A.P. Møller - Mærsk A/S improves operational profitability

A.P. Moller - Maersk’ third quarter is characterised by improved profitability across the business. Earnings before interest, tax, depreciation and amortization (EBITDA) improved 14% to USD 1.7bn in the quarter, reflecting an increase in EBITDA margin to 16.5%. Revenue decreased slightly by 0.9% to USD 10.1bn. Operating cash flow increased by 25% to USD 1.7bn with a cash conversion ratio of 105% and free cash flow before capitalized lease payments was USD 1.5bn.

“While the global container demand, as expected, was lower in Q3 due to weaker growth in the global economy, A.P. Moller - Maersk continued to improve the operating results. We delivered strong free cash flow and a return on invested capital of 6.4% as a result of strong operational performance in Ocean, higher margins in Terminals and solid earnings progress in Logistics & Services,” says Søren Skou, CEO of A.P. Moller ? Maersk, and continues:

“The strong performance for the quarter combined with our expectations for the rest of the year, led to the recent upgrade of our earnings expectations for 2019. We will continue our focus on profitability and free cash flow in Q4 and into 2020.”

EBITDA in Ocean improved 13% to USD 1.3bn and EBITDA margin increased to 17.4%, reflecting the focus on profitability through capacity management and operational performance which mitigated lower freight rates and modest volume growth in Q3 of 2.1%. Revenue was USD 7.3 which is on par with Q3 last year.

Terminals & Towage reported an increase in EBITDA to USD 313m and an increase in revenue of 5.8% to USD 986m in the third quarter. In gateway terminals, the increase in EBITDA of 33% to USD 261m and a margin of 31.7%, was driven by a volume growth of 9.2%, which contributed to higher utilization, combined with stronger cost efficiency.

Logistics & Services progressed with gross profit up 13% to USD 336m following increased activities in intermodal and warehousing & distribution, however partly offset by lower revenue in air and sea freight forwarding. The improved gross profit lead to an increase in EBITDA of 34% to USD 94m and an EBITDA margin of 5.8% and an EBIT conversion ratio of 17.5%.

Net interest-bearing debt decreased further to USD 12.1bn at the end of Q3 (USD 12.9bn at end Q2 2019) after buying back shares of USD 363m as part of the share buy-back programme announced in May 2019.

Solid progress despite market uncertainties

As part of the strategic target to become more balanced in earnings between the Ocean and non-Ocean partly through cross-selling of end-to-end and digital services, Maersk continues to develop products and services for customers, resulting in high customer satisfaction.

“I am pleased with the progress on the transformation of A.P. Moller - Maersk. We are making progress across multiple fronts including our digital transformation and growth in our land-based logistics products and terminals business,” says Skou.

Looking at the measurements of the development in the transformation this quarter, Maersk reports a cash return on invested capital improvement (CROIC) of 13.4% in Q3 from 9.0% in the same period last year.

Furthermore, non-Ocean revenue increased 3.7% in Q3 2019, driven by strong growth in the gateway terminals and growth within the strategic integrated parts of Logistics & Services such as intermodal and warehousing.

The improved profitability led to an increase in return on invested capital (ROIC) to 6.4% from negative 0.2% in the same quarter last year.

We still need to improve on profitability and return, and we continue to take measures across the business to fund the next stages of the transformation and maintain cost leadership.

Guidance for 2019
As announced on 21 October 2019, A.P. Moller - Maersk now expects EBITDA for 2019 in the range of USD 5.4 ? 5.8bn, from the previously communicated USD 5bn range.

The organic volume growth in Ocean is now expected to be slightly below the estimated average market growth, which is now expected to be in the range of 1-2% for 2019 compared to previously an expected market growth of 1-3%. Guidance is maintained on gross capital expenditures (CAPEX) of around USD 2.2bn and a high cash conversion (cash flow from operations compared with EBITDA).

CAPEX for 2020-2021 accumulated for the two years is expected to be USD 3-4bn.

The guidance continues to be subject to uncertainties due to the weaker macroeconomic conditions and other external factors impacting container freight rates, bunker prices and foreign exchange rates.


