PROFITABILITY AND GROWTH. Maersk Line Maersk Group Capital Markets Day, 9 September 2015

Transcription

1 PROFITABILITY AND GROWTH Maersk Line Maersk Group Capital Markets Day, 9 September 2015

2 page 2 LEGAL NOTICE This presentation contains certain forward looking statements (all statements that are not entirely based on historical facts, among others expectations to future financial performance, developments, resources growth and production levels). Those forward looking statements reflect current views on future events and are by their nature subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. We consider such forward looking statements reasonable based on the information available to us at this time, but the actual results etc. may differ materially from our expectations because of external factors as well as changes to APMM s goals and strategy. Thus, no undue reliance should be placed on such statements. Neither APMM, nor any other person, shall assume responsibility for the accuracy or completeness of the forward looking statements and do not undertake any obligation to update such statements except as required by law. This Legal Notice shall be governed by Danish Law. Any dispute arising out of or in relation to this Legal Notice which can not be solved amicably shall be decided by the Danish Courts.

3 page 3 INTRODUCTION Søren Skou Chief Executive Officer

4 page 4 AGENDA 1. Key highlights since last Capital Markets Day 2. Our performance 3. Industry analysis and outlook 4. Our response

5 page We have done what we outlined last year We continue to deliver on our financial objectives We have build a resilient company in a tough industry We continue to deliver value

6 We have executed what we outlined at Capital Markets Day last year page 6 COST CUT FURTHER 2M APPROVED AND IMPLEMENTED NORTH / SOUTH SHARE PROTECTED GROWTH INITIATIVES Unit cost reduced 4.9% from Implemented according to plan 20 to q and on track to deliver USD 350m annual savings 2 Capacity share of 20% maintained across North / south trades 3 Sealand successfully launched Kotahi contract implemented successfully Note: 1) At fixed bunker 2) Compared to not implementing 2M 3) North / South definition include Intra America Source: Maersk Line

7 and we have invested in new capacity for the future growth page MAERSK LINE INVESTMENTS 27 vessels 367K TEU (% of current capacity) Current new build price are close to historically low New building price per TEU index, (100=June 2008) 6.5k TEU segment k TEU segment 8.6K USD/TEU Investment 2017 delivery of first vessels Source: Maersk Line

8 We continue to deliver on all our medium term objectives page 8 MEDIUM TERM OBJECTIVES 20 H1 20 H1 20 H H1 Profitability: ROIC above 8.5% -3.8% +6.2% +9.9% +.2% EBIT-margin 5%-points above peer average 3% points 8% points 9% points 6% points Growing with the market Yes Yes Yes Yes Funded by own free cash flow USD -2,348m USD +762m USD +727m USD +781m Source: Maersk Line

9 Having achieved cost leadership, we are now a much more resilient company page 9 MARKET 09 H1 15 H1 Delta Freight rates (USD/FFE) 2,288 2,370 +4% Bunker prices (USD/Ton) % Almost identical market conditions RESULTS 09 H1 15 H1 Delta NOPAT (USDm) ,221 +2,216 ROIC, (%) %.2% +23.2pts But distinctively different performance Note: (1)2009 Includes Damco, however not material Source: Maersk Line

10 In a tough industry and a difficult market environment we see opportunities for Maersk Line page 10 POOR INDUSTRY FUNDAMENTALS PRESENTLY STRONG HEAD WINDS COMPETITIVE ADVANTAGES VALUE CREATION Deteriorating and volatile rates... leads to strive for cost efficiency through larger vessels leads to strong new ordering leads to continued imbalanced supply/demand Lowest demand since financial crisis Historically high level of deliveries Rates at historically low level Cost leadership leading to margin gap Best and largest network offering Strong brand and values Improving customer experience Pricing competitively while still delivering returns above objectives Increase market share Continue to create positive free cash flow to fund growth and invest in new IT to provide a better customer experience Source: Maersk Line

