World’s greatest container groups defend bumper dividends

The world’s two greatest publicly listed container shipping providers have defended plans to dish out multibillion-dollar payouts to shareholders, in spite of the threat of falling earnings and stress more than low tax prices.

Danish group AP Møller-Maersk and German rival Hapag-Lloyd program a combined $22.6bn dividend payout, a lot more than 33 occasions the quantity delivered in 2019.

Despite the fact that the bumper payouts stick to a record period for earnings, earnings are anticipated to fall sharply this year as worldwide trade declines since of the financial slowdown.

Each groups have forecast a roughly 70 per cent fall in earnings for 2023, with their combined payout predicted to be at least 30 per cent greater than earnings this year.

Carrier earnings have risen largely since of surging demand for on the internet buying in the course of the height of the Covid-19 pandemic, as effectively as provide chain bottlenecks that sent the expense of delivering goods by sea soaring.

Maersk stated its proposed dividend was equivalent to 37.five per cent of its underlying earnings for 2022, adding that this was “fully in line” with its policy of paying in between 30 and 50 per cent of earnings.

Column chart of  ($bn) showing Maersk’s dividend payouts have surged as profits rose

Hapag-Lloyd’s chief monetary officer Mark Frese, justifying the group’s planned €11.1bn dividend this month, insisted that the group nonetheless anticipated to preserve a net money position.

The payouts come amid criticism of the comparatively low tax prices the market enjoys since of the way the levies are calculated.

Final year a group of French lawmakers proposed a 25 per cent tax on the “superprofits” accumulated by domestic carrier CMA CGM, privately owned by the billionaire Saadé family members.

The calls by the lawmakers have resonance provided oil majors ExxonMobil and Shell, which have been hit really hard by windfall taxes, are forecast to spend out a combined $23.3bn this year, only a fraction above the combined dividends of Maersk and Hapag-Lloyd.

EU nations permitted shipping providers to be taxed on fleet capacity to quit them relocating to low-tax states. But this meant that as their earnings soared, their powerful tax price plunged.

In 2022, Hapag-Lloyd’s tax payments have been equivalent to just 1 per cent of its pre-tax earnings compared with ten per cent in 2019. Maersk’s powerful tax price fell from 49 per cent to three per cent more than the similar period.

Column chart of Income taxes as a percentage of profits before tax showing Hapag-Lloyd’s tax rate has plunged as profits soared

“You could take into consideration [this system] a tax subsidy, [but] it is tough to see the hyperlink in between the tax subsidy and a societal advantage,” stated Olaf Merk, a shipping researcher at the OECD’s International Transport Forum.

He pointed out that shipping had been exempted from an agreement on a worldwide minimum 15 per cent corporate tax, decided in the course of talks at the OECD, following lobbying by the market.

“It blows my thoughts there’s such tiny taxation of the sector, so when they have these bumper earnings they can just send them out to shareholders,” stated Aoife O’Leary, chief executive of campaign group Chance Green.

Merk stated a lot more of the industry’s earnings could have been invested in cutting emissions.

O’Leary stated shipping groups “should be paying for their pollution”.

She added that the disappointing level of investment in greening the fleet was “not surprising”, provided the absence of powerful regulation forcing shipping to decarbonise.

Hapag-Lloyd’s Frese defended the tax technique for shipping, saying it “works” and had supported the market by means of tough years when it struggled to turn a profit.

Maersk stated tax guidelines have been typically up for discussion when earnings have been higher, but added that shipping was a “cyclical industry” and it was the duty of politicians to make adjustments.

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