CMA CGM’s Earnings Skid on Red Sea Disruptions, Weak Demand

By Gaelle Sheehan and Michal Aleksandrowicz

Feb 23 (Reuters) – CMA CGM, one of the world’s largest container shipping groups, said on Friday that its core earnings dived 82.5% in the fourth quarter from a year earlier, capping a dismal year that saw disruptions to trade in the Red Sea and weak consumer demand.

In 2022, CMA CGM had been France’s most profitable company, overtaking the likes of TotalEnergies and LVMH with an annual net profit of $24.88 billion.

In 2023 net profit slumped to $3.64 billion, it said on Friday. 

The outlook for 2024 remained uncertain and would depend on both macroeconomic and geopolitical factors, CMA CGM Chief Financial Officer Ramon Fernandez said in a call.

These included an expected rebound in world merchandise trade from 2023 lows and tensions in the Red Sea seen supporting freight rates, while additional capacity in the world’s container ship fleet would pressure rates.

CMA CGM and other shipping groups have been affected by disruptions in the Red Sea since October as attacks by Yemen’s Houthi militia on commercial vessels in response to Israel’s war with Palestinian Hamas militants in Gaza have slowed trade between Asia and Europe.

On Tuesday, CMA CGM said its Jules Verne container ship transited the Red Sea under French naval escort, after suspending crossings for security risks earlier this month.

The shipping sector was also impacted in 2023 as inflation dampened demand for consumer goods and by a shift in consumer spending to services exacerbated by major inventory drawdowns in the first half of 2023, the company said. 

Volume growth should remain strong in the first half of the year, but the second half looks more uncertain, the company said. It also said investment in diversification would help it weather uncertain conditions this year.

CMA CGM reported an almost 73% drop in full-year earnings before interest, taxes, depreciation and amortization (EBITDA) to $9.0 billion, on revenue of $47.0 billion, down 36.9% year-on-year.

Its shipping division, accounting for two thirds of group revenue, saw stable volumes but full-year earnings dropped 76.6% as new shipping capacity pushed down freight rates in the industry. The unit’s profit margin fell to 23.6% from 53.7% in 2022. 

“Logistics, on the other hand, is proving more resilient, and accounts for a significant part of our business,” Rodolphe Saade, Chairman and CEO said in a statement.

EBITDA for its Logistics unit rose 25.5% in the fourth quarter from a year earlier to $343 million. 

Full-year EBITDA for the Logistics unit, accounting for almost 32% of group’s annual revenue, came in at $1.4 billion, up 12.5% from 2022. 

Earlier on Friday the EU Commission said it had cleared CMA CGM’s acquisition of the logistics operations of conglomerate Bollore, subject to a number of conditions proposed by the companies.

To address them, the parties agreed to divest all of Bolloré Logistics’ activities in Guadeloupe, Martinique, Saint Martin and French Guiana, as well as a number of assets in metropolitan France linked to these activities.

(Reporting by Michal Aleksandrowicz and Gaëlle Sheehan in Gdansk, Sybille de La Hamaide in Paris; Editing by Susan Fenton)

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