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Robert.Jervis_43227 Feb 09

A.P. Moller - Maersk reports record earnings for 2021 and guides for a strong 2022

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Also announces the intended acquisition of Pilot Freight Services, a leading U.S.-based first, middle and last mile solutions provider
A.P. Moller - Maersk (Maersk) has delivered record earnings for 2021, which was an exceptional year with focus on mitigating supply chain risks for customers while strengthening their integrated logistics offering. In 2021, revenue was up 55pct. to USD 61.8bn, EBITDA tripled to USD 24bn and free cash flow was USD 16.5bn, allowing the company to make strategic long-term investments into decarbonisation and logistics growth, combined with strong cash distribution to shareholders.

“Exceptional market conditions led to record-high growth and profitability in A.P. Moller - Maersk, however it also led to supply chain disruptions and severe challenges for our customers. We spent tremendous efforts in mitigating bottlenecks by expanding capacity across Ocean, improving productivity in Terminals and growing our global logistics footprint. We will continue these efforts as we see the current market situation persist into Q2. At the same time, we see conversations with customers change from procurement-led freight rate discussions to more holistic conversations on how we truly partner to keep supply chains running end-to-end. This clearly validates our strategy,” says Søren Skou, CEO of A.P. Moller - Maersk.

The company continued to strengthen its Logistics & Services business throughout 2021, outperforming the market growth with a revenue increase of 41pct. to USD 9.8bn, whereof 62pct. of the 34pct. organic growth came from cross selling to our Top 200 Ocean customers. Furthermore, six businesses were acquired within air, e-commerce, warehousing and fulfillment, and 85 new warehouses opened, improving capabilities and footprint across the product portfolio.

Within Ocean, profitability increased substantially with a revenue of USD 48.2bn in 2021, compared to USD 29.2bn previous year, driven by high freight rates due to the ongoing impact from the pandemic that has resulted in disruptions of global supply chains. To increase predictability and reliability, capacity was increased both for equipment and vessels, and significant effort was made to prioritise contracted volumes, with long-term contracts now representing 65pct., up from 50pct. a year ago.

Also in Terminals, profitability continued to grow in 2021 driven by strong volumes performance and storage income. With a focus on increased efficiency, utilisation and improving quality through digitisation and automation, return on invested capital (ROIC) increased to 10.9pct. which is above the target of minimum 9pct.

During the year, the use of digital solutions and services grew significantly, with turnover on Maersk.com reaching USD 38bn. Traffic increased 15pct. as customers continued to adopt digital solutions even further. Also, bookings via mobile app increased more than 15-fold.

“As Maersk has significantly improved the financial performance and progressed on the strategic journey to become an end-to-end logistics company, we have also been able to increase returns to our shareholders. For 2021, the proposed dividend amounts to a truly exceptional DKK 47bn,” Søren Skou says.

A.P. Moller - Maersk expects the current market situation to continue into Q2 2022 with a normalisation to occur early in the second half of the year. Based on these assumptions A.P. Moller - Maersk expects for full year 2022:

•        Underlying EBITDA of around USD 24bn
•        Underlying EBIT of around USD 19bn
•        Free cash flow (FCF) of above USD 15bn

Ocean is expected to grow in line with global container demand, which is expected to grow 2-4 pct. in 2022, subject to high uncertainties related to the current congestion, network disruptions and demand patterns.

For 2022-2023, the expectation for the accumulated CAPEX is USD 9.0-10.0bn, driven by intensified growth in Logistics & Services and ESG investments. The CAPEX guidance for 2021-2022 of USD 7bn is maintained.

Maersk has also announced the intended acquisition of Pilot Freight Services (Pilot), a leading U.S.-based first, middle and last mile as well as border crossing solutions provider, specializing in the big and bulky freight segment in North America for B2C and B2B distribution models, from ATL Partners, a sector-focused Private Equity firm in New York and British Columbia Investment Management Corporation (BCI), one of the largest institutional investors in Canada.
 
