Maersk’s new structure relies less on freight rates

A.P. Møller – Maersk’s new financial reporting structure, effective from the first quarter, coincides with its strategy to become a global integrator of container logistics with one bottom line.    A.P. Møller – Maersk’s (APMM) new financial reporting structure taking effect from the first quarter of 2018 is designed to be less dependent on freight rates, the company said.
   The structure, as announced at the Capital Markets day in February, consists of four segments:
     • Ocean, comprised of Maersk Line and Hamburg Süd, as well as ocean businesses of APM Terminals’ transshipment hubs;
     • Logistics and services, comprised of inland and logistics services performed by Damco, Maersk Line, APM Terminals and other service entities;
     • Terminals and towage, comprised of APM Terminals gateway terminals and Svitzer;
     • And manufacturing and “others,” comprised of Maersk Container Industry and “others.”
   The reported historical figures per the existing segments are not comparable with the new structure, and therefore, the company issued restated financials for 2017, based on the new financial reporting structure.
   APMM’s guidance for 2018 is not impacted by changes in the reporting structure.
   “With the new segmentation, APMM will align the strategic focus on growing the non-ocean part of the business disproportionately to the ocean business to establish a more stable long-term business less dependent on freight rates,” the company said.
   Although spot container rates recovered for ocean carriers in 2017 after a tumultuous 2016, Drewry said Thursday, “The average composite index of the WCI, assessed by Drewry for year-to-date, is U.S. $1,364/40ft container, which is $86 lower than the five-year average of $1,450/40ft container.”
   APMM’s new financial reporting structure coincides with its strategy to become a global integrator of container logistics with one bottom line.
   The company made significant steps in its transformation from a conglomerate to an integrated global container logistics company over the past year.
   It has been focusing on divesting its units related to oil and gas and energy in an effort to focus on its core transportation and logistics offerings.
   In October 2017, it completed the sale of its shares in its Maersk Tankers subsidiary to APMH Invest, a subsidiary of A.P. Moller Holding.
   In March of this year, the group completed its sale of subsidiary Maersk Oil to French energy giant Total S.A. However, the company noted in March that it had yet to find a “viable solution” — i.e. interested buyer — for its Maersk Drilling and Maersk Supply Service subsidiaries.
   “Improved market conditions in the offshore drilling industry, as well as strategic progress in both businesses, has raised A.P. Moller – Maersk’s confidence in finding structural solutions for both before the end of 2018,” the firm said, adding that for this reason, both units have been reclassified as “discontinued operations” for accounting purposes.
   The company is scheduled to report its first-quarter 2018 earnings on May 17.