A.P. Moller – Maersk (Maersk) has enforced strict cost-cutting measures this year, reducing its workforce from 110,000 in early 2023 to about 103,500 to counter challenging market conditions.
The Danish giant has just released financial results for the third quarter of 2023, posting a major drop in revenue to $12.1 billion compared to $22.8 billion in Q3 2022 with an EBIT margin at 4.4 per cent impacted by lower freight rates and lower volumes.
Maersk maintains its guidance ranges but now expects to be towards the lower end of the ranges.
Ocean has reported a 9 per cent increase in volumes since the previous quarter and a strong cost focus supported an 11 per cent per cent decrease in unit cost at fixed bunker compared to Q3 2022.
However, EBIT was negative at $27 million, down from $8.7 billion in Q3 2022, driven by significant pressure on rates, in particular on Asia to Europe, North America and Latin America trades.
Revenue in Logistics & Services was $3.5 billion compared to $4.2 billion in Q3 2022. The segment was impacted negatively by lower prices, especially in the air and haulage market, while volumes were broadly back in line with last year’s level, according to Maersk.
Terminals reported revenue at $1.0 billion compared with $1.1 billion in Q3 2022 driven by less demand for storage amid eased global congestion and a 4.1 per cent decline in volume.
Results were strong as a combination of price adjustments and cost measures, reported Maersk. Return on invested capital (ROIC) increased to 10.3 per cent, exceeding the expectation of above 9 per cent towards 2025.
“Our industry is facing a new normal with subdued demand, prices back in line with historical levels and inflationary pressure on our cost base,” said Vincent Clerc CEO of Maersk.
“Since the summer, we have seen overcapacity across most regions triggering price drops and no noticeable uptick in ship recycling or idling.
“Given the challenging times ahead, we accelerated several cost and cash containment measures to safeguard our financial performance,” added Clerc.
Given the worsening price outlook in Ocean, Maersk is intensifying rigorous cost containment measures and is planning to further decrease the workforce by 3,500 positions, with up to 2,500 to be carried out in the coming months and the remaining to extend into 2024.
This will reduce the global workforce to below 100,000 positions. Accordingly, total expected restructuring charge is now expected at $350 million, up from $150 million announced in February.
The accumulated effect is expected to bring down Maersk’s selling, general, and administrative expenses (SG&A) cost by $600 million for 2024. In addition, CAPEX spend has been adjusted downward for 2023 and 2024 and further measures are under review, including the continuation of the share buyback programme into 2024.