A P Moller Maersk Q2 2026 Earnings Call Transcript

A P Moller Maersk (OTC: AMKBY ) held its second-quarter earnings conference call on Thursday. Below is the complete transcript from the call. This content is powered APIs. 6 billion, driven by higher spot rates and increased demand.

5 billion and positive free cash flow, based on a revised market volume growth expectation of 4%. Operationally, the company adjusted its Ocean segment to handle Middle East disruptions, achieving volume growth and maintaining high fleet utilization at 96%. In Logistics & Services, the company introduced a new reporting structure and saw 15% revenue growth, driven by volume and rate increases, while continuing to focus on margin improvement. Terminals segment experienced 11% revenue growth and maintained strong returns, with strategic investments like the new terminal in Da Nang, Vietnam.

The company's strategic focus includes managing trade imbalances and congestion, driven by robust demand and underinvestment in terminal capacity. Management highlighted the resilience of market demand, especially from Asia, and the need for continued investment in terminal and landside infrastructure to address bottlenecks. Full Transcript Vincent Clerc, CEO Welcome everyone and thank you for joining us on this earnings call today as we present our second quarter results for 2026. My name is Vincent Clerc, I'm the CEO of A P Moller Maersk, and with me in the room today is our CFO, Robert Erni.

Let me start with the overall highlights for the second quarter. At the macro level, market demand continued unabated despite the disruptions from the war in the Gulf, driven by Far East exports on almost all trade lanes. Exports from the Far East grew for the third consecutive year, while the backhaul volumes were stagnant or negative. This has led to significantly more imbalanced trade flows and increased congestions in various regions including Europe, the East Coast of South America, West Africa and the Middle East, as volume levels are challenging the limits of ports and landside infrastructure in these regions.

These bottlenecks quickly translated into significant and sustained increases in the spot rate from mid-May, which not only had a significant effect on this quarter, but we expect will affect the outlook for the rest of the year, which I will get to shortly. 6 billion. Free cash flow turned positive again at $549 million, supported by higher earnings, albeit partially offset by a buildup in working capital driven by higher receivables, a consequence of higher rates, and by bunker inventory because of higher energy prices. As you may have seen, we have upgraded our guidance for the full year based on market volumes growth of about 4%.

5 billion and a positive free cash flow. We'll return to the guidance later in the presentation, but looking at the operational highlights by segments: in Ocean, we leveraged the agility of our network and made the necessary operational adjustments to adjust to the new situation in the Middle East and successfully increased volumes in other corridors. Weekly volumes are now consistently above pre-war levels. As we indicated last quarter, we successfully implemented commercial measures during March to recover elevated costs linked to the Middle East situation on contracts as well as at our spot business.

Separately, the continued strong market demand and more imbalanced trade flows have led to increased congestions in multiple geographies and a second round of increases in spot rates from mid-May on the Red Sea. We have gradually been reintroducing services to the Bab-el-Mandeb Strait with four services to date, the first one being announced on July 6. These make up about a third of the volumes that would ordinarily be transiting through the Strait and the Suez Canal. We continue to monitor the security situation in the region and are prioritizing the safety of crews, cargo and vessels in every transit that we make and in the decisions on the return of other services.

In Logistics & Services, the broad commercial momentum that the team has built over the past quarter supported growth across the portfolio. 1% for this quarter. The Gulf region has been impacted by the effective closure of the Strait of Hormuz, but we have managed to protect our customers' supply chains through the use of land bridge solutions. In Terminals, we continue to grow the portfolio through a new greenfield investment that we announced in Da Nang in Central Vietnam.

And as far as the existing portfolio goes, we delivered strong top line growth while demonstrating disciplined cost control to drive improvement in both profit and margins. Now, looking at the strategic priorities we had set for ourselves at the start of the year, starting with Ocean on grow, we have delivered good volumes growth at around 4% on the back of strong market demand and operational delivery. As we quickly adjusted for the disruption in the Middle East and protected our high asset turns, the volume growth has outpaced the fleet growth by 2 percentage points. Thanks to the efficiencies that Gemini has delivered, utilization remains very high at 96%.