A.P. Møller - Mærsk A/S ? Upgrades EBITDA expectation for 2019

ased on the financials for the third quarter and the updated outlook for freight rates, volumes and bunker fuel prices for the rest of the year, A.P. Møller - Mærsk A/S (APMM) upgrades its expectation for the 2019 result.

APMM’s new expectation for earnings before interest, taxes, depreciation and amortisation (EBITDA) is in the range of USD 5.4-5.8bn. The previous expectation for EBITDA was around USD 5bn. The remaining part of the guidance is unchanged.

APMM has in the third quarter, despite slower global demand growth and lower freight rates, recognised better than expected performance in Ocean driven by strong reliability and capacity management combined with lower fuel prices and continued margin improvements in Terminal & Towage, which has resulted in stronger than expected financial performance in the quarter.

Revenue was USD 10,055 mill. for APMM in Q3 2019 and EBITDA was USD 1,656 mill. and for the first nine-months revenue was USD 29,222 mill. and EBITDA USD 4,249 mill.


A.P. Moller - Maersk upgrades its digital Warehousing and Distribution with JDA

A.P. Moeller - Maersk will extend its end-to-end container logistics services with JDA Software Inc.’s Warehouse Management solutions, further building its warehousing and distribution services. The move is part of Maersk’s ongoing focus on digital technologies that simplify its customers’ increasingly complex supply chains.

Today Maersk Warehousing and Distribution provides its customers the advantages of an end-to-end delivery network and greater flexibility through a wide range of logistics solutions, in strategically located warehouses, as well as the latest processes and systems for cost effective distribution networks.

The addition of JDA’s cloud-based solutions will expand the range and flexibility of Maersk’s delivery services even further. JDA’s state-of-the-art Warehouse Management System will help Maersk customers improve warehousing processes and efficiency while lowering inventory costs. It will also help Maersk customers balance the imperative of on-time delivery with the need for cost-effective distribution.

“‘Digital’ is no longer just a buzzword, today it is unlocking tremendous value for our logistics and warehouse customers in terms of simplification and better performance,” said Henning Goldman, Global Head of Warehousing and Distribution, Maersk. “JDA’s deep expertise and leading innovation are already creating competitive advantages for its customers. The addition of these exciting solutions to our portfolio is going to help Maersk continue offering our customers truly unique, end-to-end solutions

Getting inventory to the right location and at the right time today often depends on networks with multiple suppliers and carriers. Digital solutions can provide visibility throughout the supply chain to improve on-time performance, for example coordinating the schedules of several carriers to adapt to real-world disruptions such as adverse weather. They can also simplify complex transactions between different players and sites with very different operating conditions.

“Maersk is continuing to lead the industry’s digital transformation,” said Johan Reventberg, president, EMEA, JDA. “Deploying JDA Warehouse Management, a SaaS (Software-as-a-Service) based model in the cloud will unlock complete, end-to-end visibility so Maersk can easily manage complex warehouse operations across myriad customer environments.”

Maersk will initially deploy JDA Warehouse Management in Europe (Gothenburg) and the U.S. (Newark and Santa Fe) in Q4 this year and will use these sites to build the template for the global rollout across Maersk warehouse facilities.


A.P. Moller - Maersk reports strong improvements in earnings in Q2

A.P. Moller ? Maersk delivers a 17% increase in earnings before interest, tax, depreciation and amortization (EBITDA) to USD 1.4 bn in Q2 compared to the same quarter last year. Revenue grew slightly to USD 9.6bn, which is on par with last year, and the underlying profit increased to USD 134m from USD 15m in Q2 2018.

“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,” says Søren Skou, CEO of A.P. Moller ? Maersk.

On the back of the increases in volume and freight rates, Ocean EBITDA in Q2 increased 25% to USD 1.1bn. The Ocean business continued to recover with enhanced unit cost, utilization and reliability and revenue grew 2.9% to USD 7.2bn compared to Q2 2018.

Revenue in Terminals & Towage grew 13% to USD 957m compared to Q2 last year. In gateway terminals, volume in Q2 grew by 8.5% compared to last year, leading to higher utilization. EBITDA increased by 11%, partly offset by one-off items.

In Logistics & Services EBITDA grew to USD 61m in Q2 compared to USD 52m in the same quarter last year. Revenue was at USD 1.5bn, positively impacted by increased revenue in supply chain management, but offset by declining revenue from sea and air freight forwarding.

