Average operating margin falls to lowest level in a year

by Editor

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The average operating margin for the leading container carriers fell to its lowest level in four quarters, despite the front loading of cargo by American shippers looking to get ahead of Chinese tariffs.

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The nine largest companies reporting Earnings before Interest and Tax, or EBIT, posted an average margin of 18.1% for the first three months, down from 25.8% in the previous quarter, with lines reporting a wide variety of results.

The seventh largest carrier globally, Evergreen Marine Corp, returned to the top of the rankings with a margin of 26.7%. It has now reported the highest margin in seven out of the last thirteen quarters.

Japan’s Ocean Network Express (ONE) was a surprise entry at the bottom of the list, with a margin of just 5.2%. Despite enjoying a 9.1% increase in average rates, gains on freight were offset by higher operating, variable and overhead costs. Meanwhile, ONE’s liftings rose by a modest 2.3% year-on-year, and the carrier noted weakening cargo demand after the Lunar New Year.

It is only the second time the Singapore-headquartered carrier has underperformed its peers, in particular Maersk and Hapag-Lloyd, since being created out of the container subsidiaries of K Line, NYK and MOL in mid-2018.

Freight rates from the main carriers showed on average a 10% year-on-year increase in the first quarter, although there was a wide range between carriers. ZIM recorded the largest rise, at 22%, while Evergreen and COSCO also showed double figures (19% and 12%). At the lower end, rates for HMM and Maersk rose just 0.8% and 2.5%.

Source: Alphaliner