The world’s biggest container groups defend bumper dividends -Dlight News

The world's biggest container groups defend bumper dividends

The world’s two largest publicly listed container shipping companies have defended plans to pay multibillion-dollar payouts to shareholders, despite pressure from falling profits and lower tax rates.

Danish group AP Møller-Maersk and German rival Hapag-Lloyd plan a combined $22.6bn dividend payout, 33 times more than the amount distributed in 2019.

Although the bumper payout follows a record period for profits, revenues are expected to fall sharply this year due to a slowdown in global trade due to the economic slowdown.

Both groups forecast a roughly 70 percent drop in profits for 2023, with their combined payouts forecast to be at least 30 percent higher than this year’s earnings.

Due to the increased demand for online shopping during the height of the Covid-19 pandemic, as well as supply chain disruptions, the carrier’s profits have increased significantly, which has increased the cost of shipping goods by sea.

Maersk said its proposed dividend amounted to 37.5 percent of its underlying profit for 2022, adding that this was “fully consistent” with its policy of paying out 30 to 50 percent of earnings.

A column chart of ($bn) shows that Maersk's dividend payout has increased as profits have increased.

Hapg-Lloyd’s chief financial officer Mark Frese, while justifying the group’s planned €11.1bn dividend this month, insisted the group still expects to maintain a net cash position.

The industry is paid amid criticism of comparatively low tax rates due to the way taxes are calculated.

Last year a group of French lawmakers proposed a 25 percent tax on “superprofits” accumulated by domestic carrier CMA CGM, privately owned by the billionaire Saad family.

Oil majors ExxonMobil and Shell, hit hard by the windfall tax, are forecast to pay a combined $23.3 billion this year, just a fraction above the combined dividends of Maersk and Hapag-Lloyd.

EU countries allowed taxing fleet capacity to prevent shipping companies from relocating to low-tax states. But this meant that as their profits rose, their effective tax rate fell.

In 2022, Hapag-Lloyd’s tax payments amounted to just 1 percent of its pre-tax profit, up from 10 percent in 2019. Maersk’s effective tax rate fell from 49 percent to 3 percent over the same period.

A column chart of income taxes as a percentage of pre-tax profits shows that Hapg-Lloyd's tax rate has decreased as profits have increased.

“You can think [this system] tax subsidy, [but] It is difficult to see the link between tax subsidies and social benefits,” said Olaf Merck, a shipping researcher at the OECD’s International Transport Forum.

He pointed out that shipping was exempted from the agreement on the global minimum 15 percent corporate tax, which was decided during negotiations at the OECD following lobbying by the industry.

“It blows my mind that the sector is so under-taxed, so when they have these bumper profits they can pass it on to shareholders,” said Aoife O’Leary, chief executive of campaign group Opportunity Green.

Much of the industry’s profits could have been saved by reducing emissions, Merck said.

O’Leary said shipping groups “should pay for their pollution”.

She added that the disappointing level of investment to green the fleet was “not surprising”, given the absence of strong regulation forcing shipping to decarbonise.

Hapg-Lloyd’s Frase defended the tax system for shipping, saying it “worked” and had supported the industry through difficult years when it struggled to turn a profit.

Maersk said tax rules are often up for debate when profits are high, but added that shipping is a “cyclical industry” and politicians are responsible for making changes.

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