Accelerating our transformation
The objective of the transformation of A.P. Moller - Maersk is to set the company on a new profitable growth trajectory. In the past two and a half years, we have come far in regaining our growth ambition, but we still need to improve profitability from the level seen in 2018, writes Søren Skou, CEO of A.P. Moller - Maersk.
The objective of the transformation of A.P. Moller - Maersk is to set the company on a new profitable growth trajectory. In the past two and a half years, we have come far in regaining our growth ambition, but we still need to improve profitability from the level seen in 2018.
We have transformed from being a conglomerate, with a corporate layer overseeing independent, stand-alone business units that had their own bottom lines, to one company, with one bottom line and with customers at the centre of our attention. With the listing of Maersk Drilling, scheduled for 4 April 2019, we will have almost completed the separation of our energy-related businesses, totalling more than USD 12bn worth of separation transactions.
We have acquired and integrated Hamburg Süd, contributing towards industry consolidation and positively impacting our results. We have made progress on the digital transformation of our business, digitising customer transactions, improving how we operate the business and our assets, and enabling new business opportunities.
We are transforming Maersk at a time, where our Ocean business has been challenged by weakening market fundamentals resulting in unsatisfactory financial results. We did not reach the earnings expectations we had at the beginning of the year, primarily due to the increase in bunker fuel prices having a negative impact during the first half of the year. Despite this, we have improved earnings and turned Maersk into a growth company again. Since 2016, we have added USD 12bn in revenue in the continuing businesses, a 43% increase, and have seen growth across all segments. In 2018 revenue grew 26% compared to the year before, and our net interest-bearing debt was significantly reduced.
United for growth
In 2018, the most profound step in our integration towards becoming one company was to simplify how our customers do business with us, by forming a new global frontline, which came into effect on 1 January 2019. We now have one sales team, one customer service team and one delivery organisation, covering our Ocean and Logistics & Services segments. By going to market in this way, we are taking steps to grow our non-Ocean activities and to better balance our business model.
We also took steps to integrate our support functions, such as IT/Technology, Finance, HR, Legal, Sustainability, Security and Corporate Communications, into global teams. By forming one team, as opposed to a separate team supporting each segment, these functions can provide more comprehensive services, while reducing costs.
In the first quarter of 2018, we changed our reporting structure to reflect that we are one company with one bottom line.
During 2017 and 2018, we realised more than USD 300m in savings by harvesting synergies across business segments mainly driven by closer collaboration between our Ocean segment and gateway terminals, further optimisation of our terminals and improved planning and utilisation of manufacturing capacity.
In December 2017, our acquisition of Hamburg Süd was approved, and during 2018 we consolidated both network and the operational organisations to deliver synergies, while maintaining two separate brands with two distinct value propositions for our customers. Aside from the benefits to the network, the acquisition has also enabled further utilisation of the terminals and benefits from joint procurement. Since the acquisition, we have realised USD 420m in synergies from Hamburg Süd and the expectation of synergies was therefore revised to a minimum of USD 500m by the end of 2019, from previously USD 350-400m.
2018 was a year of execution to build the foundation for the new A.P. Moller - Maersk. 2019 will be the year of accelerating our transformation to set us up for long-term, profitable growth that will benefit all our customers and create shareholder value.Søren Skou, CEO of A.P. Moller - Maersk
Improving customer experience online and offline
Maersk’s technological landscape is also transforming to help improve the customer experience and make our operations more efficient.
For ocean transport, the transactions have been digitised, enabling customers to do everything online; getting a price quote, booking and documentation. For many years, we have had the ambition to make it as simple to book a container as it is to book an airline ticket.
By enabling our customers to self-serve on multiple platforms, with 24/7 availability, we are well on our way to achieving this goal, and today, maersk.com is one of the largest business-to-business transaction sites in the world with more than 35,000 daily users and close to 20,000 bookings a day. We continuously focus on developing an even deeper understanding of our customers´ online journey, so that we can add new functionalities and products to the site.
In 2018, we improved the schedule reliability of our network putting Maersk and Hamburg Süd back in the top quartile of the industry, and the work to deliver better customer service leaves us with an all-time high customer satisfaction score in our Ocean segment. We have a continuous focus on improving the reliability of our network.
Strengthening the foundations in our terminals and manufacturing locations
The actions we have taken to strengthen our fundamentals in our terminals and manufacturing locations are also showing results.
Our gateway terminals delivered solid volume growth of 11%, which is almost three times faster than the market growth. While the majority of that growth was from closer collaboration with the Ocean segment, including Hamburg Süd, we also grew above the market with external customers. Hub productivity was up by 9.7% compared to 2017, which means that hub productivity has now overall risen by 23% since the launch of the strategy in 2016.
In 2018, Maersk Container Industry reshaped its factory footprint by exiting the dry container business and closing two of three factories. By doing this, the business will build on its core strength of refrigerated equipment and focus on meeting the expectations of customers with increasingly complex needs around temperature controlled transportation.
New safety approach
The well-being of our employees is a top priority for me personally and for our company. Seven people lost their lives while working for A.P. Moller - Maersk in 2018. These losses sadden me deeply. No one should go to work for A.P. Moller - Maersk and not come home. The loss of seven lives in 2018 only reinforces our resolve to strengthen our safety approach, so fatalities can be avoided.
To ensure that we get closer to our aim of zero fatalities, we are implementing a different approach to safety, and a new corporate safety organisation. Our new safety approach will address three critical priorities, including leadership accountability, creating capacity for safe operations, and one safety culture. We are building on the solid measures we already have in place and involving the teams that are most at risk, to identify and ensure the right preventive actions are in place, thereby mitigating even more risks.
2019 focus: Accelerating our journey
With Maersk as one of the driving forces, the industry has done an excellent job over the past 30 years in reducing costs and barriers of global trade. We are truly enabling exporters to sell their products globally, and we are making it possible for importers to source parts or goods from the most competitive suppliers, no matter where they are in the world.
However, bringing cargo from one part of the world to another is still seen by our customers as a complex and unreliable process. We aim to deliver better reliability, more visibility and simplicity with our strategy: to become the global integrator of container logistics, connecting and simplifying our customers’ supply chains. We will continue to leverage technology in the parts of the business that bring most value to the customer, and digital innovation remains key to offer customers a simple end-to-end solution.
I want to express my sincere gratitude for the incredible focus and hard work that all 80,000 colleagues at Maersk are putting into this challenging transformation.
For 2019, the listing of Maersk Drilling on Nasdaq Copenhagen will be high on the agenda, and I am confident that we will also find the right solution for Maersk Supply Service. At this stage, a warm thank you to all our colleagues in the energy businesses who have worked relentlessly under challenging circumstances and uncertainty on future perspective.
In 2019, we will continue to focus on improving results across the company while at the same time growing our Logistics & Services segment by expanding the product portfolio. We will continue our efforts to improve the customer experience across our products and pursue the technological transformation, and build on steps already taken to be one company with one culture. We will continue forging ahead, despite uncertainties in the current global macroeconomic outlook.
2018 was a year of execution to build the foundation for the new A.P. Moller - Maersk. 2019 will be the year of accelerating our transformation to set us up for long-term, profitable growth that will benefit all our customers and create shareholder value.
CEO of A.P. Møller - Mærsk A/S