Danish conglomerate A.P. Møller-Maersk is probably best known as the parent company of the world’s largest container shipping company, Maersk Line; the world’s third largest container terminal operator, APM Terminals; and freight forwarder Damco.
But the company has always had other dimensions.
In recent years, the Maersk Group has narrowed its focus by selling off a stake in Denmark’s largest bank, Danske Bank; European ferry operator Norfolkline; retailer Danish Supermarket; Odense Steel Shipyard; and other businesses.
Last month, just as this issue of American Shipper was going to press, the company took another huge step in that direction, saying it would divide itself into two independent divisions, one focusing on transportation and logistics, and the other focusing on the energy business.
According to a statement from the company, its intention is to separate its oil and gas businesses—Maersk Oil, Maersk Drilling, Maersk Supply Services, and Maersk Tankers—from the conglomerate over the next couple of years.
A.P. Møller-Maersk will become “an integrated transport and logistics company with digitalized and individualized customer solutions,” it said. In addition to Maersk Line, APM Terminals and Damco, it will also include container manufacturer Maersk Container Industry and towing and salvage company Svitzer.
The decision came after the June announcement that Søren Skou, who had headed the container shipping unit, would become the next chief executive officer of the group. He replaced Nils S. Andersen, who had held the post for eight years.
At the time, the board asked management to conduct an internal review looking at options for “generating growth, increasing agilities and synergies, and unlocking and maximizing shareholder value with the long-term view” that culminated in last month’s announcement.
The company said Skou will continue as group CEO of A.P. Møller-Maersk and CEO of the transport and logistics division.
While Maersk has said in recent years it planned to grow in step with the overall container shipping market, Skou said Maersk Line once again plans to grow market share either organically or via acquisitions, if the right opportunities develop.
“We want to make sure we maintain our leading position in the industry,” he explained, noting the recent wave of consolidation in container shipping—CMA CGM’s acquisition of APL parent NOL, Hapag-Lloyd’s acquisition of UASC, the merger of COSCO and China Shipping, and South Korea’s Hanjin Shipping filing for receivership on Aug. 31.
The company intends to create cost synergies by combining functions that today are handled separately by different business units and using digital solutions that will allow customers to increasingly “self serve.”
It also wants to improve unit costs by increasing utilization of assets, and create cost savings using the so-called “toolbox” Maersk Line has developed. In November 2015, Maersk announced plans to reduce costs by, among other things, eliminating 17 percent of its workforce, 4,000 positions.
Skou said that within the next few years, Maersk will be investing heavily in the digitization of its businesses.
He said there is a significant opportunity, not just to reduce costs, but to “provide a much better customer experience and enable us to build a platform for hopefully new revenue streams” on its website, where 55 percent of its cargo is booked.
Skou was careful to point out that there are no plans to integrate Damco into Maersk Line, though the two will integrate some back office functions. Damco will remain a “stand-alone company” and a “strong independent brand in the freight forwarding and 3PL and 4PL space,” he said. But he said there will be opportunities for the companies to drive sales leads and volume to each other, as well as jointly invest in digital solutions.
Although A.P. Møller-Maersk wants to continue growing, Skou said because of low volume growth in cargo and excess capacity, the company does not believe building new ships or new terminals is the way to do that.
Skou said there are opportunities for Maersk Line to put more volume though the facilities of APM Terminals. For a number of years, Maersk Line and APM Terminals have operated more and more at arm’s length and on market terms.
“Clearly, that has meant that Maersk Line volumes have moved to other terminal operators here and there, and we see opportunity to moving some of that volume back,” he said.
If Maersk Line and APM Terminals can work together to improve terminal productivity and reduce turn times for Maersk Line ships, that would also reduce costs.
Skou didn’t spell out exactly how Maersk Line will achieve synergies with APM Terminals and Damco, but Lars Jensen, CEO of SeaIntelligence Consulting, said it is likely to be a “balancing act.”
If the sister units work too closely together, customers may be scared away or feel they are not getting the best possible deal.
But if they are too distant, potential synergies could be lost.
In terms of revenues, A.P. Møller-Maersk is the largest public company in Denmark, with revenues of $40 billion in 2015, and the only Danish company on the Global 500 of Fortune magazine, taking the 240th slot.
While the Maersk Group is publicly listed, it is ultimately controlled by A. P Møller Holding, the holding and investment company of the A.P. Møller Foundation, which owns 41.51 percent of the company’s share capital and 51.23 percent of its votes. Two other funds control an additional 16 percent of shares and a quarter of the votes.