AP Moller-Maersk reports ‘unsatisfactory’ Q1 results, highlights new initiatives
A.P. Møller – Mærsk began 2018 with strong revenue growth however unsatisfactory earnings.
In Q1 2018, A.P. Moller – Maersk had a revenue growth of 30% to $9.3bn, 10% excluding Hamburg Süd, with growth in all business segments and a strategic transformation well underway.
A.P. Moller – Maersk reiterates its expectations for 2018 of an underlying profit above 2017 ($356mn), however noting 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 $2.6bn. 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 we are implementing a number of short-term initiatives to improve profitability and we reiterate our guidance for 2018,” says Søren Skou, CEO of A.P. Moller – Maersk.
A new financial reporting structure is 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.
Søren Skou, CEO of A.P. Moller – Maersk 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 $9.3bn with volume growth in Ocean – excluding Hamburg Süd – at 2.2%, as expected slightly below estimated global demand growth of 3-4%. The non-Ocean businesses reports 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 amortisation (EBITDA) increased by 5% to $669mn, negatively impacted by adverse rate of exchange development compared to same period last year of around net $100mn. Earnings in Ocean of $492mn was 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 $139mn to $196mn, while Logistics & Services reported slightly lower EBITDA of $23mn from $32mn.
The underlying result after financial items and tax of negative $239mn was unsatisfactory. A number of short-term initiatives are being implemented to improve profitability.