In Q2, A.P. Moller - Maersk distributed USD 615m in cash to shareholders through an ordinary dividend of USD 469m and USD 146m related to the first phase of the share buy-back programme announced in May 2019 of DKK 10bn (around USD 1.5bn) over a period of up to 15 months.

Progressing well on transformation

During the first half of 2019, A. P. Moller ? Maersk formed one sales organisation. Its focus is now on giving customers an integrated experience and offering them even more products, thus improving the financial results across the business and accelerating the transformation.

“The transformation progressed further with an improved cash return on invested capital of 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,” Skou elaborates.

The latest example of a digital innovation to improve customer experience is Maersk Spot, which simplifies the buying process and offers increased visibility and reliability by enabling customers to search and get competitive rates online, while ensuring cargo gets on board the selected vessel. TradeLens, the blockchain platform developed together with IBM, also progressed with several new commitments from carriers and port authorities during the quarter.

Guidance for 2019

While EBITDA for the first half year improved by USD 500m to USD 2.6bn, A.P. Moller - Maersk reiterates it’s full-year guidance for 2019 of an EBITDA of around USD 5.0bn including effects from IFRS 16.

“We reaffirm our guidance for 2019, while the macro environment continues to be subject to considerable uncertainties,” says Skou.

The guidance continues to be subject to considerable uncertainties due to the weaker macroeconomic conditions and other external factors impacting container freight rates, bunker prices and foreign exchange rates.





TradeLens Blockchain-Enabled Digital Shipping Platform Continues Expansion With Addition of Major Ocean Carriers Hapag-Lloyd and Ocean Network Express

Rapid adoption of TradeLens across the global shipping supply chain continues as Hapag-Lloyd and Singapore-based Ocean Network Express (ONE) Pte. Ltd announced they will join the blockchain-enabled digital shipping platform, jointly developed by A.P. Moller - Maersk (MAERSKb.CO) and IBM (NYSE: IBM).



Hapag-Lloyd and ONE, the world’s fifth and sixth largest carriers respectively, join CMA CGM and MSC Mediterranean Shipping Company, both of which recently announced they are joining TradeLens. With these additions, the scope of the platform now extends to more than half of the world’s ocean container cargo.



“Expanding digital collaboration is critical to the evolution of the container shipping industry,” said Martin Gnass, Managing Director Information Technology at Hapag-Lloyd. “TradeLens has made significant progress in launching a much-needed transformation in the industry, including its partnership model. Now, with five of the world’s six largest carriers committed to the platform, not to mention many other ecosystem participants, we can collectively accelerate that transformation to provide greater trust, transparency and collaboration across supply chains and help promote global trade.”



The addition of these two global carriers will help drive further adoption of TradeLens around the world now that TradeLens customers have access to major carriers in all three leading global vessel sharing alliances on the platform. With an already significant presence in Asia, ONE is further strengthening and expanding its coverage through joint cooperation with TradeLens to help meet the challenging demands of the crucial Asia market.



“We believe this innovative approach based on open standards and open governance can benefit the entire industry while ultimately benefitting our customers who rely on the world’s shipping industry to transport global container volume of more than 120 million TEU across international borders each year,” said Noriaki Yamaga, Managing Director, Corporate & Innovation, Ocean Network Express. “The opportunities to drive greater innovation across the shipping supply chain are enormous and we are excited about the opportunity to provide our leadership and insight to help the platform continue to evolve.”



TradeLens was launched to help modernize the world’s supply chain ecosystems. Many of the processes for transporting and trading goods are costly, in part, due to manual and paper-based systems. Replacing these peer-to-peer and often unreliable information exchanges, the platform enables participants to digitally connect, share information and collaborate across the shipping supply chain ecosystem.



“The addition of more leading carriers to TradeLens will help global supply chain customers expand and explore the benefits of digitization and deliver new opportunities to the increasing number of TradeLens ecosystem participants across the global supply chain. As a neutral industry platform, TradeLens offers supply chain visibility, ease of documentation and the potential of introducing new products on top of the platform. These attributes bring new opportunities for the Maersk transformation towards becoming an end-to-end container logistics company improving the experience and services we offer the customers,” said Vincent Clerc, Chief Commercial Officer, A.P. Moller - Maersk.



