The new direction for Maersk

A.P. Moller - Maersk held its annual Capital Markets Day in Copenhagen on Tuesday where a record attendance was introduced to the plans for the company’s two new divisions.

Capital markets day 1
Every seat was taken at the The Tivoli Congress Centre for the Capital Markets Day.

Literally every seat was taken. More investors, analysts and bankers had made the trip to Copenhagen than to any of the Group’s four previous Capital Markets Days. They saw Group management and the management teams for Transport & Logistics and Energy outline the future of A.P. Moller - Maersk during a six-hour event at the Tivoli Congress Centre.

Entitled “The new direction” the event revolved around the Transport & Logistics division which aspires to become the global integrator of container logistics, providing global supply chain solutions while delivering great customer experience.

Value in integration

“Our unique position in transport and logistics gives us a solid starting point to build on. We will meet the needs of the customers for end-to-end services and by doing so we will improve returns though revenue growth, cost cutting and other benefits,” Group CEO Søren Skou said.

Capital markets day 3
Group CEO Søren Skou on integrating across the Transport & Logistics division: “It unlocks synergies across our brands – raising returns.”

Integrating its services, the division is looking at a large market. Thus, global transportation and logistics, which includes inland services, container shipping, freight forwarding, supply chain services and more, has an annual value of approx. USD 1 trillion. And it is growing in line with GDP. Container shipping in comparison is a USD 190 billion market with stagnating growth.

A number of examples were given as to how the brands in the division can integrate and work together. Going forward, the term “network optimisation” will include both vessels and terminals. Maersk Line will help APM Terminals by feeding volume to increase utilization of the terminals – without compromising on cost leadership.

Capital markets day 9
“Maersk Line will drive volumes to APM Terminals, but not at the expense of Maersk Line cost leadership,” said Maersk Line COO Søren Toft.

Maersk Line, APM Terminals and Svitzer will work on a “pit stop” strategy to make port calls more efficient. Moreover, Damco, APM Terminals and Maersk Line will look at offering inland services which all customers need but only 12% currently buy from the division.

These and other synergies are expected to generate up to two percentage points ROIC improvement for the division over a period of three years starting in 2017. In essence, four principles are set to drive the division forward: growth, cost leadership, customer service and competitive pricing.

Everything that can be digitalised will be digitalised. It won’t be enough to give us a premium, but we expect to see better customer stickiness, higher share of wallet and greater interest in our other services.

JAKOB STAUSHOLM, GROUP CHIEF FINANCIAL, STRATEGY & TRANSFORMATION OFFICER

Capital markets day 2
Group CFSTO Jakob Stausholm: “Digital is changing the customer experience for the better and it leads to lower costs.”

Digitalisation is also a key part of the future for the Transport and Logistics division, a point that Group CFSTO Jakob Stausholm drove home by saying that “everything that can be digitalised will be digitalised”. This will not only make for cost savings, but online services will also improve customer experience and loyalty:

“It won’t be enough to give us a premium, but we expect to see better customer stickiness, higher share of wallet and greater interest in our other services,” said Maersk Line CCO Vincent Clerc.

More growth, no newbuilds
Søren Skou repeated the ambition of returning to growth, organically and inorganically, even with the plan to separate the companies in the Energy division which represent 25% of A.P. Moller - Maersk revenue (2015). Thus, the Hamburg Süd acquisition will replace 15% of the 25% and Maersk Line is winning market share.
Any need to build new vessels in addition to the current orderbook was brushed away, promising a lower level of capital expenditure in coming years:

“The industry doesn’t need any more ships and we don’t need to build in coming years,” Skou said.

Capital markets day 10
APM Terminals CEO Morten Engelstoft (middle): “There’s definitely a lot of things Maersk Line and APM Terminals can do to support each other.”

The also goes for APM Terminals, which will turn its attention from growth led by capital expenditure to cost leadership and asset utilization.

Separation to progress
For the Energy division, which the Group on 22 September gave itself 24 months to find a way to separate from A.P. Moller - Maersk, analysts were keen to hear about listings, mergers or joint ventures. No news could be given in this regard, but it was reaffirmed that the businesses will continue to be run independently, maximising shareholder value through active ownership, until the solutions are identified.

We want to progress on finding solutions on this but we will not jeopardise the value of the businesses nor their sustainability going forward.

CLAUS V. HEMMINGSEN, GROUP VICE AND ENERGY DIVISION

Capital markets day 11
CEO at Maersk Oil Gretchen Watkins’ presentation included an update on the promising Culzean and Johan Sverdrup projects, which currently break-even at USD 33 and USD 25 per barrel.
Capital markets day 12
CEO at the Energy division and Group Vice CEO Claus V. Hemmingsen: “We might find different solutions for the businesses in the Energy division, but they all come with strong track records and they are very attractive partners.”

“We want to progress on finding solutions on this but we will not jeopardise the value of the businesses nor their sustainability going forward,” said Group Vice and Energy division CEO Claus V. Hemmingsen.

The ROIC target for the integrated Transport and Logistics business was set at 8.5% over the cycle with an ambition to grow revenue. For the Energy division the individual businesses will be managed for maximising shareholder value through active ownership until separation.

Our unique position in transport and logistics gives us a solid starting point to build on.

Søren Skou

SØREN SKOU, GROUP CHIEF EXECUTIVE OFFICER