CMA CGM boosts profitability despite volume slowdown
During the second quarter of this year, French container shipping major CMA CGM improved profitability in all its business activities despite challenges related to COVID-19.
The company posted a net income of $136 million in Q2 2020, up sharply compared with a loss of $109 million in Q2 2019 and a profit of $48 million seen in Q1 2020.
EBITDA increased 26.3%, compared with the second quarter of 2019, and reached more than $1.2 billion.
Revenue for the period reached $7 billion, down 9% compared with the second quarter of 2019, due to a slowdown in volumes related to the impact of the global public health crisis on international trade.
During the quarter, the group’s operating performance generated operating cash flow in excess of $1.1 billion. Moreover, the group’s liquidity was further strengthened by securing a EUR 1.05 billion guaranteed bank loan, EUR 300 million of which was allocated to the CEVA Logistics capital increase.
An unprecedented time for shipping and logistics
CMA CGM performed second quarter operations under unprecedented circumstances due to the COVID-19 pandemic. Container traffic volumes decreased for the first time since 2009 as a result of lockdown measures in several countries.
Specifically, volumes were down 13.3% in Q2 2020 compared with the corresponding period a year earlier. As a result, revenue for the quarter was down 10.9% compared with the second quarter of 2019, totaling $5.3 billion for shipping.
Unit cost by TEU was down 4.6% compared with the second quarter of 2019, at $892 due to the decline in oil prices, the froup’s cost-cutting initiatives and the reduction in the fleet of vessels and containers deployed.
CEVA Logistics turnaround plan implementation remained on track despite the challenging environment. According to CMA CGM, the COVID-19 crisis has confirmed the relevance of the company’s strategy of offering complementary shipping and logistics services, such as CEVA Logistics’ commercial airfreight and warehousing solutions. The second quarter saw the initial signs of the recovery of the CMA CGM Group’s logistics subsidiary.
“Despite the COVID-19 pandemic, our group reported excellent results during the 2nd quarter, thus strengthening our financial structure. Thanks to our agile business model and synergies between our shipping and logistics business activities, we were able to adapt our service offerings to meet our customers’ fast-changing needs,” Rodolphe Saadé, Chairman and Chief Executive Officer of the CMA CGM Group, commented.
“CEVA Logistics’ turnaround plan is underway and in line with our expectations. During this public health crisis, preserving the safety of our employees was a top priority. Our teams have been working hard to ensure the Group’s and customers’ business continuity. Our expertise has been especially useful in combating COVID-19 by developing sea and logistical bridges to supply essential medical equipment. Third quarter results should mark a new improvement in our performance.”
Further recovery in container shipping expected
The recovery in container shipping seen since April should continue during the third quarter of 2020 for most routes, driven by faster recovery in the consumption of goods than of services, the growth of e-commerce, and usual seasonality, CMA CGM said.
These factors recently drove freight rates to historically high levels, in particular on transpacific routes where the group has a strong presence.
Considering the uncertainties relating to the current health and economic environment, the CMA CGM said it remains cautious and continues to apply the necessary public health measures, adapt its offerings, and focus efforts on operational efficiency, cost control and optimizing its operational set up.
“The group will carefully monitor the development of the situation, which remains uncertain. However, the group is confident in its business outlook for the third quarter of 2020: the current strong momentum of the shipping market, driven by both volumes and freight rates, should allow the group to further significantly improve its operating margin compared with the second quarter,” CMA CGM concluded.