Members of TradeLens gain a comprehensive view of their data and can collaborate as cargo moves around the world, helping create a transparent, secured, immutable record of transactions.



The attributes of blockchain technology are ideally suited for large networks of disparate partners. Blockchain establishes a shared, immutable record of all the transactions that take place within a network and enables permissioned parties access to secured data in real time.



“Blockchain for the enterprise is solving previously unsolvable problems,” said Bridget van Kralingen, Senior Vice President, Global Industries, Clients, Platforms & Blockchain, IBM. “Through improved trust, simplicity and improved insight into provenance, blockchain solutions such as TradeLens are delivering proven value across business processes for our clients and their ecosystems. Massive new efficiencies in global trade are now possible and we’re seeing similar effects across the food industry, mining, trade finance, banking and other industries where the value of blockchain is more apparent than ever before."

Hapag-Lloyd and ONE will each operate a blockchain node, participate in consensus to validate transactions, host data, and assume a critical role of acting as Trust Anchors, or validators, for the network. Both companies will be represented on the TradeLens Advisory Board, which will include members across the supply chain to advise on standards for neutrality and openness.

About Hapag-Lloyd

With a fleet of 235 modern container ships and a total transport capacity of 1.7 million TEU, Hapag-Lloyd is one of the world's leading liner shipping companies. The company has around 12,800 employees and 398 offices in 128 countries. Hapag-Lloyd has a container capacity of approximately 2.6 million TEU ? including one of the largest and most modern fleets of reefer containers. A total of 121 liner services worldwide ensure fast and reliable connections between more than 600 ports on all the continents. Hapag-Lloyd is one of the leading operators in the Transatlantic, Middle East, Latin America and Intra-America trades.



About Ocean Network Express (ONE)

Ocean Network Express (ONE) was incepted on July 7, 2017 following the liner service integrations of Kawasaki Kisen Kaisha (“K” LINE), Mitsui O.S.K. Lines (MOL) and Nippon Yusen Kaisha (NYK). The new entity functions from its global headquarters in Singapore, supported by regional headquarters in Hong Kong, Singapore, the United Kingdom, the United States and Brazil. ONE is the world’s sixth largest container carrier with a fleet size of approximately 1.55 million TEU. Operating more than 210 vessels, it offers an expeditious and a reliable international network of over 120 services to 120 countries and beyond. ONE is a member of THE Alliance (THEA), a global ocean carrier consortium.

For more information, please visit www.one-line.com.

About TradeLens

The TradeLens platform has been jointly developed by Maersk and IBM. TradeLens is an open and neutral industry platform underpinned by blockchain technology and supported by major players across the global shipping industry. The platform promotes the efficient, transparent and secure exchange of information in order to foster greater collaboration and trust across the global supply chain.

www.tradelens.com


Maersk introduces Maersk Spot, a new fully online product that simplifies the buying process for customers

Shipping a container has been a complex process for many years. Manual and inefficient, the buying and booking process has been often full of surprises. With the launch of Maersk Spot, Maersk aims to introduce a truly online product that can break the cycle of overbookings and offer a much simpler way to ship a container with load guarantee.

Maersk has expanded its product offering with Maersk Spot. Fully digitally enabled, the new online product provides customers a cargo loading guarantee at a fixed price upfront. With the launch of the new product, Maersk takes further steps towards simplifying the supply chains of its customers by addressing some of the fundamental inefficiencies that exist across the industry.

“It is not uncommon to see overbookings to the tune of 30%, and often this leads to rolling of the customers’ cargoes since there is overbooking to compensate for the high downfall. This creates a lot of uncertainty for our customers,” says Silvia Ding, Global Head of Ocean Products at Maersk. “With Maersk Spot, we provide full visibility of the price and terms that will ensure cargoes get on board. Ultimately allowing customers to move their cargo in a much simpler and more reliable way.”

With Maersk Spot, customers can search and get competitive rates online 24/7. The all-in price is calculated and fixed when the booking is confirmed, which happens instantly. This dynamic online pricing fixed at booking creates one transaction for the customer from quotation to booking confirmation, profoundly simplifying the buying process.

