Strategy to achieve more balance between ocean and non-ocean revenues
A.P. Moller – Maersk’s third quarter is characterised by improved profitability across the business. Earnings before interest, tax, depreciation and amortization (EBITDA) improved 14% to US$1.7 billion in the quarter, reflecting an increase in EBITDA margin to 16.5%.
Revenue decreased slightly by 0.9% to US$10.1 billion. Operating cash flow increased by 25% to US$1.7 billion with a cash conversion ratio of 105% and free cash flow before capitalized lease payments was USD 1.5bn.
Søren Skou, CEO of A.P. Moller - Maersk, said: “While the global container demand, as expected, was lower in Q3 due to weaker growth in the global economy, A.P. Moller - Maersk continued to improve the operating results.
“We delivered strong free cash flow and a return on invested capital of 6.4% as a result of strong operational performance in Ocean, higher margins in Terminals and solid earnings progress in Logistics & Services.”
“The strong performance for the quarter combined with our expectations for the rest of the year, led to the recent upgrade of our earnings expectations for 2019. We will continue our focus on profitability and free cash flow in Q4 and into 2020.”
As part of the strategic target to become more balanced in earnings between the Ocean and non-Ocean partly through cross-selling of end-to-end and digital services, Maersk continues to develop products and services for customers, resulting in high customer satisfaction.
As announced on 21 October 2019, A.P. Moller - Maersk now expects EBITDA for 2019 in the range of US$5.4 – 5.8 billion, from the previously communicated US$5 billion range.
The organic volume growth in Ocean is now expected to be slightly below the estimated average market growth, which is now expected to be in the range of 1-2% for 2019 compared to previously an expected market growth of 1-3%.
Guidance is maintained on gross capital expenditures (CAPEX) of around US$2.2 billion and a high cash conversion (cash flow from operations compared with EBITDA).
CAPEX for 2020-2021 accumulated for the two years is expected to be US$3-4 billion.
The guidance continues to be subject to uncertainties due to the weaker macroeconomic conditions and other external factors impacting container freight rates, bunker prices and foreign exchange rates.