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Robert.Jervis_43227 Nov 02

A.P. Moller - Maersk presents a record Q3 and strengthens global Air Freight offering

maersk
Announces intended acquisition of Senator International
A.P. Moller - Maersk delivered record earnings in Q3, 2021. Revenue grew 68 pct. to USD 16.6bn in Q3, EBIT was up almost five times to USD 5.9bn and EBITDA tripled to USD 6.9bn. Return on invested capital (ROIC) increased to 34.5 pct. for the past 12 months.

“In the ongoing exceptional market situation, with high demand in the US and global disruptions to the supply chains, we continued to increase capacity and expand our offerings to keep cargo moving for our customers. Our integrator strategy is key to supporting our customers’ end-to-end logistics needs by designing a more stable Ocean business, strongly growing our logistics offering and relying on automated and efficient terminals,” says Søren Skou, CEO of A.P. Moller - Maersk.

In Ocean, results in Q3 were driven by high freight rates in an exceptional market situation with revenue almost doubling to USD 13.1bn from USD 7.1bn, EBITDA increased by USD 4.4bn to USD 6.3bn and EBIT improved by USD 4.4bn to USD 5.3bn. To further guarantee reliable transportation, the share of long-term contracts was further increased, now accounting for 64 pct. of long-haul volumes compared to 50 pct. a year ago.

Logistics & Services continued the positive momentum with revenue increasing 38 pct. to USD 2.6bn whereof 33 pct. was organic. The growth was driven by strong activity increase across all products and strong commercial synergies to Top 200 Ocean customers. EBIT increased to USD 194m from USD 100m in same quarter last year and with an EBIT margin of 7.5 pct. well ahead of our mid-term target of above 6 pct.

Gateway Terminals also had a strong Q3 with revenue growing to USD 1bn in Q3 from USD 816m last year as volumes increased by 9.6 pct. mainly coming from North America, Latin America and Asia as opening times were expanded and capacity utilization increased. Together with underlying efficiency improvements, Terminals achieved a ROIC of 10 pct.

Søren Skou adds:

“As a natural next step in expanding our multi-logistics offering, we have announced the acquisition of Senator International and the ordering of additional aircraft, building on our existing Air Freight capabilities and adding even more flexibility to our customers’ supply chains. Given the significant progress of our transformation into a logistics integrator and the continued commitment to shareholder returns, the Board of Directors has decided to extend the current share buy-back programme by an additional USD 5bn over the years 2024 and 2025.”

Guidance

A.P. Moller - Maersk reiterates the guidance for the full-year as announced on 16 September 2021 with an underlying EBITDA in the range of USD 22 - 23bn, an underlying EBIT in the range of USD 18 – 19bn and a free cash flow of minimum USD 14.5bn.

Ocean is now expected to grow below the global container demand, which is now expected to grow 7-9 pct. in 2021 (previously 6-8 pct. in 2021), subject to high uncertainties related to the current congestion and network disruption.

For 2021-2022, the expectation for the accumulated CAPEX remains unchanged at around USD 7bn.

The current trading conditions are still subject to a higher-than-normal uncertainty due to the temporary nature of current demand patterns, disruptions in the supply chains. However, current conditions are expected to continue at least into the first quarter of 2022, resulting in an EBITDA for Q1 2022 in line with Q4 2021.
 
Air Freight offering

Air freight is a crucial enabler of flexibility and agility in global supply chains as it allows companies to tackle time-critical supply chain challenges and provides transport mode options for high value cargo. To better cater to customers´ needs, Maersk aims to increase its presence in the global air cargo industry.

To accelerate its product offering which integrates Logistics, Ocean, Rail and Air and expand its global air network, Maersk intends to acquire Senator International, a company with a renowned operational air freight platform of own controlled capacity and operations across Europe, Asia, South Africa, and America.

In addition, Maersk is purchasing two new B777F and leasing three B767-300 cargo planes. To operate and manage this added capacity, the cargo airline Star Air – the internal air cargo operation of Maersk established in 1987 - will become a key vehicle supporting Maersk’s logistics offering. 
 
“As a global provider of integrated logistics, Maersk is improving the ability to provide a one-stop-shop and end-to-end logistics capabilities to our customers. We have strengthened our integrated logistics offering through E-commerce logistics acquisitions, tech investments, expanding our warehouse footprint and, as a natural next step, we are now ramping up our air freight capacity significantly and creating a broader network to cater even better for the needs of customers,” explains Vincent Clerc, Executive Vice President and CEO of Ocean & Logistics, A.P. Moller – Maersk.
 
Senator has built a renowned airfreight operation centered around own controlled capacity using nineteen weekly flights across its network. Senator operates a significant part of their business through a dedicated air bridge with own controlled capacity and ensuring a high service level for its customers. This focus on own controlled capacity is highly aligned with Maersk´s air freight strategy.

“Founded by my father Uwe Kirschbaum in 1984, Senator has grown to a sizable global freight forwarder. Our employees have always delivered first-class services to our valued customers. Senator’s own controlled air product started in 2016 and has proven to be a success story. Our customers honor our reliability - particularly in challenging times during the pandemic. By joining Maersk, we strongly believe that we will be able to deliver an even broader portfolio with own controlled air capacity as well as also in other modes of transportation. Senator´s customers and team will love it,” says Tim-Oliver Kirschbaum, CEO and shareholder at Senator.

The German company brings a technology advantage with its Cargo Wise One core operating platform, a cutting-edge yet easy-to-use single system which will accelerate the integration with Maersk’s Air and LCL (Less than Container Load) products.

The enterprise value of the transaction on a post IFRS 16 basis is approximately USD 644m which based on pro-forma adjusted 2021 EBITDA corresponds to a multiple of 8.0x. The transaction is subject to closing conditions including regulatory approvals and is expected to close in H1 2022.

Maersk’s ambition is to have approximately one third of its annual air tonnage carried within its own controlled freight network. This will be achieved through a combination of owned and leased aircraft, replicating the structure that the company has within its ocean fleet. The remaining capacity will be provided by strategic commercial carriers and charter flight operators.

Star Air, Maersk´s air operator 

As an in-house aircraft operator, Star Air will operate and maintain owned and leased aircraft for Maersk while continuing to operate air cargo for its current customers.

As an integral part of building the own controlled air capacity, Star Air has purchased two new B777 Freighters to be delivered by Boeing in 2024 and leased three B767-300 Freighters which will be operational next year through Cargo Aircraft Management, the leasing arm of ATSG.

“We are delighted to welcome Star Air to the Boeing family of 777 operators and we look forward to many years of partnership as they continue to grow their air cargo division. The market leading efficiency and incredible range of the 777 Freighter will provide Maersk the flexibility to profitably operate the airplane across its large air freight network while helping to deliver on its sustainability objectives,” says Ihssane Mounir, Boeing’s senior vice president of Commercial Sales and Marketing.

Achieving carbon neutrality is a strategic imperative for Maersk. On Air, Maersk will have similar ambitions as on Ocean, including forwarding business where the company is involved with carriers that offer SAF-based (Sustainable Aviation Fuel) solutions as well as own fleet, where Maersk is committed to explore carbon neutral fuels for the Star Air operated fleet of aircraft in line with IATA guidance