What’s Going On Here?Shipping giant Maersk reported strong full-year results on Wednesday, but there might be trouble on the horizon… What Does This Mean?Companies were still struggling to get materials and products delivered last quarter, as portside congestion and a container shortage continued to slow the shipping industry down. They were so desperate, in fact, that Maersk was able to hike prices 80% higher than the same time in 2020 without putting customers off. So it’s no wonder Maersk made 64% more in revenue, even though those same shortages meant it shipped fewer containers. That pushed the company’s full-year revenue up by 55% versus the year before.
But Maersk soon brought investors back to earth: it’s expecting supply issues to ease up in the second half of this year, which could force the company to bring down its record-high prices. That might be why it gave a weaker-than-expected profit outlook for this year (tweet this), and why deflated investors initially sent its shares down 5%. Why Should I Care?The bigger picture: Maersk runs aground.
Maersk knows the sea shipping boom won’t last forever, which might be why it’s investing in areas that have more room to grow, like “land-based logistics”. Case in point: the company announced on Wednesday that it’s buying trucking firm Pilot Freight Services for $1.7 billion, which should help it offer more services across customers’ supply chains – from sea-borne shipping to last-mile delivery.
Zooming out: The economy’s sinking.
Maersk handles a fifth of all containers shipped globally, which means its performance tends to reflect the strength of global trade and, by extension, the wider economy. So the fact it’s expecting shipping growth to slow down this year doesn’t bode particularly well. That’s not the first worrying sign either: the World Bank recently said it’s expecting global economic growth to slow from 5.5% last year to 4.1% this year, as inflation and Covid continue to stifle demand. | 