A surge in bunker prices eroded the earnings in the first quarter of container shipping giant CMA CGM, even as it announced it would impose an exceptional surcharge to compensate for the continuing rise in oil prices.
Group chairman and CEO Rodolphe Saadé said: “The shipping industry is experiencing sustained growth but was hit in the first quarter by the sharp increase in bunker prices. In this environment, CMA CGM succeeded in recording a strong increase both in volumes transported and in revenue, while maintaining a positive core EBIT margin.”
He also announced the implementation of “emergency bunker recovery measures” to offset the sharp rise in fuel oil prices. “In order to deal with the increase in bunker prices, which continue to rise into the second quarter, we are implementing an exceptional surcharge.”
Volumes transported by the French liner increased by 15.0% year-over-year in the first quarter of 2018, faster than the industry’s growth, the company said in a statement.
“This progression can be explained by the commercial success of the service offering OCEAN ALLIANCE, the strong momentum of the African/US and North America/South America lines, as well the integration of Mercosul,” it added.
Revenue per container rose slightly in the first quarter of 2018 compared to the first quarter of 2017. Group revenue increased by 17.1% to US$5.41 billion compared to the same quarter last year.
Core EBIT was $88 million, down from $252 million a year earlier. The core EBIT margin is at 1.6%, down from 5.5% a year earlier but “a positive performance in a highly deteriorated environment, affected by a very sharp rise in unit bunker costs (+17%),” said the company.
Although under pressure, this core EBIT margin is one of the best in the industry, it stressed.
In the first quarter, the consolidated net income of the group stands at a loss of -$77 million, from a net income of $86 million year-on-year, resulting notably from the unfavorable euro-dollar exchange rate variation, said the company.
Emergency bunker charges
In addition to measures that aim to reduce operational costs, the group announced the implementation of emergency bunker recovery measures.
“Due to the significant increase in bunker prices since the beginning of the year and to keep ensuring the highest quality of service to its customers, CMA CGM Group will recover bunker costs through its bunker related surcharges which will be applied to all cargo on all Worldwide trades,” the group said.
The charges will apply from June 1, 2018 for non-FMC trades and from July 1, 2018 for Taiwan and FMC trades.
For dry cargo, a charge of $55 or EUR45 will be applied per twenty-foot equivalent unit (TEU). For the group’s reefer trade, a charge of $85 or EUR70 per TEU will apply.
Looking ahead, the group expects to see strong volume growth in 2018 and a significant decrease in the delivery of new vessels in the second half of the year.
“In this context, CMA CGM expects an improvement in the market environment in the second half of 2018, excluding bunker costs and the impact of exchange rates,” it further said.
The measures announced by the CMA CGM group regarding the increase in freight rates, the implementation of surcharge, and cost reduction initiatives should bear fruit in the second half of 2018, it said.
