A.P. Moller - Maersk Grows Across the Business
In the third quarter of 2018, A.P. Moller - Maersk progresses in the strategic business transformation, reporting growth in both Ocean and non-Ocean with a total revenue increase of 31% to $10.1bn, 12% excluding Hamburg Süd. Growth in non-Ocean was at 15%, which now contributes 31% of total revenue. In addition, synergy effects were realized.
“Well into our transformation, we are progressing with the integration of our business to better serve customers and unlock the full growth potential within Logistics & Services. As a result, I am pleased to see revenue growth in Q3 across the business, including supply chain services. Our profitability and cash flow is improving, positively impacted by the emergency bunker surcharge announced due to the significant increase in bunker price, synergies from Hamburg Süd and strong collaboration between Ocean and our terminal activities,” says Søren Skou, CEO of A.P. Moller - Maersk.
Compared to Q3 2017, revenue in Logistics & Services increased 7.5 % with supply chain management growing 16%. New products are being developed to improve the customer experience, with results already showing as A.P. Moller - Maersk was first in the world to launch Instant Booking Confirmation to customers in the container industry.
Furthermore, gateway terminals continued to grow volumes from external customers as well as from Maersk Line and Hamburg Süd reflecting synergy impact from the closer collaboration. Total synergies with Hamburg Süd of minimum $500m excluding integration cost are expected by 2019 as the integration is progressing faster than planned.
Cash conversion improved from 76% to 95%. The free cash flow of $2.1bn compared to negative $478m in the same period last year led to a lower net debt.
Volumes in Ocean grew 27%, 5% excluding Hamburg Süd which is above the estimated market growth of 2.7%, but lower than anticipated. Søren Skou elaborates: “Our business performance in Ocean is still challenged by increased bunker prices not being fully compensated through higher freight rates. However, we continue to see improved results in the third quarter after a very weak start to 2018.”
The underlying profit in Q3 amounted to $251m compared to $254m in the same period last year.
Earnings before interests, tax, depreciation and amortization (EBITDA) increased by 16% despite bunker price increasing 47%.
Unit costs at fixed bunker in Ocean decreased 0.6% compared to Q3 2017, when adjusted for foreign exchange rate and inclusion of Hamburg Süd.
Guidance for 2018
A.P. Moller - Maersk expects an EBITDA in the range of $3.6-4.0bn from previously $3.5-4.2bn and reiterates the expectations of a positive underlying profit.
The organic volume growth in Ocean is now expected in line with the estimated average market growth of 3-4% for 2018 (previously slightly below the estimated average market growth of 2-4%).
Guidance is maintained on gross capital expenditures (capex) around $3bn and a high cash conversion (cash flow from operations compared with EBITDA). For 2019 we now expect gross capital expenditure of $2-2.5bn.
The guidance continues to be subject to uncertainties due to the current risk of further restrictions on global trade and other factors impacting container freight rates, bunker prices and rate of exchange.
A.P. Moller - Maersk’s guidance for 2018 depends on several factors.