Maersk looks to trim $1 billion in spending
A.P. Moller – Maersk will seek to reduce costs by another $1 billion in the coming year, the group’s chief executive employee said.
“With low oil prices and a tumbling container market characterized by overcapacity and loss-making freight rates, 2009 will prove to be difficult for most business units,” said Nils S. Andersen, writing in the company’s most recent employee newsletter.
“Given the current market conditions, this means we have to reduce investments and improve cash management. All operating and capital expenses in all business units are in play. In addition, we need to control our costs better, and we have set up a target of cutting costs by $1 billion this year in addition to already planned cost cuts”
Andersen said the cost cutting “does not mean that the group is in financial trouble or expects to get into a situation like that; on the contrary, we are striving to enhance our financial stability and strength.”
He noted, “Before it was a sellers' market, where it was sometimes difficult to get vessels or steel. Now it is a buyers' market, where contracts are negotiated to get cheaper purchases. Our customers are pressing for lower prices and, unfortunately, we must in turn do the same to our suppliers; because if we do not do it faster than as our competitors, we will lose our competitiveness.”
Andersen stressed that the company will would continue to invest significantly in its businesses, pointing to Maersk Oil's Al Shaheen field in Qatar, new drilling rigs and Maersk Tankers' acquisition of Brostr'm. The company also is planning to install waste heat recovery systems on its vessels, which Andersen said would be expensive, but reduce fuel consumption by 10 percent.
Maersk Line, which accounts for 40 percent of the group and whose performance impacts APM terminals and Maersk Logistics, “faces the worst market in the history of container shipping,” with export volume from China dropping 10 to 20 percent and falling rates because of excess tonnage, he said.
“Last year the target for Maersk Line was to improve its profitability; but in 2009, it is all about being competitive in the marketplace. We have invested $20 billion in Maersk Line, but at the moment the company only breaks even,” he said. 'We want to set high objectives, but we also want to be realistic. When the year is over we want to be able to say: Maersk Line outperformed competitors, improved profitability and has satisfied customers while continuing to grow its market share.'