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            july 23, 2019

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Maersk builds on transportation logistics and unwinds its energy business


The chairman of the board of directors for Maersk, Jim Snabe, has revealed at the company's annual general meeting that the group is pressing ahead to become a top integrated transportation and logistics company.
Mr Snabe, who assumed the chairman's post in 2017, said the company's poor performance last year reflected the ongoing challenges facing the container shipping industry overall. However, he said the company's strategic focus on transportation logistics is still on track and will bear out in the coming years, New York's FreightWaves reported.
The Danish shipping giant is in the process of a major unwinding of its legacy energy business. Mr Snabe admitted that the group wrongly timed its bets on the energy sector with investments in oil exploration, drilling and tankers business exceeding income in three of the five-year period, spanning 2012 through 2016.
But many of the bets in Maersk's oil businesses "were made when prices peaked," Mr Snabe said. "So, when oil prices collapsed in 2014, we were facing great challenges."
Maersk plans now to spin off its drilling business through a public offering. However, plans to sell its supply service remain on hold due to the weakness in the offshore oil market.
The spin-offs helped Maersk reduce its debt which is "required to make the necessary investments in the future", Mr Snabe said.
With energy business divestments nearly complete, Mr Snabe said Maersk's focus ahead will strictly be on gaining the largest share of the most profitable segments in transportation and logistics. The goal will be to help navigate the twenty-odd service providers and hundreds of paper documents required to move a container.
Mr Snabe touted Maersk's ongoing technology projects, such as instant booking through its Twill platform, to simplify and accelerate the process of booking ocean freight. He said 98 per cent of all container bookings are now done over the Internet. He also said the company's blockchain initiative, TradeLens, is now handling 10,000 trade-related documents each day.
They also want a low-cost supplier, Mr Snabe said, with Maersk having some of the lowest operating expenses in the industry. It reported per unit transport costs of US$907 per TEU for 2018. In comparison, Cosco reported per unit transport cost of $782 per TEU last year.
He said the company will focus on acquisition opportunities such as the transaction for Vandergrift, which Mr Snabe said allows Maersk "to remove that complexity for customers.
"These are areas with good growth and profitability and, thus, important growth areas for Maersk," Mr Snabe said. "Our ambition is to grow our business in these areas significantly in the coming years."
He added: "Financially, 2018 was not a satisfactory year and a downgrade of our expectations," Mr Snabe said. "But it was also a year of sound progress in delivering on our long-term strategy and transformation."
Maersk registered pre-tax profit margins of six per cent last year, which Mr Snabe called "simply not satisfactory".

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