A.P. Moller – Maersk Reports A Significant Hike In Earnings And Strong Cash Flow In Q1
A.P. Moller – Maersk has closed the first quarter of 2019. It provided a huge increase of 33% in earnings before interest, tax, depreciation and amortization (EBITDA) to USD 1.2bn while revenue grew by 2.5% to USD 9.5bn as compared to Q1 2018. There is an improved operating cash flow to USD 1.5bn and free cash flow was USD 3.5bn, which also includes sale of shares in Total S.A.
“We had a good start to 2019. In Q1, revenue grew by 2.5%, operating earnings improved by 33% and cash flow from operations doubled to USD 1.5bn. With a strong free cash flow of USD 3.5bn after the sale of the remaining shares in Total SA., we have significantly strengthened our balance sheet. Net interest-bearing debt has been reduced by USD 2.4bn since Q4 and by USD 7.1bn since Q1 2018,” says Søren Skou, CEO of A.P. Moller – Maersk.
Looking at terminal profitability, the opening of the Moin terminal, Costa Rica and positive underlying volume growth in gateway terminals had a positive impact on terminal profitability in Q1. Terminals & Towage reported an increase in revenue to USD 991m from USD 911m and in EBITDA to USD 267m from USD 244m compared to same quarter last year.
Logistics & Services reported a decrease in revenue in Q1 2019 by 0.5% to USD 1.4bn driven by lower air freight forwarding revenue. EBITDA increased to USD 51m from USD 45m in Q1 2018.
The strategic transformation also progressed. In the first quarter, Maersk delivered combined synergies of USD 130m. Cash return on invested capital (CROIC) improved to a positive 6.7% from a negative 5.9%, driven by higher earnings, strong cash conversion and a reduction in invested capital.
“We made good progress on the transformation, where we have completed the separation of the energy businesses, further integrated our organisation and continued to improve our product portfolio. This resulted in a solid cash return on invested capital and delivery of synergies, getting us closer to our target of USD 1bn by end of 2019. Non-Ocean revenue and gross profit in Logistics & Services grew, but needs to accelerate in the coming quarters,” says Søren Skou.
Non-Ocean revenue grew by 3.8% in Q1 when adjusted for the closing of production facilities in Maersk Container Industry. Logistics & Services improved gross profit by 2.2%, positively impacted by growth in intermodal and from warehouse facilities.
The return on invested capital (ROIC) improved in Q1 to a positive 1.3% from negative 0.5%. The long-term target of a ROIC above 7.5% is reaffirmed.
Share buy-back, cash distribution and a new dividend policy
As part of the intention to distribute a material part of the value of shares received in Total S.A in connection with the sale of Maersk Oil, the Board of Directors has decided to exercise the authority to buy back shares with a maximum value of DKK 10bn (USD 1.5bn). The program will run from June 2019 and over a period of up to 15 months. After execution of the program, the Board of Directors will evaluate the capital structure and outlook for A.P. Moller – Maersk with the intention to distribute additional cash to shareholders, subject to maintaining investment-grade rating.
Guidance for 2019
Subject to the current risk of further restrictions on global trade and other external factors impacting freight rates, bunker prices and foreign exchange rates, A.P. Moller – Maersk reiterates its guidance of an EBITDA of around USD 5bn, including effects from IFRS 16.
Furthermore, guidance on CAPEX of around USD 2.2bn and a high cash conversion is maintained with an estimated organic market growth in volumes in Ocean of 1-3% for 2019.
Highlights Q1
Revenue
| USD MILLION | 2019 | 2018* |
|---|---|---|
|
OCEAN
|
6,929
|
6,810
|
|
LOGISTICS & SERVICES
|
1,448
|
1,455
|
|
TERMINALS & TOWAGE
|
991
|
911
|
|
MANUFACTURING & OTHERS
|
558
|
672
|
|
UNALLOCATED ACTIVITIES, ELIMINATIONS, ETC.
|
-386
|
-543
|
|
A.P MOLLER – MAERSK CONSOLIDATES – CONTINUING OPERATIONS
|
9,540
|
9,305
|
EBITDA
| USD MILLION | 2019 | 2018* |
|---|---|---|
|
OCEAN
|
927
|
652
|
|
LOGISTICS & SERVICES
|
51
|
45
|
|
TERMINALS & TOWAGE
|
267
|
244
|
|
MANUFACTURING & OTHERS
|
21
|
48
|
|
UNALLOCATED ACTIVITIES, ELIMINATIONS, ETC.
|
-30
|
-58
|
|
A.P MOLLER – MAERSK CONSOLIDATES – CONTINUING OPERATIONS
|
1,236
|
931
|
CAPEX
| USD MILLION | 2019 | 2018* |
|---|---|---|
|
OCEAN
|
469
|
1,074
|
|
LOGISTICS & SERVICES
|
9
|
8
|
|
TERMINALS & TOWAGE
|
121
|
101
|
|
MANUFACTURING & OTHERS
|
177
|
184
|
|
UNALLOCATED ACTIVITIES, ELIMINATIONS, ETC.
|
2
|
-8
|
|
A.P MOLLER – MAERSK CONSOLIDATES – CONTINUING OPERATIONS
|
778
|
1,359
|
* Q1 2018 presented as if IFRS 16 had been implemented in 2018 and adjusting for Maersk Supply Service as continuing operations.
Sensitivities on guidance for 2019
The guidance of A.P. Moller – Maersk for 2019 depends on several factors. Based on the expected earnings level and all else being equal, the sensitivities for the rest of 2019 for four key factors are listed in the table below:
| FACTORS | CHANGE | EFFECT ON EBITDA REST OF YEAR |
|---|---|---|
|
CONTAINER FREIGHT RATE
|
+/- 100 USD/FFE
|
+/- USD 1.0bn
|
|
CONTAINER FREIGHT VOLUME
|
+/- 100,000 FFE
|
+/- USD 0.1bn
|
|
BUNKER PRICE (NET OF EXPECTED BAF COVERAGE)
|
+/- 100 USD/tonne
|
-/+ USD 0.3bn
|
|
FOREIGN RATE OF EXCHANGE (NET OF HEDGES)
|
+/- 10% change in USD
|
+/- USD 0.1bn
|
Reference: maersk.com
