Third-Quarter 2016 Financial Results
► Improvement in core EBIT margin since second-quarter 2016
► NOL acquisition facility fully repaid today
- Significant improvement in Group volumes and revenue thanks to the integration of NOL
- Strict financial discipline and solid liquidity position maintained
- First signs of market stabilisation in a still challenging one
|Q3 - 2015||Q3 - 2016|
excl. NOL contribution*
|Q3 - 2016|
excl. NOL contribution*
|Q3 - 2016||Q3 - 2016|
|Revenue, in $ billions||3.98||3.33||-16.3%||4.47||33.9%|
|Core EBIT**, in $ millions||158||(42)||n.m.||(86)||n.m.|
|Core EBIT margin||4.0%||-1.3%||-5.3pts||-1.9%||-5.9pts|
|Consolidated net profit/(loss), Group share, in $ millions||51||(202)||n.m.||(268)||n.m.|
|Return on invested capital||9.2%||-2.5%||-11.7pts|
|Volumes carried, in TEU*** millions||3.3||3.2||-2.7%||4.5||35.8%|
|Fleet capacity, in TEU*** millions||1.8||2.2||+14.2%|
*Excluding NOL's contribution since its consolidation on 14 June 2016
**EBIT before disposals, impairment charges and non-recurring items
***Twenty-foot equivalent units
**** At 31 December 2015
The Board of Directors of France’s CMA CGM Group, a leading worldwide container shipping company, met under the chairmanship of Jacques R. Saadé, Chairman and Chief Executive Officer, to review the financial statements for the third quarter of 2016.
Review of operations in the third quarter
Volumes carried by CMA CGM amounted to TEU 4.5 million, an increase of nearly 36% thanks to the integration of NOL. Excluding NOL, volumes totalled 3.2 million TEUs in third-quarter 2016, down 2.7% year-on-year. The slight contraction is attributable to the Group's strategy of focusing on high contribution freight.
In a market environment shaped by continued pressure on freight rates, average revenue per TEU, excluding NOL, was down 13.9% from third-quarter 2015 but up 3.8% on second-quarter 2016, bringing an end to a downward trend that had lasted for more than a year.
As a result, revenue amounted to USD4.47 billion, an increase of nearly 34%.
The Group kept a tight rein on costs, helping to drive a year-on-year reduction in unit costs of 9.7%, excluding NOL, thanks to the combined impact of lower bunker prices and disciplined expense management.
Core EBIT margin stood at a loss of 1.9%, representing a slight improvement on the negative 2.3% reported in the second quarter of 2016.
CMA CGM's operating performance, although unsatisfactory, was among the most resilient in the industry thanks to operating discipline, which notably involves keeping a tight rein on costs and being selective about the freight carried.
Highlights and outlook
NOL acquisition facility fully repaid
During the quarter, a container sale and lease-back transaction generated proceeds close to USD580 million, which were used to pay down the NOL acquisition loan. A receivables securitisation programmeraised an additional c. USD260 million at the end of the quarter which were later t applied to the facility repayment. The acquisition loan has now been fully repaid ahead of maturity thanks to two sale and lease-back transactions completed on 16 November for amount of c. USD880 million, which involved 11 vessels .
Integration of NOL
The process of integrating NOL into the CMA CGM Group continued during the quarter and delivered its first commercial and operating results, with more than 20 new shipping alliances set up between APL and CMA CGM and the deployment of a synergy and rationalisation programme. The full reorganisation of the APL and CMA CGM lines will be completed with the deployment of the Ocean Alliance next April.
Roll-out of the Agility operating efficiency plan
The Group is pushing resolutely ahead with the roll-out of Agility – its global plan to improve operating performance, launched on 1 July 2016 – in line with the savings objective for year-end 2017.
Signature of Ocean Alliance on 3 November
CMA CGM and its partners Cosco Container Lines, Evergreen Lines and Orient Overseas Container Lines announced the details of their Ocean Alliance operating partnership in Shanghai on 3 November. The biggest operating agreement ever signed in the shipping industry, the Alliance will offer 40 services on East-West routes and provide its customers with an unrivalled level of service.
As previously announced, the Alliance is scheduled to start operating in April 2017, once the regulatory approvals have been granted.
Shipping companies have continued to take measures to adjust the deployed capacity hence resulting in a better alignment between effective capacity (net of scrapped vessels) and volumes carried. Freight rates have improved slightly but remain nonetheless at a historic lows.
Against this backdrop, the Group will continue to focus on the integration of APL, additional cost savings and the quality of service provided to its customers.
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