Maersk Group narrows losses during ‘transformational’ 2017

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   Danish shipping conglomerate A.P. Møller-Maersk A/S – which includes ocean carrier Maersk Line, port terminal operator APM Terminals (APMT) and freight forwarder DAMCO – posted an overall loss of $1.16 billion in 2017, down considerably from the $1.94 billion loss reported in the previous year, according to the company’s most recent financial statements.
   The group’s overall revenues climbed 13.5 percent year-over-year to $30.95 billion.
   The latest results come after a 2017 year in which Maersk divested its energy subsidiaries, including Maersk Oil, Maersk Tankers, Maersk Drilling and Maersk Supply Service, and acquired German container carrier Hamburg Süd, as the company attempted to return its focus fully to the transportation side of the business.
   As a result, the group reported an underlying profit from continuing operations – i.e. not including the abovementioned energy businesses – of $356 million for the year, compared with a loss of $496 million in 2016.
   Maersk attributed the results primarily to a successful year for Maersk Line in which revenues jumped 14.9 percent thanks to rising volumes and freight rates.
   Group results were also impacted by the June NotPetya cyber attack, which temporarily suspended operations for APMT and hindered operations for both Maersk Line and DAMCO.
   “Maersk Line and Damco were severely impacted by a cyber-attack in Q3,” the company said. “Maersk Line recovered quickly with strong volume growth and near all-time low unit costs toward the end of the year. Stronger cooperation between Maersk Line and APM Terminals generated the first integration synergies of around $0.1 billion despite negative impact from the cyber-attack and operational challenges in key hubs.”
   “The past year was unusual for A.P. Moller – Maersk, characterized by a cyber-attack and operational challenges in a few hubs,” Group CEO Søren Skou said of the results. “We succeeded in growing the revenue by 13 percent, improving cash flow and increasing underlying profits from a low 2016 base.
   “However, the financial result shows that significant improvements are still needed,” he added. “On the other hand, when we look at the strategic business transformation, progress throughout the year has indeed been satisfactory. We have taken the first steps towards the integration of our container shipping, ports and logistics businesses and our digital transformation is taking shape. At the same time, we have found new owners for part of the energy-related business units.”
   Maersk in 2017 entered into an agreement for Total S.A. to acquire Maersk Oil for $7.4 billion in a combined share and debt transaction, as well as a deal for A.P. Møller Holding to acquire Maersk Tankers for $1.1 billion in an all-cash transaction. The company has said a structural solution for Maersk Drilling is expected within the next 12 months.

Maersk Line

   Maersk Line (excluding results from Hamburg Süd) reported an underlying profit of $511 million on $24.3 billion in revenues for the full year in 2017, compared with a $384 million loss the year before.
   Transport volumes grew 3 percent to 10.73 million forty-foot equivalent units (FEUs), while the average freight rate jumped 11.7 percent to $2,005 per FEU, despite the negative impact of the NotPetya cyber attack.
   Volumes grew 2.4 percent on east-west trade lanes, 2.2 percent on north-south routes, and 7.3 percent in intra-regional services.
   At year’s end, Maersk Line’s fleet consisted of 287 owned vessels with a combined 2.05 million TEUs of capacity and 389 chartered vessels with 1.51 million TEUs. The total fleet capacity of 3.564 million TEUs represented an increase of 10.0 percent compared to the end of 2016.
   Maersk attributed the increase in part to a need to deploy additional capacity to accommodate incoming volumes from a slot purchase agreement signed in Q1 2017 with Hamburg Süd and Hyundai Merchant Marine (HMM).
   The carrier’s idle fleet capacity at the end of 2017 stood at 24,100 TEUs on three vessels, which was relatively unchanged from 24,700 TEUs on three vessels at the end of 2016. Maersk Line’s idle capacity corresponds to around 6.3 percent of total idle capacity in the market, the company said.
   Looking ahead, Maersk said it expects to achieve cost synergies from its acquisition of Hamburg Süd, which will remain an independent brand, of between $350 million and $400 million by 2019. Combined, Maersk Line and Hamburg Süd will sport more than 4 million TEUs in overall container fleet capacity and will control roughly 19 percent of global market share, according to the company.
   “After a successful acquisition of Hamburg Süd, the integration is off to a good start, with both carriers growing volumes during the first months,” said Skou. “A smooth integration of Hamburg Süd remains a top priority for 2018.”

APM Terminals

   APMT saw its underlying profit fall 4.4 percent to $414 million during 2017, as revenues slipped 0.9 percent to $4.14 billion.
   AP Møller-Maersk said results were negatively impacted by both the cyber attack and start up costs related to three new terminals that commenced operations in 2017 – Lázaro Cárdenas, Mexico; Izmir, Turkey; and Quetzal, Guatemala. Those impacts were offset in part by increases in terminal handling volumes and cost cutting initiatives.
   APMT’s terminals handled 39.7 million TEUs in 2017 on an equity-weighted basis, a 6.5 percent increase from the previous year thanks to “strong volumes in north Asia, Latin America and across several locations due to strong growth from Maersk Line,” the group said.
   Volume growth was slightly higher than Drewry’s estimated global port volume growth of 6 percent, according to Maersk.
   “Despite signs of stability in some markets, industry-wide market challenges and rate pressure are expected to continue in 2018,” Maersk said. “APM Terminals will continue to collaborate closely with all customers including Maersk Line in all regions, with the focus on supporting customers’ needs and improving the utilization of its facilities. With synergies from closer collaboration and additional volumes resulting from the Hamburg Süd acquisition, APM Terminals expects to deliver further volume growth in 2018.”

DAMCO
   Damco reported an underlying loss of $36 million for the full year in 2017 compared with a profit of $31 million in 2016, despite revenues rising 8 percent year-over-year to $2.7 billion. 
   The increase in revenues was driven by volume growth in both ocean and airfreight, as well as in the company’s supply chain management division, but was more than offset by the negative impacts of the NotPetya attack, lower margins and investments in products and digitization.
   “In a continually challenging market environment, Damco managed to grow sales across its product portfolio,” said Maersk. “Particularly for ocean, margins were under pressure in the first part of the year.
   “Damco succeeded in launching the digital freight forwarding platform Twill in Q2, and is rapidly expanding coverage, product features and customer base,” the company added. “Damco continues to invest in marketing excellence, product features and digital solutions, which is considered an important step to support the overall strategy of becoming the global integrator of container logistics.”


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