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Maersk transformation on track

With the integration of Hamburg Süd now complete Maersk is preparing to become “the global integrator of container logistics”.

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Maersk Line container volumes increased by 1.4% in Q2.
Maersk Line container volumes increased by 1.4% in Q2.

In its Q2 2019 Interim Report A.P. Moeller- Maersk said the integration of Hamburg Süd and the transport and logistics activities of Maersk Group companies announced in 2016 is now completed, and the goal of US$ 1 billion in synergies these moves were expected to deliver has been achieved earlier than forecast. Following its transformation plan, A.P. Moller-Maersk is now turning its attention to ditigalisaton and logistics to improve its profitability.

 

“Our transformation has now entered a new phase, where we focus 100% on executing on the strategy to become the global integrator of container logistics. The aim is to continue to improve our financial results across our business and grow our Logistics & Services segment well above market growth through organic and in-organic growth with the ambition in 2023 to achieve a more balanced operating profit (EBIT) between Ocean and non-Ocean and to improve the return on invested capital (ROIC) in line with the long-term objective of a ROIC above 7.5%,” A.P. Moeller- Maersk said.

 

This will require capital spending on new technology and some bolt on acquisitions. To fund its new strategy the company is cutting back significantly in other areas, especially on new terminal investments at APM Terminals. At the end of 2016 Maersk had committed capital expenditures totalling over US$ 5 billion. It has now slashed that figure to US$1.9 billion, of which US$ 1.2 billion is commitments towards terminal concession grants. “We have achieved this reduction by abstaining from starting new terminal projects and ordering new large vessels and will not do so until 2020 at the earliest” the company said.

 

From January 2019 Maersk has been operating as one company across its Ocean & Logistics & Services Business. “We are no longer organised as a conglomerate with a corporate layer and stand-alone divisions, that operate independently with own professional functions.”

 

Maersk has stripped out duplicate layers in sales, financial, HR, communications and legal divisions, but has expanded its technology team to number almost 3,000 people as it brings in designers, software developers, AI experts, automation engineers and data analysts “to ensure we have the expertise and talent to build solutions ourselves at speed.”

 

A.P. Moeller believes technology holds the key to future success. “Technology is core to both our vision to become the global integrator of container logistics and a key enabler to enhance our operating performance,” it said. The company’s technology strategy focuses on three areas:

 

  • Digitising customer transactions, including more digitalised products like the recently launched “Maersk Spot”.
  • Improving operations and increasing the utilisation of ships, containers and terminals through digitisation and automation.
  • Creating new revenue streams from digital products, such as TradeLens.

“Two and a half years into the strategy execution, based on the feedback we have received from our customers, and based on what we have already achieved in the technology space, we are convinced that our vision holds true and we can build the digital future of our industry,” A.P Moeller said.

 

In Q2 A.P.Moeller-Maersk delivered a good financial performance. “Q2 was a quarter of solid progress. EBITDA was up 17% and cash flow improved 86% year on year, driven by continued recovery in Ocean. The transformation progressed further with an improved cash return on invested capital at 6.9% and synergies of USD 1bn realised earlier than expected. Growth in revenue and gross profit in Logistics & Services still need to improve as we continue to build capabilities within logistics and services. We reaffirm our guidance for 2019, while the macro environment continues to be subject to considerable uncertainties,” said CEO Søren Skou.

 

In figures for the quarter revenue was US$9.6 billion (flat year-on-year), EBITDA was US$ 1.4 billion and underlying profit improved to US $34M from US $15m in Q2 2018.

 

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