Despite weaker market conditions, AP Moller-Maersk improved profitability and cash flow in 2019
AP Moller-Maersk improved earnings and free cash flow in 2019, despite weaker market conditions and global container growth of only 1.4%.
Earnings before interest, tax, depreciation and amortisation (EBITDA) improved 14% to US$5.7Bn compared to 2018 and the EBITDA margin increased to 14.7%. Revenue decreased slightly to US$38.9Bn in 2019 from US$39.3Bn. Free cash flow was US$6.8Bn, compared to US$5.1Bn last year and capex declined by US$1.2Bn to US$2Bn in 2019.
“Despite weaker market conditions, AP Moller-Maersk was able to improve profitability and cash flow. Our cash return was healthy, and we continued the reduction of net interest-bearing debt, leading to a further deleveraging of US$3.3Bn over the year. It gives us a solid starting point for 2020 to further expand our end-to-end offering within container logistics while at the same time managing the market challenges that are obviously out there,” said AP Moller–Maersk chief executive Søren Skou.
In Ocean, EBITDA in 2019 increased 15% to US$4.4Bn and the EBITDA margin of 15.3% increased by 2 percentage points, driven by a lower cost base. Revenue was US$28.4Bn with a small decrease in volumes to 13.3M FFE. Unit cost at fixed bunker decreased by 1.7%, mainly due to improvements in capacity management and foreign exchange rate developments.
The strategic focus of 2019 was on improving the financial performance of Ocean and creating a better customer experience through increased reliability, improved customer experience and introducing online services and products such as Maersk Spot, a product that offers price and loading guarantee. Also, during the year, Maersk said it took further steps in integrating the business on a structural level.
“While we still need to improve returns, we delivered solid progress in our financial performance in 2019 while progressing the business transformation, in spite of weak trade growth, ongoing trade tensions and geopolitical uncertainty in many markets,” explained Mr Skou.
Synergies harvested from the Hamburg Süd acquisition and the integration of transport and logistics reached US$1.2Bn, which is above the expected target.
AP Moller-Maersk expects an EBITDA of around US$5.5Bn in 2020, before restructuring and integration costs. The organic volume growth in Ocean is expected to be in line with or slightly lower than the estimated average market growth of 1-3% for 2020.
Maersk said in a statement “The outlook and guidance for 2020 is subject to significant uncertainties and impacted by the current outbreak of the coronavirus in China, which has significantly lowered visibility on what to expect in 2020. As factories in China are closed for longer than usual in connection with the Chinese New Year and as a result of the coronavirus, we expect a weak start to the year.”
The guidance for 2020 is also subject to uncertainties related to the implementation of IMO 2020 and the impact on bunker fuel prices and freight rates combined with the weaker macroeconomic conditions and other external factors.
The accumulated guidance on capex for 2020-21 is still US$3-4Bn. A high cash conversion (cash flow from operations compared to EBITDA) is expected for both years.