Ferrari