Business, Freight News, Sea

CMA CGM maintains positive core EBIT margin despite historically low freight rates

[ March 20, 2017   //   ]

Rodolphe Saadé, appointed CMA CGM Chief Executive Officer, reveals that CMA CGM has maintained a positive core EFIT margin in the fourth quarter 2016 despite historically low freight rates.

CMA CGM is the world’s third-largest container line. According to financial released in February, the French group reported a net profit of $45 million in the fourth quarter of last year, supported by a recovery in freight rates and efficiency measures taken during a prolonged downturn in shipping. During the same period of 2015, the carrier reported a $46 million net loss.

For the full year, it posted a net loss of $452 million including NOL, against a $567 million net profit in 2015.

“[Last year was] a landmark year in the history of our development, with the strategic acquisition of NOL and the creation of Ocean Alliance, which will fully contribute to the Group’s performance in 2017,” said Saadé. “In 2016, we succeeded in maintaining a slightly positive core EBIT margin, despite historically low freight rates, focusing on the volumes generating the highest contributions. With the increase in freight rates observed in recent months and the operational discipline that we apply quarter after quarter, we recorded a positive result in the 4th quarter and delivered on of the best performances in the industry.”

In 2016, CMA CGM announced the signing of an operational strategic partnership with its partners Cosco Container Lines, Evergreen Lines and Orient Overseas Container Lines. OCEAN Alliance, which will start operating on April 1st, operates 40 maritime services. CMA CGM is the main player, deploying a fleet of 119 vessels out of the 323 that make up the alliance.

Saadé expects that in 2017 the market will continue its recovery. He says that CMA CGM will pursue its strategy of development and innovation to consistently offer its customers more high value-added services and to differentiate the line from the competition.

“In this context, the digital transformation that we are implementing within the Group will be a strategic tool to achieve this target,” he said.

Volumes shipped in 2016 by the CMA CGM group, including all its subsidiaries, rose to 15.6 million TEUs, 20% more than in the previous year thanks to the acquisition of NOL. On a comparable basis, volumes amounted to 12.8 million TEUs in 2016 resulting from the Group’s strategic choice to focus on volumes offering the best freight rates to preserve its operating profitability.
The average income per TEU increased by 2.9 % between third quarter and the fourth quarter 2016. In a difficult environment for the industry, the average income per TEU, on a comparable basis shrank 13.6 % in 2016 compared to 2015.
Accordingly, the CMA CGM group posted revenues of $16.0 billion, up 1.9 % on the year. In the fourth quarter, revenue rose 28.0% compared to the same period in 2015.
In the second half, the group deployed its global operating efficiency plan named “Agility” that already led to a 5% reduction of average unit costs in 2016 from 2015, when excluding the effect of fuel price fluctuation. The company maintains its target to cut costs by 1 billion USD over the 18 months through December 2017.
Recurring core EBIT margin stood at 0.2% in 2016. In the fourth quarter of 2016, it was 4.2% (5.3% on a comparable basis, excluding NOL), dramatically higher than during the same period in 2015 (0.6%) and the third quarter 2016 (-1.9%). CMA CGM’s core EBIT margin in the fourth quarter was one of the best performances of the sector. In the fourth quarter, CMA CGM recorded a net profit of $45 million.