A.P. Moller-Maersk’s severing of business in Russia amounts to a $718 million impact on the ocean carrier’s earnings.
The tally was revealed in the company’s first-quarter update released this week in which Maersk detailed the business impact in its decision to step away from Russia following the invasion of Ukraine.
“As part of the exit process, A.P. Moller-Maersk is working hard to ensure the withdrawal of business activities is done responsibly, including limiting the period of uncertainty among the employees in Russia and finding solutions together with each individual,” the company said.
In Ukraine, Maersk said it has nearly 600 employees and is assisting with any relocation requests.
Some 40 Maersk employees are helping with the United Nation’s Logistics Emergency Team, of which the company is a member, to assist with the movement of relief supplies to Ukraine.
The $718 million impact on the company’s earnings before interest and taxes (EBIT), which totaled $7.3 billion in the quarter, saw the largest hit from the company’s terminals segment in which Maersk said the move away from Russia came at a cost of $485 million.
Maersk’s APM Terminals has a 30.75 percent stake in Global Ports Investments (GPI), which counts six terminals in Russia and two in Finland. The company is in the process of divesting its shares in GPI, which had revenue last year of $502.8 million.
The move away from Russia also included a $162 million impact on the company’s ocean business, $53 million in logistics and services and $18 million on towage and maritime services.
Maersk’s final call at a Russian port was completed on Monday.
Operations at the company’s two Russian warehouses continue “until a solution is found,” Maersk said.
Meanwhile, the company’s Svitzer subsidiary, provides services in the Russian island of Sakhalin and counts four tugboats with plans to sell off the business there.
Maersk acquired a majority stake in the tug boat operator in 1979.
“The Russian invasion of Ukraine came at a time, where most economic data suggested that the global economy was set to accelerate on the back of a rebound in service sector activity as the omicron wave of Covid-19 faded in large parts of the world (China a notable exception),” the company said in an analysis section of its quarterly update. “The invasion and the ensuing sanctions on Russia are clearly having a very significant negative impact on Ukraine and Russia. The invasion has also added to inflationary pressures elsewhere via higher energy and commodity prices.”
Maersk noted demand for logistics services moderating globally in the first quarter and said “not much data is available for the post-invasion period.” Much of global trade hinges on business and consumer sentiment around inflation and the geopolitical environment, alongside China’s zero-Covid-19 policy impacts, the company added.
Capacity constraints on the ocean container and air side, along with warehouse and trucking shortages, remain supply chain challenges.
“The continued congestions and dislocation of supply and demand fundamentals in the logistics industries increases the uncertainty surrounding the rates outlook,” Maersk said.
Even with the wind down in Russia, Maersk still notched gains in the quarter.
Revenue totaled $19.3 billion, up nearly 56 percent from a year ago. That was driven by growth across its business segments. Earnings were also the highest of any quarter on record for the company with earnings before interest, taxes, depreciation and amortization rising $5.1 billion to $9.1 billion.