CMA CGM rides the trade recovery wave

Nov 24, 2020

CMA CGM rides the trade recovery wave

CMA CGM Jacques Saade; Image by CMA CGM

French container shipping major CMA CGM posted strong business results in the third quarter of 2020 amid a recovery in demand for transportation of goods which was hit considerably by the COVID-19 pandemic in the first half of the year.

CMA CGM reported a revenue increase of 6% year-on-year, reaching $ 8.1 billion. The Q3 profit stood at $ 567 million, compared with $ 45 million during the third quarter of 2019 and $ 136 million during the second quarter of 2020.

The company’s volumes carried during the quarter continued to recover and were up 16.8% when compared with the second quarter of 2020. Volumes were also up 1% compared with the third quarter of 2019, CMA CGM’s Q3 report shows.

Market reports indicate that during the quarter freight rates reached unprecedented levels because of the non-availability of empty containers.

Our shipping activity has seen a significant increase in volumes transported compared to the second quarter of 2020, and CEVA’s transformation plan starts to bear fruit. This crisis has also demonstrated the solidity of our business model and demonstrated the relevance of our strategy, combining logistics solutions with transport offering,” Rodolphe Saadé, Chairman and Chief Executive Officer of the CMA CGM Group said.

The revenues of the group’s logistics subsidiary stood at $ 1.9 billion in the third quarter, up 7.9% from the third quarter of 2019. EBITDA stood at $ 167 million, up 18.4% from the third quarter of 2019, and up from $153 million in Q2 2020.

Commenting on the outlook, the company said that the maritime activity in the fourth quarter of 2020 was more sustained than during the third quarter due to the ongoing increase in volumes.

Moving forward freight rates are expected to move up amid port congestion and peak season surcharges.

This momentum is particularly marked in the United States and Latin America and allows the fleet to continue operating at full capacity as during the third quarter. As a result, freight rates remain high.

“In this favorable environment and thanks to the ongoing control of unit costs, the group should see a further improvement in the EBITDA margin in the fourth quarter,” CMA CGM said.

As liner companies push forward with efforts to overcome the losses incurred in the first half of the year, they are expected to reinstate sailings which were withdrawn in 1H20 owing to COVID-19 lockdowns, according to Drewry’s estimates.

Capacity discipline, higher freight rates, and lower bunker prices have enabled major container lines across the board to report their best third-quarter earnings since 2010.

Aggregate profit for 11 companies analysed came in at $4.53billion for the first nine months of 2020 versus just $488 billion during the same period in 2019, Drewry’s data shows.

Maersk group reported its single best quarter since it transformed from being a conglomerate in 2016 to a global integrator of container logistics with its net income rising 82% year on year.

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“Evidence of a strong 4Q20 is the monthly revenue growth of the three Taiwanese carriers as they recorded their best year-on-year revenue growth for October. While Wan Hai posted revenue growth of 32% year on year, Evergreen and Yang Ming registered growths of 27% and 24% year on year, respectively,” Drewry said.

The UK-based consultancy is bullish on carriers’ earnings in 2021 despite the impact of the pandemic as it projects that the industry should be able to make decent money (about $6 billion of operating profit) based on some of the positive data indicators related to contract rates.

Certain early bids show that carriers are quoting Transpacific contract rates for 2021 which are about 60% higher than current contract rates.

“This is not surprising, given the very high spot rate levels now which means carriers should enjoy high freight rates next year as well. In addition, with oil prices still at around the $40bbl mark, this should support the cost side in the form of lower bunker fuel prices,” Drewry added.

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