With strong discipline in our fleet management, Gemini is now fully in the base, so future asset turn uplift will likely be less pronounced, meaning that volume growth will be more in line with fleet growth in the coming quarters. Moreover, with utilization already at a high level, the task for us will be to ensure that we have the capacity to grow and we will use various levers to ensure that we continue to do so. On focus on profitability, higher spot rates from the strong market demand and the ensuing congestion drove strong Ocean earnings for the quarter. The cost increase from the Middle East conflict on contracts was recovered through surcharges and bunker formula.

Finally, with Gemini now fully implemented for a 12-month period, we can confirm that the Ocean cost benefit came in at about $950 million, just above the upper range previously communicated of $700 to $900 million. Turning to Logistics & Services this quarter, we have introduced the new reporting structure that we announced earlier in the year. Going forward, we will report Logistics & Services across three segments, namely Forwarding, Solutions and Landside. At a high level, Forwarding comprises air and ocean forwarding products, while Solutions comprises contract and lead logistics products, and Landside comprises inland and ground freight products.

This change is designed to give greater value for customers through clearer and better product categorization, simplify our Logistics & Services portfolio and organizational structures internally, and improve comparability with our peers in the industry. Through this we will also give you a better view and understanding of where growth and margin progressions are coming from across the portfolio. As you will recall, our priorities in Logistics & Services are to improve growth and accelerate margin improvement.

On the first priority, the business delivered very strong revenue growth of 15% in the quarter, driven both by volume growth in most products as well as higher rates. The high growth this quarter is a testament to the growth platform that we have been building over the years, and whilst we are pleased with the growth over the past couple of quarters, we are certainly not complacent and continue to work hard to grow this business sustainably. As I mentioned, land bridge solutions helped mitigate disruptions from the Middle East situation, illustrating the value of the integrated model for our Ocean customers.

On the margin improvement, we continue to deliver progress, with this quarter being the ninth consecutive quarter with year-on-year EBIT margin improvement. Our margins in Forwarding and Landside are strong, but we have to acknowledge that Solutions still needs improvement. The focus here is on converting the warehousing pipeline, reducing white space and improving operational efficiencies as the new business is won and ramps up. Overall, the business has shown that it can grow and improve margins at the same time and these remain key priorities for us for the remainder of the year.

Turning to Terminals, the priorities remain to grow through existing and new locations and to maintain long-term profitability. The segment continues to perform well in that regard. It delivered strong revenue growth of 11%, driven mainly by revenue per move, illustrating the strong pricing power on the terminal side. Now, as most terminals are full, new locations including Rijeka in Croatia are ramping up and helping compensate for volume impacts from disruptions in the Middle East, most notably our lower volumes in our gateway terminal in Bahrain.

We also continue to expand our portfolio with our greenfield investment in Da Nang, Vietnam. I'll add a few more words on this one very shortly. 8% while at the same time investing for growth, as we have signaled with the series of new investments we undertake. We expect some pressure on the ROIC during the build-up phase, but return on the existing portfolio will remain strong.

Let me briefly highlight the Da Nang facility, which is an excellent example of the type of long-term infrastructure investments we want to achieve in APM Terminals. APM Terminals, together with our local partner Hateco Group, won a competitive tender process to develop a new multi-user terminal in Da Nang in Central Vietnam. The port is strategically located in a region of Vietnam that is growing fast and is poised for long-term economic growth. The concession agreement with the Da Nang government gives our consortium exclusive rights to operate and expand Da Nang container ports for 50 years.

This builds on the partnership with Hateco following the opening of the Haiphong Terminal in North Vietnam last year. 7 million TEU per year. Once fully built out, our terminal will serve the growing Central Vietnam gateway market as well as the neighboring countries of Laos and Cambodia, Thailand and Myanmar. As indicated on the map, phase one, comprising berth one and two, will already go live in 2029.

This is exactly the type of location where we see long-term value creation: a strategic gateway for a growing market and an opportunity to build a state-of-the-art green and smart container terminal with a partner we know well. Before I hand over to Robert for the Financial Review, let me take a step back and talk more broadly about the developments in the Ocean markets that have led to the change in outlook and financial guidance for the year. Container market demand has been extremely resilient, this growth being driven by exports from Asia. This has continued relentlessly despite various events such as the war in the Middle East or a new round of tariffs.