“Maersk Spot radically simplifies the buying experience for our customers. Today’s offline process can be up to 13 individual steps, often involving a lot of communication and paper work from rate sheets to terms and conditions and surcharges, etc. With Maersk Spot, this cumbersome process is reduced to five simple and integrated steps ? all online,” says Ding.

When a booking is confirmed by the customer, Maersk commits to load and grants certainty in operational execution. This is a mutual commitment between the customer and Maersk which ensures that the vicious cycle of overbookings is addressed. In case of booking cancellations, fees apply at the customer’s charge. If cargo is rolled, Maersk compensates the customer. The mutual commitment paired with increased visibility of sailings and certainty of prices has been to date embraced by more than 3,000 unique customers each week, with already over 50,000 Forty-Foot-Equivalent (FFE) units booked in Q2.

One of the customers already using Maersk Spot is The Ramco Cements Limited. The company sends around 120-200 containers from Kattupalli port to Colombo every week, making their bookings one to two weeks in advance to ensure they can deliver to their customers on time with the best deal possible.

“We are quite proactive about our bookings but there were still cases where our shipments were not loaded due to capacity issues which resulted in the loss of trust with some of our customers,” says Ramakrishnan Vivekanandan, General Marketing Manager of The Ramco Cements Limited. “With Maersk Spot, we no longer have the uncertainty of not knowing if we can actually provide our customers with their shipments.”

Maersk Spot is now available on all trades, except in and out of U.S. Currently available as BETA site, the product will be implemented on maersk.com at the beginning of August.


Maersk to offer customers carbon-neutral transpor

A new carbon neutral product - the first of its kind in the industry - is being piloted with select Maersk customers who are highly engaged in sustainable solutions for their supply chain. H&M Group is the first company to trial it as part of the shift towards carbon-neutral transportation.

The biofuel in the pilot project is the same blend of used cooking oil and heavy which has been tested and successfully validated in a trial driven in collaboration with the Dutch Sustainability Growth Coalition (DSGC), and Shell his year. It is certified as a sustainable fuel by the International Sustainability & Carbon Certification (ISCC) body.

"The biofuel trial on board Mette Maersk has proven that decarbonized solutions for shipping can already be utilized today, both technically and operationally. While it is not yet an absolutely final solution it is certainly part of the solution and it can serve as a transition solution to reduce CO2 emissions today. With the launch of this product, Maersk seeks to help our customers with their goal of moving to sustainable supply chains, "explains Søren Toft, Maersk COO.

The biofuel to be utilized is carbon neutral and provides, H&M Group the ability to reduce their transport and logistics emissions towards their aspiration of carbon neutrality, when accounting for only the emissions from the vessel. The Roundtable on Sustainable Biomaterials (RSB) will provide a procedure to ensure carbon savings are accredited to our customers appropriately. When taking a full lifecycle view including also all emissions from upstream production and transportation, the fuel entails savings of 85% compared to bunker fuel.

The goal of such pilot projects is to unlock the potential of sustainable fuels so they become a commercial reality.

"Our high ambition to become climate positive by 2040 requires cooperation and engagement from all parties in the supply chain. We want to use our size to be a force for good and enable scaling innovative solutions, such as the carbon neutral ocean product, for a greener commercial transport," says Helena Helmersson, COO H&M Group.

We will use the biofuel project learnings to support a broader product offering and will continue to co-develop and facilitate the uptake of solutions that will help bring about more cost-efficient carbon-neutral options for the carbon neutral transportation.

Today the shift away from fossil fuels can be expensive for shippers. Ensuring the wide-scale adoption of carbon-neutral solutions therefore requires technical innovation and supportive global policies.

"We believe this is the only commercially viable path to make the required investments our industry requires to reach the carbon neutral target. We are so pleased to see a significant shift in sentiment and involvement from customers, fuel suppliers, equipment manufacturers, and competitors towards sustainable solutions," emphasizes Toft.

Shipping remains the most carbon-efficient means of global transport today, but accounts for 2-3% of global emissions. This number will continue to grow if left unchecked by industry leaders and policy makers.

Maersk will continue to facilitate, test, and develop low-carbon solutions on our journey to 2050.


