Maersk plans to trim capital spending
A.P. Moller – Maersk will rein in spending due to the global economic slowdown and credit crunch.
In a letter to employees in the company’s in-house magazine, Maersk Post, Chief Executive Officer Nils S. Andersen said the company must “adapt to the lack of capital. So, we have decided that we will run our business the next couple of years in a way where we do not need additional funds from banks.”
Elsewhere he said, “the near future looks challenging, but I am confident that we are in a strong position, partly because our businesses provide a balance and because we have a strong balance sheet. Nevertheless, we are, of course, affected by volatile oil prices and a drop in world trade. And in order to come stronger out of the international crisis, we have to be conservative in our investments, focus on cash generation and become even more cost focused in the daily running of our businesses.”
The company has “cut or postponed all non-committed investment proposals until we are sure that we can pay it out of our own cash flow,” he said. “That gives us a low flexibility on investments in 2009-2010.”
But Andersen added, “That being said, we will still invest billions of dollars next year so our strong growth will continue. Maersk Line has ordered a large series of special vessels for the Africa and South America trades, Maersk Tankers is acquiring Brostr'm, Maersk Drilling has a significant newbuilding program, and Maersk Supply Service has ordered 17 new vessels.
“Looking ahead, our job is to squeeze as much out of our businesses as we can while we continue being motivated regardless of the tough business environment. I acknowledge that it will be less fun at times, but if we execute right we will come out as a stronger company on the other side of the economic slowdown,” he added.
“We need to change our entire mindset on costs and fully understand that a dollar saved is a dollar earned,” says S'ren Thorup S'rensen, the company’s chief financial officer, in the same magazine. “This means that we have to be prepared to cut projects if they do not generate an acceptable cash flow within a reasonable timeline. We also have to cut services if they do not add value to our customers and our own business. In general, we must have a much more financially disciplined approach to evaluating the things we do.”
The company said it will cut all unnecessary costs including traveling unless it is critical for business. It said a new strategy for minimizing travel costs by implementing seven travel agency booking centers in order to consolidate volume is expected to save the company $30 million per year.