Maersk CEO: Our Q1 Result Was Unsatisfactory

The first quarter performance of Danish transport and logistics major A.P. Moller – Maersk was unsatisfactory, especially in the ocean-related part of the business, the group’s CEO Søren Skou said.

This is the first time the business conglomerate, which is currently undergoing a transformation into a global integrator of container logistics, announced its quarterly results in a new financial reporting structure.

The results feature four new business segments Ocean, Logistics & Services, Terminals & Towage and Manufacturing & Others, which are aligned with the strategic focus on growing the non-ocean part of the business disproportionally to the ocean.

“The new format reflects that we are an integrated global container transport and logistics business focusing on our customers’ value chains, and it allows us to follow our progress, particularly in those parts of the business which are not purely ocean freight, which we need to grow in order to minimise the cyclical part of our business,” Skou explained.

The group’s profit for the period stood at USD 2.76 bn. Nevertheless, Maersk’s underlying result for the quarter after financial items and tax was a loss of USD 239 million.

Earnings before interests, tax, depreciation and amortization (EBITDA) increased by 5 pct to USD 669 million, negatively impacted by the adverse rate of exchange development compared to same period last year of around net USD 100 million.

The group’s earnings in the Ocean segment reached USD 492 million, impacted by higher unit costs due to adverse developments in bunker price and rate of exchange, Maersk said.

For the non-Ocean businesses, the higher volumes in Terminals & Towage led to an improvement in EBITDA from USD 139 million to USD 196 million, while Logistics & Services reported slightly lower EBITDA of USD 23 million from USD 32 million.

“In the first quarter of 2018, we reported a 30 pct revenue growth and the integration of the business is well underway with a successful start to the Hamburg Süd integration and the closing of Maersk Oil transaction in March with an accounting gain of USD 2.6 bn. “

The group’s revenue hit USD 9.3bn in the quarter with volume growth in Ocean – excluding Hamburg Süd – at 2.2 pct, slightly below estimated global demand growth of 3-4 pct.

The non-Ocean businesses reported a revenue growth with 6pct in Logistics & Services and 11 pct in Terminals & Towage, reflecting strong growth in volumes mainly driven by commercial wins and new terminals and services.

Maersk added that synergies have been realized from increasing collaboration especially between Ocean and gateway terminals, leading to volume growth significantly above the market growth.

“In response to the current challenging market conditions we are implementing a number of short-term initiatives to improve profitability and we reiterate our guidance for 2018,” Skou said.

Namely, for 2018 Maersk expects an underlying profit above 2017 (USD 356 million) and an EBITDA in the range of USD 4-5 bn (USD 3.5bn).

However, the company noted that there were increased uncertainties due to geopolitical risks, trade tensions and other factors impacting container freight rates, bunker prices and rate of exchange.