Maersk Q1 Report - Transformation

A.P. Moller Maersk begins 2018 with strong revenue growth however unsatisfactory earnings

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. 

“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 USD 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.

Logistics& Services

Logistics & Services reported a revenue growth of 6% to USD 1.5bn (USD 1.4bn)，driven by supply chain management and inland haulage. EBITDA for Q1 was USD，23m (USD 32m) impacted by continued investments in new digital solutions and implementations as well as adverse development in exchange rates.

Through introduction of new supply chain solutions and strong sales performance Logistics & Services experienced a number of significant customer wins in Q1 2018. The customer wins and strong pipeline is part of the execution of the strategy of providing customers with end-to-end solutions. Further, the continued investment in product development and digital solutions is an important part of the overall strategy.

Financially, the strong sales performance lead to a revenue growth of 6% in Q1 2018, primarily driven by supply chain management services and inland haulage. However, due to the continued investments in digital solutions and implementations as well as adverse foreign exchange rate development, the increased revenue was not converted to EBITDA, which decreased to USD 23m (USD 32m). The target is to significantly improve the profitability through the increased sale of integrated end-to-end digital solutions and more efficient operations.

Developments in the quarter

Significant customer wins within supply chain management supports the strategy of providing end-to-end solutions to the customers. The roll out of Twill continued throughout Q1 2018. Twill is a digital freight forwarding platform which makes shipping simpler for customers, allowing a booking process which is as easy as buying an airplane ticket. Australia, India, Benelux, the US and Mexico have successfully been added to the map. The platform now operates in more than 10 countries, and aim is to add 15 more countries in 2018. The digital supply chain management agenda has further been pursued with the launch of the platform “Digital Damco” which allows the customer to combine all offered digital products to enhance the supply chain experience. To support the strategy to bring in and connect more e-commerce customers, Damco created a joint venture with a local partner in Nansha, Guangzhou, China. The joint venture gives the opportunity to introduce market-leading solutions to existing and potential new customers. The Inland Services showed portfolio additions in Europe, inland haulage hub in Bucharest, Romania, in North Africa  upgraded facilities in Sfax, Tunisia and in the Americas, BCO in-plant in Arica, Chile, as well as upgraded facilities in Caldera, Costa Rica.