Profitable in 2012, CMA CGM expects same in 2013

Wednesday, March 20, 2013

Michel Sirat, chief financial officer of CMA CGM, said 2012 was “a very satisfactory year in terms of profitability.”
The French liner company is anticipating similar profitability despite a poor economy in Europe and supply-demand equilibrium, which he said is still “a bit shaky” for the container shipping industry.
In a telephone press conference where he commented on the company’s financial results released Tuesday, Sirat said “You can have relatively weak conditions inbound Europe, and still on average have what we had in 2012, which is a satisfactory year from a profitability standpoint and from a volume growth. We do not expect conditions in Europe in 2013 to be worse from 2012.”
Tuesday, CMA CGM said it had a net profit of $361 million in 2012, compared to a $5 million loss in 2011, and EBITDA (earnings before interest, taxes, depreciation, and amortization) of $1.3 billion in 2012, compared to $729 million in 2011.
Sirat noted that while the year was incredibly volatile from a freight rate standpoint, CMA CGM’s revenues increased 7 percent to $15.9 billion on a 6 percent growth in volume. He added volumes rose 4.5 percent on East-West lanes, and 8.5 percent on North-South routes.
“Europe is important to us, but it is not any more important, or the bulk of our profitability. Far from it,” he said.
Sirat said one of the benefits of being a large carrier is that the company can take advantage of profitability in various trades as they move around the world from year to year, noting, for example, in 2012 the company had strong results for services to Africa. In 2013, he said the company expects growth in services to Africa, Latin America, Russia, and some parts of Europe and the United States.
He said the company is seeking higher rates in the Asia-Europe trade and noted they have improved from $1,000 per TEU at the end of 2012 to around $1,400 per TEU now.
Sirat said CMA CGM was not predicting a stable trend in any trade.
“We think we are going to see a little bit of a repeat of 2012 with less volatility. On many trades you will see regular GRIs (general rate increases) being eroded over time and then being reannounced, reinforced, etc. So that is something we expect to see on some major trades,” he said.
He said the company expects a very good year on most North-South trades and CMA CGM sees “relatively healthy” demand for its services in the United States, but it was still too early to predict profitability or freight rates because of capacity being added in the transpacific. CMA CGM has no plans in the short term to change services of add capacity on trades to the United States.
Sirat said the company was successful in reducing costs by $800 million, double the goal it had set for itself. He said CMA CGM was able to reduce bunker cost per TEU by 12 percent and reduced charter expenses by $200 million.
He explained the company is improving its balance sheet by selling a 49 percent stake in Terminal Link for 400 million euro to China Merchants Holdings International, arranging equity injections of $100 million equity injection from the Yildirim Group and $150 million from the French state investment company Fonds Stratégique d’Investissement, and restructuring debt with a bank group.
He said the company reduced debt from $5 billion to $4.6 billion in 2012 and plans to bring it down to $3.5 billion by the end of 2013. - Chris Dupin