CMA CGM Profits Plunge as Container Shipping Market Normalizes

Friday, 31 May 2024

French shipping company CMA CGM saw a significant decline in profit during the third quarter of 2023, as the container shipping market continued to return to pre-pandemic conditions.

Despite similar volumes to last year, the company’s net income dropped to $388 million in Q3 2023, down from over $7 billion in Q3 2022—highlighting the container shipping industry’s abrupt 180 after a two-year pandemic-fueled bull run as new capacity hitting the water sinks freight rates.

The container shipping industry as a whole reached peak profits in the Q2 2022 after seven straight quarters of earnings growth as strong consumer demand combined with widespread port congestion pushed freight rates to records.

“The industry continued to normalize in the third quarter, with a return to pre-pandemic market conditions. Our performance remained very solid however, confirming the relevance of our growth strategy in terminals and logistics. We are consequently more resilient as we enter this new cycle,” said Rodolphe Saadé, Chairman and CEO of the CMA CGM Group.

Saadé acknowledged that the global economic slowdown is expected to continue affecting the industry, but highlighted the company’s commitment to controlling operating costs and focusing on decarbonization and digitalization of the supply chain to meet customer needs.

In Q3 2023, CMA CGM reported revenue of $11.4 billion, with 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 was $0.1 billion as of September 30, 2023.

Despite a 51.8% decrease in revenue from shipping operations, volumes increased by 0.9% compared to the same period last year, reaching 5.7 million TEUs. The company said gowth in volumes was seen in North-South and short-sea lines, while East-West lines experienced normalization due to inventory drawdowns and moderate household consumption.

Logistics operations revenue in Q3 reached $3.7 billion, with a 3.0% decrease in EBITDA compared to the previous year. CMA CGM said the stability of the logistics business is attributed to strong service offering and resilience, while other activities like port terminals and air cargo reported increased revenue but decreased EBITDA due to normalized volumes, congestion, and weak demand in the air freight market.

CMA CGM is continuing to invest in its operating assets and the energy transition for shipping and logistics. In August 2023, the company completed the acquisition of the GCT Bayonne and New York container terminals, which have been renamed Port Liberty Bayonne and Port Liberty New York. CMA CGM is also actively diversifying the energy mix of its vessels as it aims to achieve Net Zero Carbon by 2050. The company has already invested over $17 billion in a fleet of nearly 120 LNG- and methanol-powered ships, set to be delivered by 2027.

Looking ahead, CMA CGM expects a return to pre-Covid conditions in the transport and logistics markets, but global economic activity in 2023 is forecasted to be below historical averages. There is no anticipated recovery in 2024, and the introduction of new capacity may offset the expected rebound in world trade and impact freight rates.

However, CMA CGM says it plans to address challenges by maintaining operating cost discipline, pursuing decarbonization, integrating strategic investments, and monitoring the geopolitical environment.