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Container groups defend bumper dividends

By News Desk
March 19, 2023

London: The world’s two biggest publicly listed container shipping companies have defended plans to dish out multibillion-dollar payouts to shareholders, despite the threat of falling profits and pressure over low tax rates.

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

Although the bumper payouts follow a record period for profits, earnings are expected to fall sharply this year as global trade declines because of the economic slowdown.

Both groups have forecast a roughly 70 percent fall in profits for 2023, with their combined payout predicted to be at least 30 percent higher than earnings this year.

Carrier profits have risen largely because of surging demand for online shopping during the height of the Covid-19 pandemic, as well as supply chain bottlenecks that sent the cost of delivering goods by sea soaring.

Maersk said its proposed dividend was equivalent to 37.5 percent of its underlying profits for 2022, adding that this was “fully in line” with its policy of paying between 30 and 50 percent of earnings.

Hapag-Lloyd’s chief financial officer Mark Frese, justifying the group’s planned €11.1 billion dividend this month, insisted that the group still expected to maintain a net cash position.

The payouts come amid criticism of the comparatively low tax rates the industry enjoys because of the way the levies are calculated.

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

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

EU countries allowed shipping companies to be taxed on fleet capacity to stop them relocating to low-tax states. But this meant that as their profits soared, their effective tax rate plunged.

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

“You could consider [this system] a tax subsidy, [but] it’s difficult to see the link between the tax subsidy and a societal benefit,” said 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 global minimum 15 per cent corporate tax, decided during talks at the OECD, following lobbying by the industry.