Major Ocean Carriers CMA CGM and MSC to Join TradeLens Blockchain-Enabled Shipping Platform

Global container carriers CMA CGM and MSC Mediterranean Shipping Company (MSC) today announced they will join TradeLens (www.tradelens.com), a blockchain-enabled digital shipping platform, jointly developed by A.P. Moller - Maersk (MAERSKb.CO) and IBM (NYSE: IBM).

With CMA CGM, MSC, Maersk, and other carriers committed to the platform, data for nearly half of the world's ocean container cargo will be available on TradeLens. The addition of CMA CGM and MSC will provide a significant boost to the TradeLens vision of greater trust, transparency, and collaboration across supply chains to help promote global trade. The companies will promote TradeLens and create complementary services on top of the platform for their customers and partners.

"Digitization is a cornerstone of the CMA CGM Group's strategy to provide an end-to-end offer tailored to our customers' needs. We believe that TradeLens, with its commitment to open standards and open governance, is a key platform to help usher in this digital transformation," said Rajesh Krishnamurthy, Executive Vice President, IT & Transformations, CMA CGM Group. "TradeLens' network is already showing that participants from across the supply chain ecosystem can derive significant value."

"Digital collaboration is a key to the evolution of the container shipping industry. The TradeLens platform has enormous potential to spur the industry to digitize the supply chain and build collaboration around common standards," said André Simha, Chief Digital & Information Officer, MSC. "We think that the TradeLens Advisory Board, as well as standards bodies such as the Digital Container Shipping Association, will help accelerate that effort."

TradeLens enables participants to connect, share information and collaborate across the shipping supply chain ecosystem. Members gain a comprehensive view of their data and can digitally collaborate as cargo moves around the world, helping create a transparent, secured, immutable record of transactions.

The attributes of blockchain technology are ideally suited to large networks of disparate partners. Blockchain establishes a shared, immutable record of all the transactions that take place within a network and enables permissioned parties access to trusted data in real time.

With more than 100 participants on the platform today, TradeLens is already processing over ten million discrete shipping events and thousands of documents each week, providing shippers, carriers, freight forwarders, customs officials, port authorities, inland transportation providers, and others a common view of transactions, which can build trust. A commitment to data ownership rights and permissioned access to data helps ensure privacy and confidentiality while enabling users to collaborate more efficiently with real-time access to shipping data.

"The major advances IBM continues to make in blockchain illustrate that the technology is fostering new business models and playing an important role in how the world works" said Bridget van Kralingen, Senior Vice President, Global Industries, Clients, Platforms & Blockchain, IBM. "More than a hundred participants have put their trust in the TradeLens network and are gaining greater transparency and simplicity in the movement of goods. Together we are advancing a shared aim to modernize the world's trading ecosystems."


CMA CGM and MSC to Play an Important Role in the TradeLens Network

CMA CGM and MSC will operate a blockchain node, participate in consensus to validate transactions, host data, and assume the critical role of acting as Trust Anchors, or validators, for the network. CMA CGM and MSC will be on the TradeLens Advisory Board which will include members across the supply chain to advise on standards for neutrality and openness.

Supporting the Entire Shipping Supply Chain

"While carrier participation is critical, it is important to note that the TradeLens platform relies on participation from across the entire supply chain ecosystem," said Vincent Clerc, Chief Commercial Officer, A.P. Moller - Maersk. "Increasing ease of doing business for our customers and providing visibility across the container journey is at the center of the Maersk strategy. And TradeLens is all about that in its aim to transform the supply chain industry and provide value to all players, from freight forwarders, to ports and terminal operators and inland transportation providers, to customs and other governmental agencies, and ultimately to the customers themselves."

Beneficial cargo owners like Procter and Gamble will benefit from the addition of more carriers onto the platform. "P&G ships a significant volume of ocean containers every year. Whether filled with our products or the materials used in production, understanding the status of our containers helps us manage an efficient supply chain. We are convinced that the industry will benefit from the transparency and accuracy of blockchain solutions and we are pleased to see MSC, CMA CGM, and Maersk all on the TradeLens platform. We have been testing TradeLens for the P&G business and see potential as the solution scales. We look forward to industry-wide adoption to benefit all network members," said Michelle Eggers, Director Global Logistics Purchases, P&G.


