Danish shipping giant A.P. Moller-Maersk said its revenue in the first quarter of the year increased by 30% to US$9.3 billion year-over-year, but saw an underlying deficit of $239 million from last year’s deficit of $139 million, as it described short-term results in its key ocean business as “unsatisfactory.”
The group in a release said there was growth in all business segments, and reiterated its expectations for 2018 of an underlying profit above 2017.
At the same time, it noted increased uncertainties due to geopolitical risks, trade tensions, and other factors impacting freight rates, bunker prices and rate of exchange.
“In the first quarter of 2018, we reported a 30% 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 2.6bn,” said Soren Skou, CEO of A.P. Moller-Maersk.
“At the same time, on the short-term performance, our result especially in the ocean related part of the business was unsatisfactory.”
In response to the current challenging market conditions, he said they are implementing a number of short-term initiatives to improve profitability as their “strategic transformation” is now underway.
“The underlying result after financial items and tax of negative USD 239m was unsatisfactory. A number of short-term initiatives are being implemented to improve profitability,” the company said.
These actions include a new financial reporting structure being implemented from Q1 2018 “to support the strategic direction towards becoming the global integrator of container logistics.”
“The four new business segments (Ocean, Logistics & Services, Terminals & Towage and Manufacturing & Others) are aligned with the strategic focus on growing the non-ocean part of the business disproportionally to the ocean,” the company said.
Skou explained: “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.”
A.P. Moller-Maersk increased its revenue to $9.3 billion with volume growth in ocean—excluding Hamburg Süd—at 2.2%, as expected slightly below estimated global demand growth of 3% to 4%.
The non-ocean businesses reported a revenue growth with 6% in logistics & services and 11% in terminals & towage, “reflecting strong growth in volumes mainly driven by commercial wins and new terminals and services.”
“Further, synergies have been realised from increasing collaboration especially between Ocean and gateway terminals, leading to volume growth significantly above the market growth.”
Earnings before interests, tax, depreciation and amortization (EBITDA) increased by 5% to $669 million from $638 million, negatively impacted by adverse rate of exchange development compared to same period last year. Earnings in ocean of $492 million were impacted by higher unit costs among others, due to adverse developments in bunker price and rate of exchange.
For the non-ocean businesses, the higher volumes in terminals & towage led to an improvement in EBITDA from $139 million to $196 million, while logistics & services reported slightly lower EBITDA of $23 million from $32 million.
A.P. Moller-Maersk reiterated expectations for 2018 of an underlying profit above 2017’s $356 million and an EBITDA in the range of $4.0 billion to $5.0 billion from $3.5 billion in 2017. However, it foresees increased uncertainties stemming from geopolitical risks, trade conflicts, and other developments that can impact container freight rates, bunker prices, and exchange rate.
