French shipping giant CMA CGM has reported a substantial drop in profit for the third quarter of 2023, signaling a notable shift in the container shipping market as it adjusts to pre-pandemic conditions1. Despite maintaining similar shipping volumes compared to the previous year, the company’s net income plummeted to $388 million in Q3 2023, down from a robust $7 billion in the same quarter of 2022. This stark decline underscores the industry’s abrupt reversal after a two-year pandemic-driven bull run, with new capacity entering the market leading to sinking freight rates.
The container shipping sector, which experienced peak profits in Q2 2022, marked seven consecutive quarters of earnings growth driven by robust consumer demand and widespread port congestion, resulting in record-high freight rates1. Rodolphe Saadé, Chairman and CEO of the CMA CGM Group, noted that despite the industry returning to pre-pandemic conditions, the company’s performance remained solid, affirming the resilience of their growth strategy in terminals and logistics1.
Saadé acknowledged the anticipated global economic slowdown and emphasized the company’s commitment to controlling operating costs, along with a focus on decarbonization and digitalization of the supply chain to meet customer needs1.
In Q3 2023, CMA CGM reported revenue of $11.4 billion, witnessing a shift in contributions from maritime shipping and logistics. EBITDA decreased by 78.2% to $2.0 billion, with an EBITDA margin of 17.5%, down by 28.5 points. The company’s net debt stood at $0.1 billion as of September 30, 20231.
Despite a 51.8% decrease in revenue from shipping operations, the company experienced a 0.9% increase in volumes compared to the same period last year, totaling 5.7 million TEUs. Notably, growth in volumes was observed in North-South and short-sea lines, while East-West lines faced normalization due to inventory drawdowns and moderate household consumption1.
Logistics operations revenue in Q3 reached $3.7 billion, with a 3.0% decrease in EBITDA compared to the previous year. The stability of the logistics business is attributed to a robust service offering and resilience, while other activities such as port terminals and air cargo reported increased revenue but decreased EBITDA due to normalized volumes, congestion, and weak demand in the air freight market1.
CMA CGM is actively investing in its operating assets and energy transition for shipping and logistics. The recent acquisition of GCT Bayonne and New York container terminals, now named Port Liberty Bayonne and Port Liberty New York, exemplifies the company’s strategic moves1.
Looking ahead, CMA CGM anticipates a return to pre-Covid conditions in the transport and logistics markets, although global economic activity in 2023 is expected to remain below historical averages. The company foresees no recovery in 2024, and the introduction of new capacity may offset the expected rebound in world trade, impacting freight rates. Despite these challenges, CMA CGM outlines plans to address them by maintaining operating cost discipline, pursuing decarbonization, integrating strategic investments, and closely monitoring the geopolitical environment.
Source:gCaptin By Mike Schuler
