Maersk aims to become ‘the global integrator of container logistics’

12/15/2016

A.P. Moller-Maersk has outlined its plans for Maersk to become “the global integrator of container logistics” as it seeks to tap into the growing US$1 trillion broader logistics and supply chain market, not just a “stagnating” US$190 billion container shipping market

During a six-hour Capital Markets Day event for investors, analysts and bankers, A.P. Moller-Maersk outlined the future of its newly created for Transport & Logistics and Energy divisions.

Entitled ‘The new direction’, the event revolved around the Transport & Logistics division, which “aspires to become the global integrator of container logistics, providing global supply chain solutions while delivering great customer experience”, the group said..

Highlighting the “value in integration”, Maersk said: “Integrating its services, the division is looking at a large market. Thus, global transportation and logistics, which includes inland services, container shipping, freight forwarding, supply chain services and more, has an annual value of approximately US$1 trillion.

“And it is growing in line with GDP. Container shipping, in comparison, is a US$190 billion market, with stagnating growth.”

Group CEO Søren Skou commented: “Our unique position in transport and logistics gives us a solid starting point to build on. We will meet the needs of the customers for end-to-end services and by doing so we will improve returns though revenue growth, cost cutting and other benefits.”

A number of examples were given as to how the brands in the division could integrate and work together. The group said that in future, the term “network optimization” would include both vessels and terminals.

“Maersk Line will help APM Terminals by feeding volume to increase utilization of the terminals – without compromising on cost leadership,” it added. “Maersk Line, APM Terminals and Svitzer will work on a ‘pit stop’ strategy to make port calls more efficient. Moreover, Damco, APM Terminals and Maersk Line will look at offering inland services which all customers need but only 12% currently buy from the division.”

It said these and other synergies were expected to generate up to two percentage points return on invested capital (ROIC) improvement for the division over a period of three years, starting in 2017.

“In essence, four principles are set to drive the division forward: growth, cost leadership, customer service, and competitive pricing,” the group added.

It stressed that digitalisation was also “a key part of the future for the Transport and Logistics division”, a point that group CFSTO Jakob Stausholm drove home by saying: “Everything that can be digitalised will be digitalized.”

This would not only make for cost savings, but online services will also improve customer experience and loyalty – even if it would not justify increases in prices.

“It won’t be enough to give us a premium, but we expect to see better customer stickiness, higher share of wallet, and greater interest in our other services,” said Maersk Line CCO Vincent Clerc.

Skou reiterated the strategic shift announced in October, where the company stressed that Maersk Line would focus on growth, but not via newbuild vessels.

Skou repeated the ambition of returning to growth “organically and inorganically”, even with the plan to separate the companies in the Energy division, which represented 25% of A.P. Moller-Maersk revenue in 2015.

“Thus, the Hamburg Süd acquisition will replace 15% of the 25%, and Maersk Line is winning market share,” the group said.

Any need to build new vessels in addition to the current orderbook was brushed away, promising a lower level of capital expenditure in coming years. “The industry doesn’t need any more ships and we don’t need to build in coming years,” Skou said.

The same also goes for APM Terminals, which “will turn its attention from growth led by capital expenditure to cost leadership and asset utilisation”.

The ROIC target for the integrated Transport and Logistics business was set at 8.5% “over the cycle, with an ambition to grow revenue,” the company said. “For the Energy division, the individual businesses will be managed for maximising shareholder value through active ownership until separation.”