The Clearing House - Corporate Changes in Payment Practices - September 2023

Maersk Cuts Another 3,500 Jobs Amid Shipping Industry’s ‘New Normal’

Maersk container ship

Maersk is eliminating another 3,500 positions after having reduced its headcount by 6,500 throughout the year.

The Copenhagen-based shipping company announced this move while reporting its financial results for the third quarter, including a decrease in revenue from $22.8 billion in the same quarter last year to $12.1 billion, Maersk said in a Friday (Nov. 3) press release. The company attributed the drop in revenue to lower freight rates and volumes.

“Our industry is facing a new normal with subdued demand, prices back in line with historical levels and inflationary pressure on our cost base,” Maersk CEO Vincent Clerc said in the release. “Since the summer, we have seen overcapacity across most regions triggering price drops and no noticeable uptick in ship recycling or idling.”

The company’s layoffs — which had already seen a reduction in headcount from 110,000 to 103,500 before the latest cuts — are one of the cost containment measures Maersk has implemented to enhance competitiveness and resilience, according to the release.

These measures aim to bring down Maersk’s selling, general and administrative expenses (SG&A) cost by $600 million for 2024, the release said. The company has also lowered its capital expenditure (CAPEX) spend for 2023 and 2024 and is considering extending its share buyback program into 2024.

“Given the challenging times ahead, we accelerated several cost and cash containment measures to safeguard our financial performance,” Clerc said. “While continuously streamlining our organization and operations, we remain dedicated to our strategy of fulfilling our customers’ diversified supply chain needs while pursuing growth across our Terminals business and Logistics & Services.”

In terms of performance, Maersk’s Ocean segment saw a 9% increase in volumes compared to the previous quarter, according to the press release. However, the segment’s EBIT was negative at $27 million, primarily due to significant pressure on rates, particularly in the Asia to Europe, North America and Latin America trades.

The Logistics & Services segment recorded a decrease in revenue, impacted by lower prices in the air and haulage market, the release said. However, increased cost management efforts helped stabilize margins sequentially.

Maersk’s Terminals segment reported revenue of $1.0 billion, down from $1.1 billion last year, driven by reduced demand for storage amid eased global congestion and a decline in volume, per the release. However, the segment achieved strong results through price adjustments and cost measures.

Despite the challenging market conditions, Maersk maintains its financial guidance for 2023, expecting to be towards the lower end of the previously communicated ranges for underlying EBITDA and underlying EBIT, according to the release. The guidance for free cash flow remains unchanged.

It was reported in October that the daily market prices for cargo transportation from Asia to the United States and Europe have dropped by as much as 90% since early 2022. The largest container carriers have responded to this decline by canceling sailings and mothballing vessels to reduce operating costs.