French shipping giant CMA CGM warns demand is deteriorating

Wednesday, 26 April 2023

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French shipping giant CMA CGM SA, controlled by the billionaire Rodolphe Saade and his family, warned of a steep drop in demand so far this year, extending a slump that led to a more than halving of quarterly profit.

A downturn that began in the second half of last year “remained at play in 2023, as market conditions in the transport and logistics industry continue to deteriorate,” the world’s third-largest container line said in a statement Friday. The company cited a sharp decrease in freight rates, geopolitical tensions and economic uncertainty.

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The bleak outlook from the French transporter is in line with European rivals A.P. Moller-Maersk A/S and Hapag-Lloyd AG, and points to a cooling period in the notoriously cyclical shipping market. The pandemic had fuelled a surge in consumer demand for goods that snarled global supply chains, propelling freight rates and shipping profits to unprecedented levels. These weakened significantly at the end of last year.
CMA CGM’s net income more than halved to $3.04 billion during the fourth quarter from $6.71 billion in the final three months of the previous year. Despite the drop, full-year profit for 2022 rose to a record $24.9 billion, surpassing the $17.9 billion in 2021.

Still, the company said “certain macroeconomic signals are stabilising,” with US consumers and the labor market remaining resilient, a European recession being “avoided for the moment,” and some emerging markets in Latin America and Asia staying strong.

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The pandemic boom filled the coffers of the Saades and rival European shipping tycoons like Gianluigi Aponte, founder of Mediterranean Shipping Co., and Klaus-Michael Kuehne, who has stakes in logistics and shipping companies. Closely held CMA CGM hasn’t yet announced a payout for 2022.
The latest results could help get CMA CGM out of political hot water in France, where some lawmakers have called for a windfall tax on the company due to its high profits. Saade, the second-generation head of the carrier, has so far avoided any such penalty. He has invested some profits to reduce carbon emissions, as well as to expand operations in ports, logistics, air cargo and media.

Source : https://economictimes.indiatimes.com

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