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Towards a premium conglomerate

25 September, 2014 

Sam Cage

This week, analysts, investors and journalists attended the Maersk 2014 Capital Markets Day in Copenhagen to hear the latest on the Group’s strategy and performance across the businesses.

“We are focused on profitability, reducing volatility and ensuring we will win long-term in our markets,” Maersk Group CEO Nils S. Andersen told analysts, investors and journalists gathered in Copenhagen.

Stig Frederiksen, analyst at Nordea, on Capital Markets Day

“The first impression is it is a company that has achieved a lot since 2 years ago. When you look at the strategy today, taking the headwinds into account, the management has managed to get quite far into their strategy.”

“I’m looking at what they’ve done in each business, on capital allocation and shareholder friendly initiatives to improve the valuation of the company. It’s on track, it’s what we want to hear, there is still work to do of course and even with the initiatives, they haven’t forgotten it’s a growth company. They’re not just going to strip out invested capital to create a good return, they are still going to invest and keep their market position but do it in a more disciplined way.”

The Maersk Group is making solid progress on its targets as it moves towards being a premium conglomerate and will consider further share buybacks if it does not identify investment opportunities that offer fast enough growth, CEO Nils S. Andersen told the 2014 Capital Markets Day.

“We are focused on profitability, reducing volatility and ensuring we will win long-term in our markets,”
Andersen told analysts, investors and journalists gathered in Copenhagen. 

APM Shipping Services

Capital Markets Day focused on three of the five core businesses that are key to the Group’s long-term success – Maersk Line, Maersk Oil and APM Shipping Services, the new name for Services and Other Shipping.

The Group aims to grow invested capital to USD 65-70 billion by 2017, an increase of about 30 percent from a baseline in the second quarter of 2012. At least 75% of invested capital will be within Maersk Line, Maersk Oil, APM Terminals and Maersk Drilling – a number very close to today’s 76%. 

Maersk Line’s share of invested capital will probably fall towards a 25-30% range, while the combined share of Maersk Oil, APM Terminals and Maersk Drilling will rise towards 45-50%.

“We will continue our portfolio optimisation with room for divestments, as we saw with the Venezuela barges and the Port of Virginia, and further investments as well,” Andersen said. “What we’re focusing on is improving performance across the businesses in our Group so that when you invest in our company you feel comfortable and confident in that investment.”

Improving returns

Becoming a premium conglomerate requires building a track record of world class business unit performance, value creating portfolio management and distribution of potential excess capital, said CFO Trond Westlie.

From left to right: Maersk Group CFO Trond Westlie, Maersk Group CEO Nils S. Andersen and APM Shipping Services CEO Morten Engeltoft.

APM Shipping Services key messages

Target for USD 500 million in underlying profit by 2016

Damco restructuring – affecting processes, people and systems – needed to take out costs and strengthen commercial competitiveness

Ambitious growth plans in Maersk Supply Service over the next five years, with the plan of doubling invested capital over this period

Making Maersk Tankers a top industry performer by significantly increasing returns and establish active position taking based on data and analytics

Svitzer focus on further improving port and vessel profitability and growth in terminal towage sector

The Group seeks to improve its return on invested capital by focused and disciplined capex allocation, optimisation of its portfolio and performance management, said Andersen.

It intends to grow dividends in nominal terms and has just initiated a share buyback programme, and the Maersk B share has outperformed a basket of peers by 21% in the year to date and 74% over the last five years.

“A premium conglomerate means world class business unit performance and customer delivery. It is value creating portfolio management. It is an ambitious and inspiring home for our businesses. And it is of course living our values and preparing for the next 100 years,” Westlie said. 

Absolutely doable

In the business’s first presentation to Capital Markets Day, APM Shipping Services CEO Morten Engelstoft set out how it intends to reach a target of USD 500 million in underlying profit by 2016, from a baseline of about USD 300 million – meaning an increase of about 70% in two years.

APM Shipping Services, one of the five core businesses, which was set up last year to focus on the smaller and core units of the Group. The four component parts – Maersk Tankers, Maersk Supply Service, Svitzer and Damco – have each examined their business and strategy to see how they can improve performance to the targeted level. 

Among these, Damco is restructuring processes, people and systems to reduce costs and improve its competitiveness and Maersk Tankers is overhauling its fleet to focus on transporting oil products – where it expects stronger long-term demand and returns – rather than crude.

“We have the size and positions in these businesses that we need to compete. We must deliver our $500 million target,” Engelstoft said. “It won’t be a walk in the park, but it is absolutely doable.”

To see a replay of Capital Markets Day, click HERE.

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