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            december 07, 2019

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Maersk has no plans to buy new vessels


Danish shipping giant AP Moeller-Maersk has no plans to buy new vessels and will instead focus on controlling costs and target its growth efforts towards the development of inland logistics rather than the transportation of sea freight.
"We are focused on our costs," chief executive Soren Skou was quoted as saying in a Wall Street Journal report, after the company posted better-than-expected earnings for the third quarter in spite of falling revenue. "We have a strict focus on capacity and network capacity."
Mr Skou said in an interview that Maersk will focus its capital spending and strategic planning on efforts to build up its business beyond port-to-port ocean transport, expanding its logistics services business that provides more profitable long-term growth potential.
"We need to grow in acquisitions on land warehouses and customs house clearing services," Mr Skou said. "We have invested around US$1 billion already on the land side supply chain and we are looking to put in hundreds of millions more over the next year."
The effort has been three years in the making, but revenue from the what Maersk calls its Logistics & Services unit totalled $1.6 billion in the last quarter, a fraction of the $7.3 billion generated from shipping. Gross profit growth from Logistics and Services improved to 13.4 per cent in the quarter.
Mr Skou said he wants half of the company's income to come from non-ocean services over the next three years.
Maersk has 70,000 customers at sea, with clients ranging from US retail chains and car makers to furniture suppliers, electronics companies and clothing importers. However, less than a quarter of those customers use the company to move their goods from ports to warehouses and distribution centres.
Compared with other global logistics providers, Maersk's logistics infrastructure is small with 100 inland cargo-handling locations around the world.
Finance chief Carolina Dybeck Happe said in an investor call that "there are no intentions now to invest in any large vessels."
"We will, of course, at some point, need to replenish our fleet to maintain our competitive network," she said. But "new vessel orderings in the years to come will be to maintain the competitiveness, rather than to gain more market share in shipping."
Maersk, which moves one-fifth of all containers globally, reported a net profit of $520 million in the quarter ending September 30 against an impairment impacted loss of $219 million the year before.
Turnover was down by just under 1 per cent on the same quarter of last year, to $10.1 billion, but EBITDA increased 14 per cent to $1.7 billion.
Mr Skou noted a "strong operational performance in ocean, higher margins in terminals and solid earnings progress in logistics and services".
He said: "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."
Maersk's container line business saw flat revenue, at $7.3 billion, on liftings of 6.8 million TEU, up 2.1 per cent on Q3 2018, a consequence of the carrier's revenue per TEU falling, by an average 3.6 per cent across its three regional TEU sectors, to $929 per TEU.
Maersk expects box growth of two per cent this year, below the 4.5 per cent growth recorded in 2018.

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