Leading the transformation of our industry

Published on 09 February 2018

A message from Jim Hagemann Snabe, Chairman of the Board of Directors of A.P. Møller - Mærsk A/S.

2017 has been a year of considerable and rapid change for A.P. Moller - Maersk, as we have progressed on the execution of our new strategy: finding future solutions for our energy businesses, integrating and transforming the transport and logistics business and strengthening the governance.

A transformation that will not only change  A.P. Moller - Maersk, but the entire industry.

The future focus is to deliver best-in-class services within container shipping, ports and logistics, as an integrated company with expanded coverage of the whole value chain. By offering a wider range of logistics services, as well as products not related to sea transport, we will deliver more value to our customers, seek growth, increased earnings, and reduced volatility of our business.

It has always been and remains an integral part of our purpose to safeguard the long-term viability of our companies by investing in and building value-creating businesses that have a positive impact on society. This has been a guiding principle in our strategic change, as well as in our work to define viable solutions for our oil and oil-related businesses.

Future growth will be based on organic growth in the individual transport and logistics businesses combined with targeted acquisitions, and in December 2017, we welcomed Hamburg Süd to the Maersk family in a significant strengthening of our customer offering and container line presence.

This meant new beginnings for our transport, logistics and ports businesses in defining the future of A.P. Moller - Maersk as well as new structural solutions for our oil and oil-related businesses, which have been an integral part of our company identity for decades.

Finding future solutions for our energy businesses

We set out to have defined new structural solutions for all the oil and oil-related businesses before the end of 2018. Already in 2017, this resulted in not only defining, but also executing on solutions for two of our oldest and most iconic energy businesses; the sales of Maersk  Oil and Maersk Tankers.

On 21 August 2017, we entered into an agreement to sell Maersk Oil to Total S.A. for USD 7.45 billion in a combined share and debt transaction. Maersk Oil will become part of the world’s fourth largest oil and gas company, which has a strong performance record and long-term growth and investment interest in the oil and gas sector. Denmark will become the regional hub for Total’s activities in Denmark, Norway and the Netherlands, a testament to Maersk Oil’s capabilities and position and ensuring a continued Danish stronghold in the North Sea. The transaction is progressing as planned and we expect to close during Q1 2018, pending regulatory approvals.

Furthermore, we sold Maersk Tankers to APMH Invest, a subsidiary of A.P. Moller Holding, for USD 1.171 billion in an all-cash transaction, which closed 10 October 2017. In determining the future ownership for Maersk Tankers, it was imperative to ensure a financially solid owner with industry insight and a long-term view on the inherent cyclical nature of the tanker industry. This to ensure that Maersk Tankers can continue to take advantage of market opportunities, while upholding the capabilities and the organisation on which its strong name and global leading market position are built.

Over the last six months, we have seen signs of improved market conditions in the offshore drilling industry. This has, amongst other elements, raised our confidence in finding structural solutions for Maersk Drilling and Maersk Supply Service before the end of 2018. Maersk Drilling was reclassified as discontinued operations in the third quarter financial statement, and Maersk Supply Service in the fourth quarter financial statement.

I would like to take this opportunity to extend my sincere gratitude to all our employees in the oil and oil-related businesses for their continued passion, efforts and dedication during the separation process.

Transforming the transport and logistics industry by reducing complexity

The digital revolution has fundamentally impacted behaviours and trade patterns over the last 5-10 years, making its marks on many industries. However, the transportation and logistics industry has not yet undergone any significant transformation.

There are many reasons for this; the most important being the complexity of container shipping, the lack of standardisation, and ability to adjust to multiple unforeseen events in the handling process, as the underlying processes in shipping remain largely manual, paper-based and typically with little standardisation between different countries and authorities.

We ship close to one out of five containers and one of four reefer containers globally, corresponding to approximately 13 million forty foot containers annually.  For each container shipped, there may be up to 30 different parties involved, communicating up to 200 times. Although we have seen some development over the last decade, the basic shipping experience is virtually unchanged seen from a customer’s point of view.

We want to transform the industry by reducing the complexity. We believe it should be as easy for our customers to ship a container as it is to send a parcel with a postal carrier. 

Based on our leading position within container shipping, port activities, supply chain management and freight forwarding, we want to improve and simplify the shipping experience by utilising and integrating our c apabilities across the value chain. This enables us to offer seamless value-adding end-to-end services to our customers based on digital, innovative customer solutions, extending the industry’s most effective and efficient delivery network to every market in the world.

The future focus is to deliver best in class services within container shipping, ports and logistics, as an integrated company with expanded coverage of the whole value chain.

The opportunities from digitisation are significant. It has the potential to both simplify the customer experience and improve the productivity of assets, primarily ships and ports, effectively reducing costs across the value chain. 

It is my sincere belief that this company is best positioned to front the digitisation of the shipping industry, having operated the complexities of container shipping for four decades in more than 130 countries around the world. We have the capabilities, the assets and the potential to fundamentally change the shipping industry, already having launched various initiatives that focus on digitising the paper flow.

With a leading position comes responsibility

Responsible business is engraved in the very identity of A.P. Moller - Maersk. With the scale of our company and our involvement all over the globe, it is essential that we, as an industry leader, address global challenges through innovation, investment and collaboration and use our influence, position and commercial strength to systematically reduce negative and enhance positive impacts on the societies of which we are a part.

This includes eliminating facilitation payments, taking an active stand on responsible ship recycling to radically improve the working conditions and reduce the environmental impact, as well as leading the reduction of global emissions in the transportation sector. 

The transport sector is responsible for 23% of global energy-related emissions. Of these, shipping accounts for 3-4%. We are pursuing a CO2 reduction of 60% per container moved by 2020 compared to 2007 through efficiency improvements and more fuel-efficient vessels. We have so far reduced CO2 emissions by 43%.

Strengthening corporate governance 

In 2017, we strengthened our corporate governance system and adapted the focus points on the Board of Directors’ agenda to fit our transformation priorities and the separation of the energy businesses. The key objectives of our governance system are to support early identification of opportunities and challenges, ensure efficient processes for informed decision-making, support agile planning and fast execution while always maintaining sound controls and clear allocation of powers and responsibilities.

In 2017, the Board formed the Transformation & Innovation Committee, and the Board has defined success criteria and a governance structure around the separation of our energy businesses to closely monitor preparations and execution. 

To further accelerate the integration of our container shipping, ports and logistics businesses, and the development of customer-oriented end-to-end transportation and logistics solutions, the Executive Board was expanded and strengthened in December 2017 with the appointment of the Chief Operating Officer and Chief Commercial Officer of Maersk Line as well as the CEO of APM Terminals.

Since taking up my position as Chairman in March 2017, I have been immensely impressed by all our employees across A.P. Moller - Maersk, their ability to adapt to change and the passion for their industry and the development of our businesses. This was most notable during the cyber-attack in June, when all employees rallied together, working relentlessly as one global team to uphold our services to customers and partners.

This loyalty and focus is what has built our unique position over decades and made A.P. Moller - Maersk into the significant company it is today. It is also the foundation for our future - taking care of today, actively preparing for tomorrow.

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