The remaking of Maersk
Published on 21 February 2018
The A.P. Moller Foundation donated the Opera House, where Capital Markets Day was held, to the Danish state in 2000.
One year in to its new strategy, A.P. Moller - Maersk has made substantial steps in its transformation, moving from a conglomerate to a focused and integrated global container logistics company.
The acquisition of Hamburg Süd has been completed and integration is progressing, and the new Maersk is digitising and transforming to improve customer experience, cost and asset productivity, and developing new revenue sources. There have been USD 14 billion in M&A transactions under the new strategy, and each has been strategically important and financially attractive.
The oil and oil-related businesses are being divested to bring greater focus on container logistics and the underlying business is improving, though still not satisfactory. 2017 was a challenging year with unsatisfactory performance, yet improvements have been demonstrated in revenue, EBITDA and ROIC.
"We are undertaking a transformation at scale, with significant progress one year in," CEO Søren Skou told the more than 200 investors, analysts, bankers and journalists who gathered at the landmark building by Copenhagen Harbour. "Across our businesses, we will continue to pull all levers to restore performance and bring us forward."
In the Energy division, viable structural solutions have been announced for two of the businesses, Maersk Oil and Maersk Tankers, realising substantial value of USD 9.3 billion and exceeding analyst consensus. A.P. Moller - Maersk is committed to distribute proceeds from the Energy separations to shareholders, subject to maintaining investment grade.
"We are undertaking a transformation at scale, with significant progress one year in" – Søren Skou, CEO.
Structural solutions for Maersk Drilling and Maersk Supply Service are to be defined before the end of 2018.
"There have been two significant achievements in 2017 in the separation of the Energy businesses," says Claus V. Hemmingsen, Vice CEO and CEO of the Energy division. "We are aiming for higher than expected Energy proceeds and the transactions we have done, and those that we are pursuing, contribute to the focusing of the future A.P. Moller - Maersk as the global integrator of container logistics."
The remaking of Maersk, led by the expanded Executive Board, will take 3-5 years, repositioning the company for future growth and returns in global container logistics. It will offer simpler end-to-end products and services, seamless customer engagement and a superior delivery network.
Integrating the businesses is already unlocking value, supporting efficiency through the entire value. Examples include increased terminal utilisation, improved inland services, optimised hub operations, joint production planning between Maersk Line and Maersk Container Industry, and cross-selling across the brands.
The acquisition of Hamburg Süd, which has historically delivered strong results, further strengthens the offering and cost competitiveness, and there have already been some early successes. The transition has been smooth with no interruptions, synergy realisation is on track and there is a continued Hamburg Süd presence in markets impacted by regulatory requirements.
There are multiple initiatives to improve customer experience, some of them for all customers and some catering to specific segments, many of them in the digital space. These include the digital freight forwarder Twill, removing complexity from the process; Remote Container Management, improving ability to trade perishable goods; and the global trade digitisation joint venture with IBM, bringing secure and instant data visibility.
Because of the change from conglomerate to the integrated model, A.P. Moller - Maersk is also changing the way it reports financially. There will be only one bottom line and new segments will support the strategic direction and how the business is run. It is natural step in the journey towards becoming the integrator and will be implemented early, from Q1 2018, to be a catalyst for integration. It means one consolidated profit and loss account (PnL), balance sheet and cash flow statement. Revenue, EBITDA, EBIT and key operational metrics will be reported per segment.
Segments from Q1 2018:
- Ocean - Maersk Line ocean revenue, Hamburg Süd ocean revenue, APM Terminals transhipment hubs
- Terminals & Tugs - APM Terminals gateways, Svitzer
- Logistics & Services - Damco, Trade Finance, inland haulage and other logistics services
- Manufacturing, Others - Maersk Container Industry, others