2% in Q2 alone, and our weekly volumes today are above what they were prior to these events. This is not a pull-forward but real underlying demand and has led us to increase our expectation of growth in the container market from 2 to 4% earlier in the year to around 4% at the end of June. Additionally, that growth continues to be imbalanced with headhaul growth far outpacing backhaul. This means that terminal volumes are growing far faster than container market volume growth, given the need to return an ever-increasing number of empty containers on the backhaul.

This growth and increasing trade imbalances comes on the heels of about 15 years since the financial crisis where investment into terminal capacity has lagged. With market demand growing faster than terminal capacity, we were bound to hit a bottleneck at some point. To illustrate this, cumulative headhaul growth from the Far East over the past three years, or since 2024, has now been around 25% with the cumulative global terminal capacity growth only at 10% over the same period. This clearly shows the extreme challenges that some terminals are facing today.

Many of them are completely full, resulting in growing congestions in some of the key nodes of our network, which is impacting the global network and not just the local situation. Because of their criticality, the effect of these disruptions will not be linear. And when a key node like Shanghai, which today has a 12-day waiting time, is affected, this will result in sharp rises in rates. Given the resilience of demand, the degree of underinvestment into terminals, and the time that it will take to bring terminal capacity online to match these demands, it means that rate events such as what has happened since May will become more frequent in the years to come.

As we look at this year, this is what we've been seeing. The combination of strong headhaul demand led to increasing congestions in many key ports, which in turn led to sharp increases in freight rates and finally led to our upgraded guidance. In effect, the bottleneck in the supply chain is now moving from ships to the landside and this cannot be debottlenecked quickly. And so we believe that we are seeing right now a structural change, with the rate environment becoming more benign, albeit still with a lot of volatility remaining.

With that broader market perspective, I will now hand over to Robert, who will take you through the Financial Review. Robert Erni, Group Chief Financial Officer Thank you, Vincent. We had a good second quarter with results stronger in comparison to both the prior year and the first quarter. This performance was driven by all three segments, but in particular Ocean, as higher spot rates and volumes translated into better earnings and stronger cash generation.

8 billion, up 20% year on year, supported by strong demand in the container market, higher spot rates in Ocean, and continued growth across all our segments. The strong revenue growth translated into higher profitability. 6 billion, driven mainly by Ocean, while Logistics & Services and Terminals also continued to perform well. Free cash flow was positive at $549 million compared with negative $373 million last year, reflecting the stronger earnings.

5 billion. Turning to cash flow, the stronger results also translated into improved cash generation in the quarter. 3 billion supported by EBITDA of $3 billion. This implies cash conversion of 75%.

The lower cash conversion compared to the last quarter was mainly due to the increased working capital reflecting higher receivables following the increase in Ocean rates and higher bunker inventory because of higher bunker prices. Gross capex was $931 million, in line with our annual guidance, while repayments of lease liabilities amounted to $863 million. After all of these, free cash flow was positive and better than both last quarter and the same period last year. In addition, we returned $367 million to shareholders during the quarter, the majority through the ongoing share buyback program.

As I mentioned, the increased earnings were mainly driven by Ocean, so let me spend a few minutes on what happened. 5 billion, up 23% year on year, mainly driven by rates and further supported by good volumes. Average loaded freight rates increased by 22% year on year and 32% sequentially, driven by strong spot rates across most of our trade clusters, particularly Latin America and Intra-Asia. 4 million FFE, supported by strong market demand driven mainly by Far East exports.

Despite various cost headwinds, unit costs at fixed bunker and FX decreased by 1% year on year. Note that if you exclude the positive impact from the extended useful life of our vessels, which was implemented this year, unit costs would be slightly up year on year. As a result, earnings increased significantly over the first quarter and we delivered EBITDA of $2 billion and EBIT of $935 million. The increased profitability was mainly driven by the strong development in spot rates, while the commercial measures with contractual customers compensated for the higher operating costs resulting from the Middle East disruption.

Finally, gross capex was $663 million and, while slower than last year, remains within the scope of our annual guidance. The year-on-year improvement in Ocean earnings becomes clearer when we break down the main moving parts of the bridge. 6 billion on EBITDA. This included compensation for higher bunker costs, elevated insurance premiums, longer dwell times, as well as other transshipment and network costs associated with contingency routing.

Strong volume growth also contributed positively, adding $185 million. These benefits were partly offset by significantly higher bunker prices following the oil price surge back in May. Bunker prices were up 44% year on year, resulting in a negative impact of around $612 million.