11 page 11 A COMPETENT LEADERSHIP TEAM Todays speaker Todays speaker Todays speaker Søren Skou Chief Executive Officer Jakob Stausholm Chief Strategy & Transformation Officer Pierre Danet Chief Financial Officer Søren Toft Chief Operating Officer Vincent Clerc Chief Trade & Marketing Officer Stephen Schueler Chief Commercial Officer Michael Chivers Chief Human Resource Officer Joined Maersk in 1983 Various positions globally CEO of Maersk Tankers from CEO of Maersk Line since Jan. 20 Executive board of Maersk Group since 2006 Joined Maersk in 20 Shell, 19 years in various positions in EU, Latin America and Asia ISS, 4 years as CFO Board of directors of Statoil since 2009 Joined Maersk in 2015 Procter & Gamble for 19 years in different financial leadership roles HP, 4 years most recently as CFO of HP s Printing & Personal Systems division for EMEA Joined Maersk in 1994 Various positions in Denmark, Europe and Asia Prior to current position, Head of Network Planning Joined Maersk in 1997 Various positions in USA and Europe Prior to current position, Head of Transpacific & Asia Europe service Joined Maersk in 20 Microsoft, head of sales & marketing 20 years in Procter & Gamble latest as Head of Retail Operations Joined Maersk in 20 Sony Ericsson, 17 years in various positions ending as Head of Global HR Source: Maersk Line

12 page OUR PERFORMANCE Pierre Danet Chief Financial Officer

13 page Improved already strong results Adding to an already established track record Driven by strong cost and balance sheet fundamentals We have build a resilient company in a tough industry

14 The continued strong financial performance enables self funding of new investments page Continued strong NOPAT NOPAT, (USDm) 3,000 2,500 2,000 1,500 1, ,000-1,500-2, QTR 15 LTM 15 and free cash flow allowing for extraordinary delivery of EEEs in Free cash flow, (USDm) 3,000 2,000 1, ,000-2,000-3,000-4,000-5, , QTR Delivery of 5 EEEs impacting free cash flow by USD556m 15 LTM 15 Source: Maersk Line

15 For 6 consecutive quarters we have delivered ROIC above medium term target page 15 ROIC, (%) Quarterly LTM 8.5% 16% % 8% 4% 8.5% 4.6% 9.7% 6.5% 4.0% 10.9% 8.5% 6.2% 10.8% 9.0%.3%.5%.0% 10.1% 0% -4% -8% -% -.7% -16% Source: Maersk Line

16 Volumes recovered in improving utilization page 16 Volumes improved in resulting in utilization recovering Nominal Capacity, ( 000 TEU) Avg. Capacity Volume Volume, ( 000 FFE) Capacity turn, (FFE/TEU) 3,200 3, ,000 3, ,800 2,600 2,400 2,800 2,600 2, ,200 2, ,000 2, , , Notes: Capacity turn = Volume / Nominal capacity adj. for idling and vessels added for slow steaming Source: Maersk Line, Alphaliner

17 We have increased capacity much less than industry page 17 Growing capacity less than industry also compared to top 10 carriers 1 Index, ( 20 = 100) Industry volume Industry nominal capacity ML nominal capacity Nominal capacity growth, ( ) Hapag-Lloyd Evergreen Hamburg Süd 51% 46% 43% CMA CGM 31% MOL CSCL Cosco MSC Hanjin Maersk Line 25% 22% 21% 16% 15% % 0% 20% 40% 60% Note: 1) Top 10 carriers based on July 15 capacity market share Source: Maersk Line, Alphaliner

18 We are continuously taking out costs page 18 We continue to take out costs Unit cost, (USD/FFE) and are at an all time low on unit cost Unit cost at fixed bunker price, (USD/FFE) 3,200 3,000 CAGR -8.7% 3,200 3,000 CAGR -5.1% 2,800 2,800 2,600 2,600 2,400 2,400 2,200 2,200 2, Note: Unit cost excluding gain/loss, restructuring, share of profit/loss from associated companies and including VSA income. Unit cost at fixed bunker price calculated based on 400 USD/Ton all years. Source: Maersk Line 15 2,

19 Continued focus on SG&A capturing scale benefits page 19 Declining SG&A trend Quarter based LTM SG&A cost, (USDm) 2,250 significant improvement per FFE Quarter based LTM SG&A unit cost, (USD/FFE) 300 2,200 CAGR -2.3% 280 CAGR -5.5% 2, , , , Note: 1) Selling, general & administrative expenses Source: Maersk Line

