CMA CGM, the French shipping and logistics conglomerate, keeps pulverising profit records, with net income reaching a staggering $14.8bn in the first half.
The bonanza, however, may slow down as inflation puts a lid on consumer spending and curbs demand for shipping, the Marseilles-based company warned on Friday.
It nevertheless pledged to keep reinvesting its mammoth profit in decarbonisation and announced a $1.5bn energy transition fund to help meet its green targets.
“During the second quarter, we continued to accelerate our strategy and our transformation around our two pillars: shipping and logistics,” chief executive Rodolphe Saade said on 2 September, the day CMA CGM announced surging net income for the second quarter, at $7.6bn from $3.48bn a year earlier.
Profitability nearly tripled in the entire first half to $14.8bn from $5.56bn a year ago.
This means CMA CGM earned almost as much in the first six months of this year as it did over the entire 2021, when net income reached $17.9bn.
Despite its recent diversification, shipping still accounts for the bulk of business. Maritime operations accounted for $16bn of the group’s overall $19.5bn revenue in the second quarter.
Headwinds from global inflation, however, are clear to see.
“The global decline in consumer spending, which was already perceptible this summer, will lead to more normal international trade conditions in the second half as well as to a downturn in shipping demand,” Saade said.
Softer demand for shipping services has already led to a decline in spot freight rates “in some regions”, CMA CGM warned.
The company carried 5.6m teu in the second quarter, down 1.3% from the same period last year.
“Volume growth is currently being dampened by the congestion in ports and overland supply chains, which has led to longer vessel transit times,” it said.
On the cost side, higher energy prices increased bunker costs by $1.1bn year on year in the first half.
New $1.5bn green fund
Despite the headwinds, CMA CGM said it will stick to its strategy of reinvesting 90% of consolidated profit in supply chain diversification and clean energies.
In its latest initiative to that effect, it announced a $1.5bn energy transition fund on Sunday.
The amount, to be spent over five years starting in October, will bring together CMA CGM engineers, energy experts, financial analysts and project managers.
Their object will be to “guide the group’s overall strategy” towards developing low-carbon fuels and energy solutions across its entire business base — from ships to land and air transport, ports, logistics services and offices.
CMA CGM has set itself a 2050 deadline to reach net zero emissions.
“We have allocated the resources needed to accelerate our energy transition and that of the entire shipping and logistics industry,” Saade said.
The company will also continue to invest in new businesses in its drive to diversify beyond the maritime sector.
In the first half of 2022 alone, it made three such acquisitions: Ingram Micro’s Commerce & Lifecycle Services business, Colis Prive and European contract logistics company Gefco.
These moves meet with shareholder approval.
“CMA CGM is in an amazing place,” the company’s 24%-owner Robert Yuksel Yildirim told TradeWinds in an interview in July, adding that it has become “too big to fail” now.