Finance

Third Quarter 2020 Business Activity - Strong CMA CGM Group operating performance


  • Marked recovery in volumes transported in shipping and logistics activities.
  • Increase in operating margin during the third quarter.
  • Fleet entry of the flagship of a new generation of 26 liquefied natural gas-powered container vessels.

The Board of Directors of the CMA CGM Group, a world leader in shipping and logistics, met today under the chairmanship of Rodolphe Saadé, Chairman and Chief Executive Officer, to review the financial statements for the third quarter of 2020.


Rodolphe Saadé, Chairman and Chief Executive Officer of the CMA CGM Group, commented:

In a favorable market environment for our industry, the Group reported very strong financial and operating performances due to the full commitment of its teams. Our shipping activity has seen a significant increase in volumes transported compared to the second quarter of 2020, and CEVA's transformation plan starts to bear fruit. This crisis has also demonstrated the solidity of our business model and demonstrated the relevance of our strategy, combining logistics solutions with transport offering. In a context of strong demand for the coming months, we will continue to respond with agility to the needs of our customers.

Business activities and financial performance of the third quarter of 2020


The CMA CGM Group demonstrates strength and agility in an unprecedented global context


The third quarter business activities saw a marked recovery in demand for transportation of goods, following the scaling back triggered by the Covid-19 pandemic during the first half of the year. In response to this recovery, the CMA CGM Group stepped up the redeployment of operated capacities during the third quarter, once again demonstrating the agility of its business model and the commitment of its employees.


This increase in volumes transported was due to:

  • the pick-up in global economic activity following the easing of various lockdown measures;
  • the strong momentum in terms of the consumption of goods to the detriment of services activities, encouraged in some locations by support packages;
  • strong e-commerce growth with inventory rebuilding;
  • the usual seasonal variation in business activity in preparation for both the September and Christmas peak consumption periods in western countries.

Strong financial indicators for the Group


During the third quarter of 2020, the CMA CGM Group showed great responsiveness to support recovery in the sector. The health crisis has confirmed the relevance of the Group's strategy in terms of the complementarity between logistics solutions and maritime transport.


Group revenue was up by more than 6% during the third quarter of 2020 compared with the third quarter of 2019, reaching a level of USD 8.1 billion. TABLE 1


EBITDA (1) improved markedly to USD 1.7 billion, representing a 68% increase compared with the third quarter of 2019. The EBITDA margin continued to rise, reaching 21.0% (versus 13.3% during the third quarter of 2019). The operating margin reached USD 1.0 billion, i.e., 12.6%, versus USD 332 million (4.4%) for the third quarter of 2019.


During the third quarter of 2020, the CMA CGM Group reports yet another solid improvement in Net Income Group share, with profits of USD 567 million, compared with USD 45 million during the third quarter of 2019 and USD 136 million during the second quarter of 2020.


The Group’s operating performance generated an operating cash flow in excess of USD 1.8 billion, i.e. USD 814 million more than during the third quarter of 2019. The Group’s liquidity stood at USD 2.8 billion on September 30, 2020.


(1) EBITDA before capital gains/(losses) on the disposal of fixed assets and subsidiaries.


Shipping: strong EBITDA growth of +76%TABLE 2


Volumes carried during the third quarter of 2020 continued to recover and were up 16.8% compared with the second quarter of 2020. Volumes were also up 1% compared with the third quarter of 2019. Revenue for the quarter increased by 6.3% compared with the third quarter of 2019, totaling USD 6.3 billion for shipping, thanks to average revenue per TEU (twenty-foot equivalent unit) of USD 1,120, up 5.2% year-on-year, in particular on Transpacific trade lanes.


Shipping EBITDA grew by an impressive 76% during the third quarter of 2020 to USD 1.5 billion (versus USD 870 million during the third quarter of 2019). Unit cost by TEU was down -6.8% compared with the third quarter of 2019, at USD 845 due to the combined impact of declining oil prices and the Group’s cost-cutting initiatives, notably in transportation and intermodal services. As a result, the Group has seen a strong 205.7% increase in its operating margin to USD 978 million.


Logistics: a transformation plan which is bearing fruitTABLE 3


CEVA Logistics continues to recover and is on course with its transformation plan. The effects observed in the second quarter of 2020 continued and improved during the third quarter.


The revenues of the Group's logistics subsidiary stood at USD 1.9 billion in the third quarter, up 7.9% from the third quarter of 2019. EBITDA stood at USD 167 million, up 18.4% from the third quarter of 2019, and up from the second quarter of 2020 (USD 153 million).


This performance was mainly supported by the turnaround in contractual logistics activities (warehousing solutions and related services) following the reopening of sites closed in the second quarter due to the health crisis. Airfreight momentum also remained strong with favorable margins despite the significant reduction in air traffic.


The operating margin recovered from USD 12 million in the third quarter of 2019 to USD 39 million in the third quarter of 2020. Finally, the contribution of CEVA Logistics to net income Group share stood at USD 1 million compared to - USD 44 million in 2019.

Highlights for the third quarter of 2020


Liquefied Natural Gas, a pioneering choice for a new generation of container ships


On September 22, the CMA CGM JACQUES SAADE joined the fleet. The Group's new flagship is the world's largest container ship powered by liquefied natural gas (LNG). The CMA CGM Group is firmly committed to the energy transition in maritime transport and is rolling out a plan aimed at providing the Group with a fleet of 26 LNG-powered ships by 2022. Liquified gas is an energy of the future, which preserves air quality by removing 99% of sulfur oxides, 91% of particulate matters and 92% of nitrogen oxide emissions. It enables the reduction of CO2 emissions by up to 20% compared with standard fuel oil engines.


For more information, visit https://www.lng-powered-cmacgm-vessel.com/en/home/


Development of expertise in air freight


Building on its strategic development in logistics, the CMA CGM Group intends to increase its expertise in air freight. The CMA CGM Group has therefore signed a memorandum of understanding for the acquisition of a 30% stake in Groupe DUBREUIL Aéro (France's leading private airline group, owner of the airlines Air Caraïbes and French Bee). This transaction is subject to review by the competition authorities.

Outlook


Strengthening of the Group's financial structure


In October, the Group went ahead and issued bonds worth EUR 525 million and prepaid its outstanding bonds due to mature in 2021.


In addition, and in line with its debt reduction strategy, the CMA CGM Group will prepay USD 750 million of various debts in the coming weeks. These include the NOL (now CMA CGM Asia Pacific Limited) notes due to mature in 2021.


Both rating agencies S&P and Moody's have adopted a favorable outlook on CMA CGM's debt rating (B + and B2 respectively).


Ongoing momentum in world trade and earnings outlook


During the fourth quarter, maritime activity is more sustained than during the third quarter due to the ongoing increase in volumes. This momentum is particularly marked in the United States and Latin America and allows the fleet to continue operating at full capacity as during the third quarter. As a result, freight rates remain high.


In this favorable environment and thanks to the ongoing control of unit costs, the Group should see a further improvement in the EBITDA margin in the fourth quarter.