A.P. Moller - Maersk delivered a first quarter report showing a strong recovery in earnings from the fourth quarter of 2023, the company said in a release.

Results were driven by a good performance in Terminals, higher demand, and a prolonged Red Sea crisis.

As these conditions are expected to continue well into the second half of the year, Maersk lifts the lower end of its guidance range and now expects underlying EBIT at USD -2.0 to 0.0bn.

"We had a positive start to the year with a first-quarter developing precisely as we expected," Vincent Clerc, CEO of Maersk said. 'Demand is trending towards the higher end of our market growth guidance and conditions in the Red Sea remain entrenched. This not only supported a recovery in the first quarter compared to the previous quarter but also provided an improved outlook for the coming quarters, as we now expect these conditions to stay with us for most of the year."

Due to the ongoing Red Sea crisis, plans are made for the current rerouting south of the Cape of Good Hope to be extended potentially for the remainder of the year, while A.P. Moller - Maersk still expects overcapacity to prevail which implies lower rates during the second half.

Maersk’s rates continued to be under pressure versus the previous year, resulting in revenue for Q1 of USD 12.4 billion (USD 14.2b), a decrease of USD 1.9b mainly from Ocean, with an increase of USD 33 million and USD 123m in Logistics & Services and Terminals, respectively.

Ocean results increased sequentially given the strong volumes and tightened rates impacted by the Red Sea/Gulf of Aden situation but were significantly down from the previous year. The average loaded freight rate increased compared to Q4 2023 but decreased compared to Q1 2023. The rerouting south of Cape of Good Hope led to higher bunker consumption and higher operating costs. EBIT remained negative and significantly lower than in Q1 2023 but improved compared to Q4 2023.

Logistics & Services experienced growth in volumes across all product families. While Transported by Maersk and Managed by Maersk achieved good results in a strongly competitive environment, Fulfilled by Maersk was weak with lower capacity utilisation in Contract Logistics and contract implementation challenges in Ground Freight in North America weighing on margins.

Terminals delivered solid volume growth (like-for-like) across all regions, particularly in North America with a significant increase in US West Coast volumes.

Market environment

The report noted that the situation in the Red Sea/Gulf of Aden had a significant impact on the Ocean business with the implementation of a new network, which caused market rates and costs to increase, due to the supply chain disruptions.

Despite abundant risks to supply chains, demand for container trade increased in Q1 2024. Global container demand is estimated to have grown between 7-9% y/y, with all import regions contributing positively. The figure surprised on the upside, the company said.

They added that the global economy continues to demonstrate a certain strength amid increasingly confrontational geopolitics and high interest rates.

Economic growth is expected to be around 2.5% in 2024, according to Oxford Economics, an upward revision from their forecasts at the beginning of the year. Growth is becoming increasingly balanced as activity improves in manufacturing.

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