CMA CGM Sees Larger Loss in 2Q, Pushes Delivery of Ships

French container shipping company CMA CGM has decided to postpone the delivery of certain vessels until 2017 and reduce its capital expenditure commitment as part of its plan to improve operating performance, which includes a programme to reduce costs by USD 1 billion over the next 18 months.

The company said that these plans are structured around the reorganisation of the line network, the optimisation and renegotiation of bunker costs, charters, logistics, port handling and other operating expenses, as well as certain initiatives intended to boost revenue per TEU, notably by expanding in such high value-added segments as reefer carriage.

CMA CGM saw its net loss widen from USD 100 million reported in the first quarter of 2016 to a net loss of USD 109 million for the second quarter of 2016, and against a net profit of USD 156 million seen in the second quarter a year earlier.

CMA CGM’s revenue came in at USD 3.3 billion for the quarter, down from USD 4.1 billion reported in the same quarter of 2015.

Excluding NOL’s contribution, freight carried by the company rose by 0.2% year-on-year in the second quarter, to 3.3 million TEUs.

Volumes rose slightly on the North-South lines, but declined on the East-West lines. Including NOL, which was consolidated as from June 14, total volumes carried for the period amounted to 3.5 million TEUs.

Average revenue per TEU, excluding NOL, fell by 18.8% year-on-year and by 6% quarter-on-quarter, reflecting the persistent pressure on freight rates. As a result, consolidated revenue contracted by 18.6% like-for-like over the period, to USD 3.3 billion (USD 3.5 billion including NOL).

“We are experiencing a market environment that remains difficult, with excessively low freight rates weighing on our revenue and margins. In an environment shaped by a lack of visibility, CMA CGM has the advantage of a strong liquidity position. The strategic relevance of NOL, fully financed, is reinforced. We are working to improve operating performance, notably via the launch of the Agility plan, which includes a programme to reduce costs by USD 1 billion over the next 18 months, and in addition to the post-acquisition synergies with NOL,” Rodolphe Saadé, CMA CGM Group Vice-Chairman, said.

The shipping giant earlier completed the exercise of its rights of compulsory acquisition of all the remaining NOL shares owned by NOL shareholders who had not accepted the all-cash voluntary conditional general offer, at a price per share equal to the Offer Price of SGD 1.3 (USD 0.96).

NOL is now a wholly-owned subsidiary of CMA CGM and “will be delisted from the Official List of the Singapore Exchange Securities Trading Limited (SGX-ST)”

NOL’s shares are scheduled to be delisted from the SGX-ST with effect from 9 a.m. on September 6, 2016.