Finance

2018 SECOND QUARTER FINANCIAL RESULTS: Volume growth and positive net income in a market environment affected by rising fuel costs

  • Growth in volumes (+9.6%) and revenue (+7.4%)
  • Core EBIT margin (1.2%) impacted by rising oil prices (+27.7% over a year)
  • Supportive market development in the third quarter


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


"Over the second quarter CMA CGM has recorded a core EBIT margin close to the first quarter as well as a positive net income in spite of a sharp increase in fuel prices. The strong volume growth demonstrates our commercial strength and the quality of our service offering.
The acquisition of a 25% stake in CEVA is an important step in our strategy to complement our transport offering with logistics services. We are confident for the second half of the year. We anticipate an improved operating margin thanks to the rise in freight rates and sustained volumes.”


Q2 - 2017 Groupe Q2 - 2018 Groupe Variation
Revenue in USD billions 5.31 5.70 +7.4%
Core EBIT* in USD millions 472 67 (85.8)%
Core EBIT margin 8.9% 1.2% (7.7) ppts
Net Income Group share in USD millions 213.0 22.7 NS
ROIC (return on invested capital) 5.20% 7.30% 2.1 pts
Volumes carried in TEU millions** 4.73 5.19 +9.6%
Vessel fleet 462 509 +10.2%
Fleet capacity in TEU millions** 2.4 2.6 +11.5%
Gearing (adjusted net debt / equity)*** 1.32 x 1.23 x (0.09) x

* Core EBIT excluding asset sales and depreciation and non-recurring elements
** TEU = Twenty-foot Equivalent Unit
*** On 30th June


The Board of Directors of the French CMA CGM Group, a worldwide container shipping company, met under the chairmanship of Rodolphe Saadé, Chairman and CEO, to review the financial statements for the second quarter of 2018.


Q2 2018 BUSINESS AND FINANCIAL PERFORMANCE

Revenue increase driven by volume growth


In the second quarter of 2018, the volumes transported by CMA CGM increased by +9.6%, higher than the industry growth.


This progress can be explained by the strength of the Transpacific and Asia/Gulf lines within OCEAN Alliance, as well as lines from and to South America.


Average revenue per container transported decreased slightly (-2.1%) in the second quarter of 2018 in comparison with the second quarter of 2017.


The revenue of the Group in the second quarter of 2018 increased by +7.4% as compared to last year, attaining USD 5.70 billion.


EBIT margin under pressure

Over the course of the second quarter of 2018, CMA CGM recorded a Core EBIT of USD 67.1 million, reflecting a core EBIT margin of 1.2%.


The Core EBIT margin notably echoes the very sharp rise in unit bunker costs (+27.7% per ton of bunker over the past year).


The Group intends to pursue the cost reduction initiatives announced upon the release of its first quarter results to improve its operational and financial performance. These notably concern the optimisation of container fleet management and the improvement of energy efficiency.


The consolidated net income Group share amounts to USD 22.7 million in the second quarter. It is supported by improved financial results, positively impacted by the rise of the US dollar versus the Euro.


Q2 2018 HIGHLIGHTS

During the second quarter, the Group continued its development along the lines of the strategy defined by Rodolphe Saadé, which resulted in several initiatives in the following areas:


Maritime development

Announcement of the acquisition of Containerships, an intra-regional transport leader in Northern Europe

The acquisition of the Finnish business Containerships, a specialist in the intra-European market, is part of the strategy to strengthen CMA CGM’s offering in the intra-regional trades, one year after the acquisition of Mercosul in South America. Containerships offers its customers a complete range of services, with logistics solutions by ship, truck, rail and barges. Containerships will take delivery of four LNG-fuelled vessels with a 1,120 TEU capacity later this year. This transaction, subject to approval by the relevant authorities, should be closed before the end of the year.


Delivery of the CMA CGM Jean Mermoz and Ice-Class vessel

The Group expanded its fleet in the second quarter with the delivery of the CMA CGM Jean Mermoz, a 20,600 TEU capacity container ship designed to operate on the Asia-Europe trades. It also took delivery of another Ice-Class vessel, whose reinforced hulls will enable it to operate on the Baltic routes.


Ocean Alliance Day 2 Product

During the second quarter, the Group continued to develop its services, in particular with the launch of Ocean Alliance Day 2 Product. With 41 East-West services (Asia-North America, Asia-North Europe and Asia-Mediterranean), the operational alliance of which CMA CGM is a part represents the largest offering on the market. Ocean Alliance is number one on the Transpacific trade, with 20 dedicated services.


Logistics development

Strengthened presence in logistics

On May 3, 2018, CMA CGM acquired a stake of approx. 25% in CEVA Logistics in the company's initial public offering. With this operation, the Group strengthens its presence in logistics. Commercial cooperation projects between the two groups will allow CMA CGM to offer its customers high added value solutions throughout the logistics chain.

CMA CGM's securities were converted into CEVA Logistics common shares on August 13, 2018.


Customer Centricity

Commercialisation of a new “connected container” offering

On 19 June, the Group announced the deployment of an innovative container tracking solution: TRAXENS by CMA CGM, a connected box that tracks, amongst others, the location, the opening and closing of container doors, and the temperature variations.
This new offering is an important element in the Group's Customer Centricity strategy, enabling the collection and analysis of extensive data to improve customer service.

Innovation

Cooperation with Shone, a start-up specialising in artificial intelligence

By enabling Shone (based in San Francisco) to collect data on board the Group's vessels, CMA CGM is participating in the development of an artificial intelligence system designed to facilitate the work of crews on container ships, whether in decision support, piloting assistance or maritime safety.


OUTLOOK

The CMA CGM Group is confident in the second half of the year and anticipates an improvement in its core EBIT margin, thanks in particular to the recent rise in freight rates and sustained of volumes.