Maersk Feeling Impact of Trade War
A.P. Moller - Maersk has closed the first quarter of 2019 with a 33 percent increase in earnings before interest, tax, depreciation and amortization (EBITDA) to $1.2 billion. However, the group released its financial results noting an impact as a result of the trade war between China and the U.S.
"We are still facing considerable uncertainties from weaker macro numbers as well as the risk from trade tensions and implementation of IMO 2020,” said Søren Skou, CEO of A.P. Moller - Maersk. “In Q1, volumes on trans-Pacific trade between Asia and North America have shown signs of decline, and new tariffs can potentially reduce expected growth in global container volumes by up to one percentage point."
However, Skou remains positive about the company's strategy to transition out of the energy business. Group revenue grew by 2.5 percent to $9.5 billion in the first quarter of 2019 compared to that of 2018. "With a strong free cash flow of $3.5 billion after the sale of the remaining shares in Total SA., we have significantly strengthened our balance sheet," he said.
Total purchased Maersk Oil in 2017, and Maersk Drilling became a stand-alone company in 2018. It was announced last month that Claus V. Hemmingsen will step down as Vice CEO of A.P. Moller - Maersk and CEO of the Energy division having successfully concluded the separation of Maersk Tankers, Maersk Oil and Maersk Drilling. The Energy division will close down at the latest by the end of June 2019.
Moller-Maersk's overall transport and logistics business has grown significantly over the last few years - both organically and inorganically through the acquisition of Hamburg Süd.
Profitability in Ocean increased. EBITDA grew 42 percent to $927 million compared to same period last year, mainly driven by a 3.9 percent increase in average loaded freight rates and an improvement in total operating cost of 2.8 percent. Revenue increased to $6.9 billion despite lower volumes which declined 2.2 percent, impacted by the front-loading seen on the Pacific trades in Q4 2018 and weak demand on Latin America and Oceania trades.
The opening of the Moin terminal, Costa Rica, and positive underlying volume growth in gateway terminals had a positive impact on terminal profitability in the quarter. However, Logistics & Services reported a decrease in revenue driven by lower air freight forwarding revenue.
"We made good progress on the transformation, where we have completed the separation of the energy businesses, further integrated our organization and continued to improve our product portfolio. This resulted in a solid cash return on invested capital and delivery of synergies, getting us closer to our target of $1 billion by end of 2019," says Skou.
Although Maersk Oil has been sold, the Board of Directors has decided not to pursue a separation
solution for Maersk Supply Service.
Subject to the current risk of further restrictions on global trade and other external factors impacting freight rates, bunker prices and foreign exchange rates, A.P. Moller - Maersk reiterated its guidance of an EBITDA of around $5 billion.