It has been an unusual and eventful year for A.P. Moller - Maersk.
We progressed in the remaking of the company, separating out the oil and oil-related businesses and transforming our container shipping, ports and logistics businesses. Business results were improved from a low 2016 base, and we did a total of USD 14 billion worth of M&A transactions. We overcame an aggressive cyber-attack which led to a difficult third quarter and consequently financial results were negatively impacted.
New and strong ownership was found for Maersk Oil and Maersk Tankers. We agreed to sell Maersk Oil to oil and gas major Total S.A. and have sold Maersk Tankers to A.P. Moller Holding. In a separate step, we sold the remaining 19% stake in Dansk Supermarked Group to the Salling Companies, which allows us to further focus on the core business.
We successfully acquired Hamburg Süd and the integration is progressing well. With this acquisition, one in five of all containers in the world and one in four of all reefer containers are moved by Maersk Line.
We continued to progress on the digital transformation of our core business, moving customer transactions online and digitising the way we operate our assets. Our e-pay solutions have launched and are ramping up successfully. We launched Twill, a digital forwarder, primarily in Asia-Europe trade lanes and customers are responding well in adapting to new self-service solutions.
Our vision of becoming the global integrator of container logistics, connecting and simplifying our customers’ supply chains, is taking shape.
Financially, we reported revenue growth of USD 3.7 billion to USD 30.9 billion and an underlying profit of USD 356 million in 2017. The underlying profit in the transport and logistics business of USD 1.0 billion was in line with latest guidance.
There were strong underlying market conditions through most of the year, but the result was negatively impacted by the cyber-attack, weaker rates and increasing bunker costs, especially in the fourth quarter.
Enhanced customer offering
Hamburg Süd is an outstanding brand with high-quality products and by combining our two businesses we will reinforce the global positions of both companies and enhance our service offerings to customers.
It supports Maersk Line’s growth strategy and is a unique opportunity to realise commercial opportunities as well as sizable operational synergies between the two companies. In the early stages of our integration journey, there has been a positive and welcoming attitude on both sides and willingness to work and learn together.
Maersk Line and Hamburg Süd will offer customers better market coverage, attractive direct services and benefits via a combined global network. The cost synergies will primarily be derived from integrating and optimising the networks as well as standardising procurement. Together, Maersk Line and Hamburg Süd will have a total container capacity of more than 4 million TEU and a global capacity market share of approximately 19%.
Delivering on the vision
We continue to believe that the liner industry will consolidate further, which we will benefit from, and that there is a low need for capital expenditure as future ordering is expected to stay low for the coming years.
The transport and logistics market is big and growing. Estimated revenue in container shipping is USD 150 billion with expected growth in line with GDP, and for contract logistics USD 245 billion with growth above GDP. Traditional freight forwarding may be growing below global GDP yet has revenue of USD 180 billion, while supply chain management is smaller at USD 40-50 billion but growing faster.
We are in a strong position, with a competitive advantage from combining asset operations with capabilities to deliver end-to-end solutions that tap into markets covering the whole journey from producer to consumer.
Our vision to become the global integrator of container logistics implies three essential building blocks. The first is to provide those simple end-to-end solutions to meet our customers’ complex supply chain needs, and as part of this we are planning several value-added services online to complement the physical offering, including inland services and custom house brokerage.