20 Keeping the balance sheet fit despite growing volumes page 20 Decline in invested capital since 20 Invested capital, (USDm) Invested capital Invested capital per FFE (rha) Invested capital per FFE, (USD/FFE) 22,000 3,500 CAGR -0.1% 21,000 3,000 20,000 2,500 19,000 2,000 18,000 CAGR -4,0% ,500 Note: Volumes are annualized. Invested capital ultimo period. Source: Maersk Line

21 Key financial disclosures page 21 Financial Performance Change %-change Revenue (USDm) 6,263 6, % Total cost (USDm) 5,756 6, % NOPAT (USDm) % Underlying result % Volume ( 000 FFE) 2,484 2, % Average freight rate (USD/FFE) 2,261 2, % Unit cost at floating bunker prices (USD/FFE) 2,246 2, % Unit cost at fixed bunker prices 2 (USD/FFE) 2,305 2, % Invested capital 3 (USDm) 20,340 20, ,8% ROIC (%) 10.1% 10.8% n.a. -0.7% Note: 1. Underlying result is equal to the result of continuing business excluding net impact from divestments and impairments 2. Unit cost at fixed bunker price of 400 USD/ton and including VSA income, 3. Invested capital avg. of period Source: Maersk Line

22 page 22 INDUSTRY ANALYSIS & OUTLOOK Jakob Stausholm Chief Strategy & Transformation Officer

23 page Adverse business environment leads to deflationary freight rate development Fragmented industry where scale matters Competitive results

24 Industry demand growth at its lowest since the financial crisis page 24 Demand growth, (%) Quarterly y/y growth LTM 20% 16% CAGR 9.5% CAGR 3.2% CAGR 3.7% % 8% 4% 0% -4% -8% -% -16% -20% E Note: LTM based on last 4 quarters Source: Maersk Line

25 Recent drop in European import from Far East expected to bounce back from Russia and re-stocking improvements page drop in European imports from Far East due to Russia and EU retail inventories Container demand growth y/y, (%) 1 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% 5% 7% -1% -6% -2% -4% 4% 2% E E Note: 1) Westbound container demand on trades E1 and E2 Source: CTS, European Commission and Maersk internal calculations Actuals Forecast Russian container import Actuals Forecast from Far East, growth (%) EU retail inventory investments, growth (%) EU inventories expected to normalize in

26 Container demand is likely to recover as GDP-multiplier expected to normalize from historically low 2015 level page 26 Global GDP growth, (%) Actual Forecast Global Container demand, (%) GDP Multiplier % 9.5% % 2.5% 3.2% 3.7% High pre-crisis GDPmultiplier, driven by massive offshoring to e.g. China, and containerization E 2016E- 2017E % % 2-4% 3-5% Impacted by e.g. Russia Europe de-stocking Port congestion US West Coast % 2% 4% 6% 8% 10% 0% 2% 4% 6% 8% 10% Source: Focus Economics, IMF and Maersk internal calculations

27 Supply has outgrown demand past 9 years except for 2010 and trend expected to continue page 27 Y/Y Growth, (%) Y/Y Supply Growth Y/Y Demand Growth 20% 15% Forecast 10% 5% 0% -5% -10% Excess capacity primarily absorbed by slow steaming Less incentive for further slow steaming -15% Note: Capacity growth compares standing container vessel capacity beginning of year to end of year, while demand growth compares total amount of containers in two consecutive years. Capacity forecast assumes no additional slow steaming, as the low oil price gives less incentive to slow down vessel speed. Also, idling is assumed to remain broadly unchanged. Forecast demand growth is for illustration purpose shown as midpoint for the expected interval. Source: Alphaliner, Maersk Line E E

28 Rates will continue to be under pressure from supply/demand imbalance page 28 Maersk Line s average freight rate has declined 1.9% p.a. since 2004 Maersk Line freight rate fixed bunker, (USD/FFE) 3,700 3,500 3,300 3,100 CAGR -1.9% Since CAGR (%) ,900 2,700 2,500 2,300 Vicious circle H H Notes: Bunker price fixed at 20 level of 662 USD/FFE. Comparison of freight rate with 2004, 2008 and 2010 based on yearly freight rate average. Source: Maersk Line

