The bad news for France’s CMA CGM, the world’s third-largest ocean carrier: Profits proceed to slip. The excellent news: The corporate continues to be raking in over a billion 1 / 4, net profits and revenue per container are still well above pre-COVID levels, and it still has an enormous money cushion courtesy of its boomtime windfall.
CEO Rodolphe Saade said Friday that “performance stays robust” despite “difficult market conditions” amid “further normalization” of shipping rates.
Liquidity still high at $3.8B
The group reported net income of $1.33 billion for the second quarter of this yr, down 82% from one-off, boom-inflated profits a yr ago and down 34% sequentially from the primary quarter of this yr.
Nevertheless, the newest results were substantially higher than pre-pandemic performance. CMA CGM posted a net lack of $109 million in Q2 2019 and net income of $22.7 million in Q2 2018.
Q2 2023 results are in step with company expectations. CMA CGM said in late May that it expected the primary quarter to be its best quarter of the yr. And as of Friday, its bearish outlook on the second half hadn’t modified. A mix of “uncertain demand” and newbuilding deliveries “is more likely to weigh on freight rates in shipping, particularly on east-west lines,” it said.
Despite multiple company acquisitions and a really large newbuilding program, CMA CGM still has still loads of money left within the coffers, affording it a runway to “weather the cycle.” As of June 30, CMA CGM had $3.8 billion in liquidity, albeit down $1.85 billion from the tip of last yr.
The group’s ocean shipping division reported $2,983 in revenue per forty-foot equivalent unit of carried volume in Q2 2023, down 16% versus the primary quarter of this yr but still up 36% and 37% from pre-COVID levels within the second quarters of 2018 and 2019, respectively.
Poised to be second-largest carrier on this planet
CMA CGM could surpass Denmark’s Maersk to develop into the world’s second-largest carrier in some unspecified time in the future in the following few years.
In line with Alphaliner data, CMA CGM currently operates a fleet of 627 vessels with a complete capability of three.5 million twenty-foot equivalent units (including owned and chartered ships). It has 119 vessels on order totaling 1.2 million TEUs, equating to an orderbook-to-fleet ratio of 35%.
In capability terms, CMA CGM’s orderbook is second only to that of Switzerland’s MSC, the world’s leading container line operator. “CMA CGM’s most up-to-date orders suggest a more urgent growth ambition,” said Alphaliner.
CMA CGM’s newbuilding capability on order is triple Maersk’s. Alphaliner believes the French group could move into second place as soon as late 2024 or early 2025.
That timeline is predicated on the idea that half of CMA CGM’s newbuilding capability will replace existing charters, and half will likely be fleet growth, whereas Maersk has stated that it should predominantly use newbuildings to switch chartered tonnage, not grow its fleet.
Big moves in secondhand and charter markets
CMA CGM’s future growth follows aggressive activity in each the secondhand purchase market and the charter market. In line with Alphaliner, CMA CGM acquired 105 container ships totaling 427,000 TEUs since August 2020, second only to MSC.
CMA CGM “is primary by far” within the chartering market this yr, said Alphaliner. The ocean carrier has chartered 170 ships yr so far, greater than quadruple No. 2 charterer Cosco, which has leased 40 vessels.
From a strategic standpoint, CMA CGM is using bumper profits earned in the course of the supply chain crisis to reinforce the corporate for the long run more so than taking the cash off the table and enriching shareholders within the near term via outsized special dividends.
In line with Alphaliner, “The CMA CGM’s group net income of $24.9 billion in 2022 made history because the largest-ever annual corporate profit recorded in France. Unlike several other large carriers, the Marseille-based group opted to not pay out a good portion in dividends, as a substitute reinvesting 90% of the profits, equal to $21.8 billion, back into the business.”
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