CMA CGM maintains a positive core EBIT margin despite historically low freight rates

Posted by Daily Shipping Times on 15-03-2017        Tweet

MARSEILLE: The Board of Directors of France's CMA CGM Group, a leading worldwide container shipping company, met under the Chairmanship of Jacques R. Saadé, Chairman of CMA CGM board, to review the financial statements for the year ended December 31 2016.

Review of operations and financial performances in 2016

Volumes shipped in 2016 by the CMA CGM group, including all its subsidiaries, rose to 15.6 million TEUs, 20% more than in the previous year thanks to the acquisition of NOL. On a comparable basis, volumes amounted to 12.8 million TEUs in 2016 resulting from the Group’s strategic choice to focus on volumes offering the best freight rates to preserve its operating profitability.

The average income per TEU increased by 2.9 % between third quarter and the fourth quarter 2016. In a difficult environment for the industry, the average income per TEU, on a comparable basis shrank 13.6 % in 2016 compared to 2015. Accordingly, the CMA CGM group posted revenues of 16.0 billion USD, up 1.9 % on the year. In the fourth quarter, revenue rose 28.0% compared to the same period in 2015.

In the second half, the group deployed its global operating efficiency plan named "Agility" that already led to a 5% reduction of average unit costs in 2016 from 2015, when excluding the effect of fuel price fluctuation. The company maintains its target to cut costs by 1 billion USD over the 18 months through December 2017.

Recurring core EBIT margin stood at 0.2% in 2016. In the fourth quarter of 2016, it was 4.2% (5.3% on a comparable basis, excluding NOL), dramatically higher than during the same period in 2015 (0.6%) and the third quarter 2016 (-1.9%). CMA CGM’s core EBIT margin in the fourth quarter was one of the best performances of the sector. In the fourth quarter, CMA CGM recorded a net profit of 45 million USD.

Mr. Rodolphe Saade, CEO – CMA CGM commented, “2016 has been a landmark year in the history of our development, with the strategic acquisition of NOL and the creation of OCEAN ALLIANCE, which will fully contribute to the Group’s performance in 2017. In 2016, we succeeded in maintaining a slightly positive core EBIT margin, despite historically low freight rates, focusing on the volumes generating the highest contributions. With the increase in freight rates observed in recent months and the operational discipline that we apply quarter after quarter, we recorded a positive result in the 4th quarter and delivered one of the best performances in the industry.

In 2017, the market is expected to continue its recovery. CMA CGM will pursue its strategy of development and innovation, in order to consistently offer its customers more high value-added services and thereby differentiating ourselves from the competition. In this context, the digital transformation that we are implementing within the Group will be a strategic tool to achieve this target.”

2016 Highlights

NOL Acquisition and integration

The acquisition of NOL, which operates under the APL brand, was finalized on June 14, 2016. This acquisition is the group’s biggest acquisition in its history. This acquisition significantly enhanced CMA CGM’s footprint, especially on the Trans-pacific shipping routes, and it is delivering substantial synergies.

The integration process into the CMA CGM group is moving forward as expected, and the first positive impacts are observed:

•             Launch of 24 new maritime services

•             5% increase of volumes in the fourth quarter of 2016 compared to the prior quarter

•             Full repayment of the acquisition credit

Signature of OCEAN Alliance

In 2016, CMA CGM announced the signing of an operational strategic partnership with its partners Cosco Container Lines, Evergreen Lines and Orient Overseas Container Lines. OCEAN Alliance, which will start operating on April 1st, operates 40 maritime services. CMA CGM is the main player, deploying a fleet of 119 vessels out of the 323 that make up the alliance.

With the combination of the OCEAN ALLIANCE maritime services and its own offer, CMA CGM will offer an unparalleled level of service for its customers.

Outlook

In 2017, leveraging its global presence, dynamism, capacity of adaptation and innovation, and strategic actions implemented in 2016, CMA CGM should benefit from the sector’s improving environment, initiated in the 4th quarter of 2016

•             In line with the 4th quarter of 2016, the first months of 2017 show an improvement in freight rates, and an increase in volumes.

•             The group will maintain its discipline in its unit expenses control, pursuing the execution of the Agility plan.

•             CMA CGM does not anticipate any new ship orders on a short-term basis in order to maintain the still delicate balance between supply and demand. The Group has also postponed to 2018 the delivery of 3 vessels originally planned in 2017.