Asset driven

Asset driven CMB's focus on operating ships and planes pays off.

By Chris Gillis

   Twenty-five years ago, Compagnie Maritime Belge had a finger in nearly every aspect of the ocean shipping business, including containerships, tankers for oil and chemicals, bulkers and terminal operations.
   But the Belgian carrier soon discovered that diversification was more trouble than it's worth and began a nearly two-decade-long journey toward a singular focus on managing dry bulk shipping assets.
   'We're a dry bulk asset operator, plain and simple,' said Frank Geerts, who joined CMB 1982 straight out of university and eventually became the Antwerp-based company's financial controller.
   CMB's path to simplification was steered by the Saverys family, which took over the company in the early 1990s. Marc Saverys joined Bocimar's chartering department in 1975, then the dry bulk division of CMB. In 1985, he left Bocimar and became Exmar's managing director, which at that time was a diversified ship-owning company. He was in charge of the dry bulk division.

Cape-size ship Mineral Kyoto delivered to CMB in 2004.

   After the takeover of CMB by the family holding company Almabo in 1991, Saverys became a CMB director, and in 1992 was appointed managing director. He is also chairman of the CMB companies Bocimar and holds director roles in other companies tied to the group.
   From 1992 to 2003, CMB sold assets that did not focus on the direct ownership and operation of ships. Safmarine acquired a 49 percent share of CMB's container operations in 1991 and the rest of the unit by 1996. The Euronav group, which was involved in tankers, was restructured and spun off. In June 2003, Exmar, an operator of gas carriers, was also decoupled from CMB.
   Earlier this year, CMB signed a letter of intent with Groep H. Essers to sell its interest in Hessenatie Logistics. CMB expects to close the transaction by the end of the first quarter. The impact of the transaction will be included in CMB's 2010 consolidated accounts. Linklaters and BNP Paribas Fortis are acting as advisors to CMB in the transaction.
   In the eyes of CMB, the divestitures have paid off. CMB recorded a fiscal year 2010 profit of 122 million euros ($169 million), roughly the same as the previous year, and Geerts said that despite the current volatility in the charter market the company is 'on track' in 2011 to turn a profit once again.
   As of March, CMB operated a fleet of 15 cape-size bulk vessels (ranging from 70,000 to 80,000 deadweight tons), which are ideal for transporting coal, ores and grain, and 11 handy-size ships of 30,000 to 57,000 deadweight tons.
   'Our focus today is on dry bulk ships for charter,' Geerts said. 'It's proven to be a good policy.'
   Before the economic recession of 2008-2009, CMB ordered 18 ships from Asian shipyards, including cape, handy and post-Panamax sizes. The fleet is expected to reach 42 bulkers by the end of 2011. The fleet is less than five years old. 'We rarely keep a vessel for more than 10 years before someone buys it,' Geerts said.
   However, Geerts warned the worldwide cape-size fleet has become heavily overbuilt. The number of cape-size vessels on order for delivery in 2011 and 2012 will amount to half of the world's existing capacity.
   'We have some difficult years ahead of us but it doesn't mean it can't be overcome,' Geerts said. 'There's some flexibility.'
   Most of CMB's cape-size vessels are engaged in the bustling coal and ore trades from Australia and South Africa to China.
   When asked how large CMB will grow its fleet in the coming years, Geerts said it's to be determined. 'There is no specific plan on whether we'll be big or small. We've had years when we had only nine ships,' he said. 'For now, we'll remain a mid-sized operator.'
   During the past century, CMB has endured the devastation of two world wars, periodic economic downturns, and hasty restructurings that even threatened the Belgian carrier's very existence. More than 105 years later, the company continues to prove its resiliency to investors.
   CMB has also emerged as a player in the air carrier business in recent years. In 1998, the company became a shareholder in Dublin-based Air Contractors Group, an operator of freighter and passenger planes, including Airbus 300s, Hercules L100-30s, ATR 42s and ATR 72s. By 2007 it owned the company. CMB's air business operates under ASL Aviation Group, a joint venture between CMB and 3P Air Freighters, a private equity fund managed by Petercam.
   In November, ASL finalized its acquisition of Safair, a South African aviation company. Through the transaction, ASL obtained five Boeing 737-800 passenger planes, five A300 B4 freighters, eight Hercules, and three ATR 72-500s. All aircraft are either leased to postal integrators, such as DHL, FedEx, UPS and TNT, or established airlines.
   CMB said the acquisition enhances ASL's three core activities: airlines, aviation support, and leasing services. With the takeover of Safair, ASL now has a staff of 1,200 worldwide, 90 planes and an annual turnover of about 400 million euros ($547 million). The group flies about 70,500 flight hours annually.
   Geerts said ASL's B737s are 'quick change' capable, meaning that passenger seat modules can be pulled out of the fuselage for all-cargo operations within 15 minutes. The planes operate from hubs in Johannesburg, Dublin and Paris. Since ASL's planes are smaller, they're generally regionally focused.
   'With DHL we fly with our own planes and their planes,' Geerts said. 'We'll fly passenger flights during the holidays.'
   He added CMB applies its asset-focused business model ASL. 'We don't take any load risk,' he said. 'We sell flights. Whether they're full or empty is not our problem.'
   Even during the recent economic recession, the aviation business remained a high point for CMB and its joint venture partner. Geerts said when times are tough air cargo loads inevitably become smaller and shift from larger to smaller planes.