29 Significant orders placed in the first half of 2015 with increasing ordering of largest vessels page 29 >10,000 TEU <9999 TEU LTM orders share Orders placed, LTM Order share of >10,000 fleet 2 (TEU 000) 1 of fleet, (%) 1,600 37% 36% 37% 40% 1,400 35% 1,200 1, % 30% 25% 20% 600 % 18% 15% % % H1 H2 H1 H2 H1 H2 15H1 5% 0% Note: LTM based on half years. 1) Orders placed as percent of fleet based on capacity in given years, 2) >10,000 orders share of >10,000 TEU fleet, 3) <10,000 orders share of <10,000 TEU fleet Source: Maersk Line, Alphaliner

30 Current order book is large, and will worsen supply/demand imbalance page 30 Open orders firmly exceed demand growth expectations Industry order book share of fleet 1, (%) 30% 25% 20% 15% 10% 5% 0% H1 H2 H1 H2 Needed order book size of current fleet to address demand growth forecast range 2 H1 H2 % 11% 9% at 5% demand growth at 4% demand growth at 3% demand growth Current order book (H1 15) Competition order to grow capacity at faster pace Current order book share of carrier fleet for top 10 carriers 3, (%) Evergreen COSCO MSC MOL CMA CGM Maersk Line CSCL Hamburg Süd Hanjin Hapag-Lloyd 6.4% 5.8% 5.4% 15.5% 15.4% 20.7% 24.7% 23.9% 39.5% 39.3% 0% 10% 20% 30% 40% 50% Note: 1) Fleet at given period ultimo, 2) Expected duration of an order book is 2.5 years with 1,1% expected scrapings per year based on historical period 2000 onwards; 3) Capacity and order book as of ultimo July Source: Maersk Line, Alphaliner

31 Our tonnage plan is robust and value creating even in adverse market conditions page 31 We need capacity to grow We order vessels where no alternative Small investments compared to network size 2M enable us to utilize major vessels Even in adverse market scenarios, newly ordered vessels create value with recent orders we can now plan ahead Source: Maersk Line

32 As the largest carrier we have delivered sustainable EBIT margin gap page 32 Gap to peers above target Core EBIT margin gap, (% pts.) also when peers have improved results H Core EBIT margin, (%) 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 9% 9% 9% 8% 6% 5% 5% Target 2% H1 H2 H1 H2 H1 H2 15H1 Maersk Line CMA CGM COSCO OOCL Hanjin Hapag Lloyd ZIM NYK K Line APL CSCL Hyundai MM. MOL Peer group Avg -1.3% -2.1% 10.8% 9.1% 7.9% 7.0% 6.0% 5.3% 5.1% 2.1% 1.9% 1.1% 0.7% 4.6% -15% -10% -5% 0% 5% 10% 15% Note: Peer group includes CMA CGM, APL, Hapag Lloyd, Hanjin, ZIM, Hyundai MM, K Line, CSAV, OOCL, NYK, MOL, COSCO, CSCL. Peer average is TEU-weighted. EBIT margins are adjusted for gains/losses on sale of assets, restructuring charges, income/loss from associates. Maersk Line EBIT margin is also adjusted for depreciations to match industry standards (25 years). Source: Alphaliner, Company reports, Maersk Line

33 We are on average operating in an unhealthy industry, but large carriers can earn a decent profit page 33 On average an unhealthy industry EBIT Margin, (%) Industry EBIT-Margin Trend 15% 10% 5% 0% -5% -10% however large carriers can earn profits EBIT Margin, (%) Best in Class Best in Class average 15% 10% 5% 0% -5% -10% -15% -15% Best in class Source: Maersk Line

34 Scale is a lever of profitability page 34 Average EBIT-margin H1, (%) 10% 8% Regional focus Global scale leaders Maersk Line 6% Wan Hai CMA 4% SITC OOCL 2% 0% -2% -4% K Line Hanjin NYK CSCL ZIM Yang Ming APL Hyundai MOL COSCO Evergreen Hapaq Lloyd? CSCL+COSCO 1-6% ,000 1,500 2,000 2,500 3,000 Note: 1) Post-merger scenario based on weighted EBIT-margin and combined volume Source: Maersk Line, Company Reports, Alphaliner Average capacity H1, ( 000 TEU)