With the intended acquisition of Pilot, Maersk will extend its integrated logistics offering deeper into the supply chain of its customers. It will complement the earlier acquisitions already made to provide integrated logistics solutions in North America, especially with Performance Team (PT) (B2B warehousing and distribution) and Visible SCM (e-commerce warehousing and parcel distribution). Pilot will be adding specific new services within the fast growing big and bulky e-commerce segment, thus increasing cross-selling opportunities. It will also create significant cost synergies by leveraging capabilities across the different parts of service solutions.

“In Maersk we continue our path to develop truly integrated logistics offering for our customers, offering them better visibility, more control and resilience in their supply chains. Adding the capabilities of Pilot is especially important because it will allow us to create more exciting solutions for our customers and support them through the acceleration of the migration towards e-commerce. Furthermore, it will open significant cost synergy opportunities by leveraging the capabilities we have already developed in the network,” says Vincent Clerc, CEO of Ocean & Logistics, A.P. Moller - Maersk.
 
Throughout the unfolding of the pandemic, macro trends in the supply chain have accelerated, such as the increased shift towards e-commerce, especially for big and bulky items. This important shift will continue and necessitate the creation of new distribution networks and solutions to support companies adapting their supply chains to these new consumer demands. The transition goes for numerous B2C vertical segments such as retail, home furnishings and consumer electronics as well as B2B segments such as aerospace, automotive and healthcare.
 
Pilot operates a North American facilities-based transportation network of 87 stations and hubs through which freight is transported and distributed to end customers. The company uses mainly 3rd party providers of trucking and has access to controlled capacity which facilitates a high quality first, middle and last mile service offering. The scope encompasses full truckload (FTL) and less-than-truckload (LTL) for both B2C and B2B distribution including heavy and bulky shipments with white glove service with a focus on expedited and time definite services.

The combined Pilot and Maersk scale will offer customers app. 150 facilities in the U.S., including distribution centers, hubs and stations. This landside logistics network depth combined with Maersk’s international presence will create tremendous new, end-to-end supply chain performance capabilities. Pilot’s acquisition of American Linehaul Corporation in July 2021 was instrumental in creating this leading market expertise in middle mile, LTL expedited capabilities.

“By investing in first mile, middle mile and last middle and integrating them we meet a clear customer demand. This acquisition will add even more expertise and supply chain capacity to customers facing capacity constraints and multiple handoffs with providers in the B2C and B2B space. After completion of this transaction, we will be able to help them install stronger, more integrated supply chains with better visibility and better outcomes for consumers. We look forward to welcoming the Pilot team aboard the A. P. Moller - Maersk family,” said Narin Phol, Regional Managing Director at Maersk North America.

Pilot Freight Services CEO, Zach Pollock, added “We are looking forward to joining Maersk. This is the ideal outcome for our customers, company and employees who will be able to tap into the ambitious transformation of simplifying and integrating global supply chains which will enable us to perform on a larger stage.”

The transaction price is USD 1.68bn equivalent to an enterprise value of USD 1.8bn post IFRS-16 lease liabilities, reflecting a pre-synergy EV/EBITDA multiple of 13.8x based on an estimated post IFRS-16 EBITDA of approximately USD 130m for full-year 2021. The acquisition is subject to regulatory review and approval which is expected to be obtained by Q2 2022. Both companies will operate as independent businesses and run their operations as usual until that time.
 
Established in 1970 and headquartered in Glen Mills, Pennsylvania USA, Pilot is a leading U.S.-based last mile and full mile solutions provider with 87 locations throughout North America, and offices in Spain and The Netherlands with more than 2,600 full-time employees and a flexible pool of employees to support seasonal volume increases.

The company specializes in Business-to-Consumer (B2C) home delivery for big and bulky goods (>70 kgs/155 lbs, non-conveyable) in the U.S. and Business-to-Business (B2B) that is high value, time sensitive freight, requiring high levels of service with last mile and full mile solutions, including in-home installations