A.P. Møller - Mærsk A/S reports solid uplift in earnings and strong cash flow in Q1

A.P. Moller - Maersk has closed the first quarter of 2019 with a 33% increase in earnings before interest, tax, depreciation and amortization (EBITDA) to USD 1.2bn while revenue grew by 2.5% to USD 9.5bn compared to Q1 2018. Operating cash flow improved significantly to USD 1.5bn and free cash flow was USD 3.5bn, including sale of shares in Total S.A.

"We had a good start to 2019. In Q1, revenue grew by 2.5%, operating earnings improved by 33% and cash flow from operations doubled to USD 1.5bn. With a strong free cash flow of USD 3.5bn after the sale of the remaining shares in Total SA., we have significantly strengthened our balance sheet. Net interest-bearing debt has been reduced by USD 2.4bn since Q4 and by USD 7.1bn since Q1 2018," says Søren Skou, CEO of A.P. Moller - Maersk.

Profitability in Ocean increased. EBITDA grew 42% to USD 927m compared to same period last year, mainly driven by a 3.9% increase in average loaded freight rates and an improvement in total operating cost of 2.8%. Revenue increased to USD 6.9bn despite lower volumes which declined 2.2%, impacted by the frontloading seen on the Pacific trades in Q4 2018 and weak demand on Latin America and Oceania trades.

Looking at terminal profitability, the opening of the Moin terminal, Costa Rica and positive underlying volume growth in gateway terminals had a positive impact on terminal profitability in Q1. Terminals & Towage reported an increase in revenue to USD 991m from USD 911m and in EBITDA to USD 267m from USD 244m compared to same quarter last year.

Logistics & Services reported a decrease in revenue in Q1 2019 by 0.5% to USD 1.4bn driven by lower air freight forwarding revenue. EBITDA increased to USD 51m from USD 45m in Q1 2018.

Progress on transformation

The strategic transformation also progressed. In the first quarter, Maersk delivered combined synergies of USD 130m. Cash return on invested capital (CROIC) improved to a positive 6.7% from a negative 5.9%, driven by higher earnings, strong cash conversion and a reduction in invested capital.

"We made good progress on the transformation, where we have completed the separation of the energy businesses, further integrated our organisation 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 USD 1bn by end of 2019. Non-Ocean revenue and gross profit in Logistics & Services grew, but needs to accelerate in the coming quarters," says Søren Skou.

Non-Ocean revenue grew by 3.8% in Q1 when adjusted for the closing of production facilities in Maersk Container Industry. Logistics & Services improved gross profit by 2.2%, positively impacted by growth in intermodal and from warehouse facilities.

The return on invested capital (ROIC) improved in Q1 to a positive 1.3% from negative 0.5%. The long-term target of a ROIC above 7.5% is reaffirmed.

Share buy-back, cash distribution and a new dividend policy

As part of the intention to distribute a material part of the value of shares received in Total S.A in connection with the sale of Maersk Oil, the Board of Directors has decided to exercise the authority to buy back shares with a maximum value of DKK 10bn (USD 1.5bn). The program will run from June 2019 and over a period of up to 15 months. After execution of the program, the Board of Directors will evaluate the capital structure and outlook for A.P. Moller - Maersk with the intention to distribute additional cash to shareholders, subject to maintaining investment-grade rating.

Furthermore, the Board of Directors has decided a new dividend policy with an annual payout ratio of 30-50% of underlying net result. The new dividend policy provides A.P. Moller - Maersk with the flexibility to adjust dividends within a range to accommodate investments needed to balance the company and grow non-Ocean disproportionately. In the medium-term the annual payout ratio should be expected to be at the low to mid-point of the range.

Guidance for 2019

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 reiterates its guidance of an EBITDA of around USD 5bn, including effects from IFRS 16.

Furthermore, guidance on CAPEX of around USD 2.2bn and a high cash conversion is maintained with an estimated organic market growth in volumes in Ocean of 1-3% for 2019.

"We reaffirm our guidance for the 2019 results. We are still facing considerable uncertainties from weaker macro numbers as well as the risk from trade tensions and implementation of IMO 2020. 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 1 percentage point", Søren Skou says.


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