35 The three largest carriers have historically grown very differently page 35 Capacity market share (%) Maersk Line MSC CMA CGM 20% 18% 16% % % 10% 8% 6% 4% 2% 0%.2% 15.9% PONL acquisition '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 ' ' ' '15E '16E '17E 4.7%.0% '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 ' ' ' '15E '16E '17E 2.7% 9.0% '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 ' ' ' '15E '16E '17E TEU CAGR % MLB MSC CMA CGM % % % % % % % Growth strategy Organic + M&A ( big ) Pure organic Organic + M&A (multiple smaller) % Note: Forecast based on current order book Source: Maersk Line, Alphaliner

36 A deflationary mindset continue to be key while defending market leader position page 36 Forward looking statements E 2016E Industry demand (CAGR growth, %) Industry nominal capacity (CAGR growth, %) Cost (Maersk Line) Market share (Maersk Line) 7% 4% 4% 2-4% 3-5% 10% 6% 6% 9% ~5% Deflationary mindset: Continue to drive cost reductions Growing at least with the market to defend our market leading position Investments (Maersk Line) CFFI (Net), USD bn Adjusted since 20 capital markets day Avg. 2.5 p.a. We expect to invest on average USD ~3 bn p.a. (vessels, containers, retrofits and other investments) until 2020 Notes: Nominal capacity growth is expected deliveries less expected scrappings. Investments from are an avg. for the period and includes Damco, Maersk Container Industry and Container Inland Services from , while APM Terminals is excluded. The P&O Nedlloyd acquisition in 2005 is included. Investments include committed investments, approved but not committed investments and non-approved investments. Source: Maersk Line, Alphaliner.

37 page 37 OUR RESPONSE Søren Skou Chief Executive Officer

38 Our short term response to current tough market conditions page blanked sailings August-October 2015 (vs. 15 same period 20) 2M network reductions as already communicated Additional 2-4 larger string reductions planned in 2015 to adjust capacity to demand

39 We will continue to drive cost out and have plenty of opportunities page 39 We have a toolbox for cost cutting Tonnage plan impact on slot cost Example: Asia North Europe Slot cost index 20 = 100, (USD/TEU) Network rationalization Speed equalization & Slow steaming Improve utilization SG&A 2M Improve procurement Inland optimization Deployment of larger vessels Retrofits CAGR -3.1% Source: Maersk Line

40 Having cost leadership has enabled us to grow both volume and margins page 40 Volume, (FFE 000) Volume ROIC ROIC, (%),000,000 CAGR 5.3% 25% 20% 10,000 8,000 6,000 8,073 8,452 8, % 9, % 15% 10% 4, % 5% 2, % 0% % Source: Maersk Line

41 and with returns consistently above objectives, growth create value page 41 ROIC, (%) ROIC LTM ROIC 1 8.5% ROIC 20% 15% 10% 5% 0% 8.5% 4.6% 9.7% 6.5% 4.0% 8.5% 10.9% 6.2% 9.0% 10.8%.5%.0%.3% 10.1% -5% -10% -.7% We have room to invest for growth and still deliver returns above the lower band target -15% Note: 1) LTM ROIC based on quarterly figures Source: Maersk Line

42 page 42 Maersk Line s new objectives Revised objective Top quartile performer 1 EBIT-margin 5%-points above peer average Growing at least with the market to defend our market leading position Funded by own cash flow Average returns of % (ROIC) Note: 1) Performance rank based on EBIT margin Source: Maersk Line

43 We have a toolbox for growth with various paths page 43 E-W N-S INTRA Grow based on cost leadership and best network proposition Protect strong position, grow with market Grow MCC, Seago, and Sealand REEFER Pursue conversion projects Source: Maersk Line

44 page We have done what we outlined last year We continue to deliver on our financial objectives We have build a resilient company in a tough industry We continue to deliver value

45 Thank you page 45