Maersk’s Q2 result of USD 1.1 billion sees a resilient Group performing in volatile markets. A strong balance sheet allows for a USD 1 billion share buy-back, while still leaving muscle to pursue acquisitions. Nevertheless, a strategy update was deemed necessary, particularly in light of ongoing oil price turbulence.
“We are confident that we will continue delivering solid earnings, and we are maintaining our guidance for the year. The new oil price environment is a challenge, but being a conglomerate with highly competitive business units we are in a situation where we do not have to make dramatic changes. We will of course pursue cost-savings, but we can also afford to look into the market and take advantage of the opportunities that the volatility may bring”, says Group CEO Nils S. Andersen.
While growth and profit targets for Maersk Oil, APM Terminals, Maersk Drilling and APM Shipping Services will be replaced by plans adapted to the current environment, Group targets will remain the same.
Group targets intact
“We still want to deliver a 10% return on invested capital, we still want to grow, we still want to grow underlying dividends and maintain a strong financial profile. This remains unchanged”, Andersen says.
“We will need new targets for business units impacted by the oil price, i.e. ones that are not tied to specific earnings or growth ambitions. Maintaining the Group objectives and taking away the individual business unit targets will give us more flexibility to take advantage of opportunities that we see in the markets”.
Nevertheless, the targets have served the Group well.
Take Maersk Drilling and APM Terminals for example. These businesses have moved from posting annual earnings of less than USD 200 million prior to the financial crisis to becoming significant contributors to the Group’s profit. The targets have also served as a point of orientation for the Group.
“During the past years, we have focused the Group. Selling a number of businesses, it was also important to underline that we did that in order to invest in building our world class businesses. That’s still what we want to do”, Andersen explains.
Retaining market leadership
Adjustments to Maersk Line’s strategy reflect the growing strength of the company as well as the dynamics of a competitive environment.
“Maersk Line has established itself in a situation where it should be able to deliver 10% over the cycle, but we also have to accept volatility in the results depending on the competitive situation. Therefore, the annual return on invested capital is set to 8.5%-12%”, Nils S. Andersen says.
And as for the adjustment of the growth ambition from “growing in line with the market” to “growing at least with the market to defend its market leading position”:
“Being the market leader, it is quite natural to say that we will defend our position. As some of our competitors choose to be aggressive at times in the market, growing ahead of the average of the industry, we will have to open up to also doing that, so that we do not gradually lose our leading position”, he continues.
In terms of the competitive and relative performance of the Group’s business units, the targets will not change.
“All business units are met with the target of being top quartile performance-wise. That is a relative measure similar to Maersk Line’s target of staying ahead of the industry by 5% on EBIT margin and this will continue”, Nils S. Andersen says.
The current impact on the Group’s oil related industries, and to a certain extent container freight rates, can be compared to what was seen during the financial crisis back in 2009. The difference is the strength of the Group. Hard work has paid off, and the Group is ready to seize the opportunities:
“We can afford to go into the markets with quite a bit of confidence and focus our time on growth opportunities rather than firefighting. I am optimistic that we can use this to strengthen the Group going forward and I wish to thank our leaders and employees around the world for their strong contribution bringing us here”, says Group CEO Nils S. Andersen.