Shipping giant CMA CGM paints gloomy outlook as profit plummets

CMA CGM sketched out a sombre outlook for the shipping industry, with the world’s third-largest container line saying freight rates remain weak and a steep slump in US demand for goods out of China isn’t over. 

“The transport and logistics market remains depressed,” the French company controlled by billionaire Rodolphe Saade and his family said in an earnings statement last Friday (Jul 28).

Sluggish economic growth and persistent inflation is expected to weigh on consumer spending for the rest of the year, while deliveries of new vessels in the market could hurt rates.

The closely held company’s second-quarter net income fell about 83 per cent to US$1.3 billion from a record US$7.6 billion in the same three months of the previous year.

The profit margin narrowed to 21.1 per cent from 49.2 per cent.

A rapid downturn that began in the final six months of 2022 has shaken the container transport industry that had enjoyed an unprecedented boom during the pandemic fuelled by a surge in consumer demand for goods.

CMA CGM rival ZIM Integrated Shipping earlier this month cut its full-year forecast due to weak rates, while AP Moller-Maersk and Hapag-Lloyd are scheduled to report results next month. 

East-West shipping routes are “under more pressure and dropping faster than the North-South trade, which remains pretty dynamic”, CMA CGM chief finance officer Ramon Fernandez told reporters on Friday.

He cited China export volumes dropping 25 per cent to the US – with destocking not yet complete – and 5 per cent to Northern Europe, but rising by double digits to Africa, Latin America and the Middle East.  

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CMA CGM is raising rates on Aug 1 for most trade leaving Asia, Fernandez said, adding that the prices for freight transport in the spot market have somewhat stabilised in recent weeks. New vessel capacity arriving on the market is likely to weigh on rates, particularly on East-West lines, the company said.

It has about 100 new vessels on order that will be added to a 623-strong fleet, Fernandez said.

Record profits over the previous two years filled the coffers of the Saades and rival European shipping tycoons such as Gianluigi Aponte, founder of Mediterranean Shipping, and Klaus-Michael Kuehne, who has stakes in logistics and shipping companies.

CMA CGM went on a buying spree with the windfall, most recently bolstering its media assets by finalising on Thursday the purchase of La Tribune newspaper.

The company is also working to close its biggest purchase to date: Bollore SE’s logistics arm for an enterprise value of five billion euros (S$7.3 billion).

While second-quarter revenue from containers plunged 48 per cent to US$8.35 billion, sales at the company’s logistics unit were flat at US$3.78 billion.

The Saade family is worth about US$23 billion, according to the Bloomberg Billionaires Index.