Rodolphe Saadé, Vice-Chairman of CMA CGM
“In a very difficult environment, we have in the first quarter recorded an increase in volumes above the market average, while maintaining a positive core EBIT margin. We will continue our strict financial discipline, including the implementation of a significant cost reduction plan. In addition, we are moving forward on our strategic projects, namely the proposed acquisition of NOL and the creation of a new operational alliance OCEAN with a launching anticipated in April 2017.”
The Board of Directors of France’s CMA CGM Group, a leading worldwide container shipping group, met under the chairmanship of Jacques R. Saadé, Chairman and Chief Executive Officer, to review the financial statements for the first quarter of 2016.
Review of operations in the first quarter
CMA CGM reported a 2.9% increase in volumes during the first quarter, to 3.2 million TEU, beating the market which grew by 1.2% (source: Drewry), and focused on maintaining its core EBIT margin.
The increase is mainly attributable to growth in the Transatlantic and Transpacific lines operating to and from the United States, which offset the decrease in volumes carried between Asia and Europe, where the Group had scaled back its capacity in response to weaker demand. Consolidated since 1 July 2015, OPDR also contributed to the increase in volume.
In an environment characterised by strong pressure on freight rates, average revenue per TEU fell 17.6%, a decrease that remains smaller than the average decline in the Group’s benchmark indices and reflects the ongoing imbalance between supply and demand.
CMA CGM’s revenue came in at $3.4 billion for the period, down as compared to first-quarter 2015 when the Group benefited from particularly favourable freight rates and volumes.
CMA CGM continued to implement its cost control policy, once again reducing its unit costs in the first three months of the year. This enabled the Group to achieve core EBIT of $3 million despite challenging conditions.
The Group reported a net loss of $100 million in first-quarter 2016.
Highlights and outlook of CMA CGM Group
Roll-out of a $1-billion cost reduction plan
CMA CGM has initiated a new plan to cut costs by $1 billion within 18 months. The programme will be rolled out in 2016.
Slight improvement in freight rates in some areas
The recent trend on the Asia-Europe and Asia-Mediterranean lines shows a slight improvement in its freight rates since 1 May 2016, but the environment remains fragile.
NOL proposed acquisition
CMA CGM continued with the proposed acquisition of NOL and has already received some of the required clearance from the relevant regulatory authorities. The European Commission as well as Indian authorities have approved the proposed acquisition. This project will reinforce the Group’s leading position in the industry and create major synergies.
Creation of the Ocean Alliance
On 20 April 2016, CMA CGM announced it was forming the Ocean Alliance operational partnership with Cosco Container Lines, Evergreen Lines and Orient Overseas Container Lines. The alliance will boast a fleet of 360 vessels that will operate across 40 shipping lines, and will offer high-quality services on the following major global shipping routes: Asia-Europe, Asia Mediterranean, Asia-Red Sea, Asia-Middle East, Transpacific, Asia-North America East Coast, and Transatlantic. It is expected to be launched in April 2017, following clearance from the regulatory authorities.
|.||Q1 2016||Q1 2015||Change %|
|Revenue, in $ billions||3.4||4.0||-15.3%|
|Core EBIT*, in $ millions||3||406||n.m|
|Core EBIT margin||0.1%||10.1%||n.m|
|Consolidated net profit Group share, in $ millions||(100)||406||n.m|
|Return on invested capital||4.1%||13.4%||-9.3ppt|
|Volumes carried, in TEU** millions||3.2||3.1||+2.9%|
|Fleet capacity, in TEU** millions||1.812||1.699||+6.7%|