During the third quarter A.P. Moller - Maersk improved profitability across the business and delivered strong free cash flow, despite the negative impact on global economies from the COVID-19 pandemic. The company grew earnings before interest, tax, depreciation and amortisation (EBITDA) 39 pct. to USD 2.3bn with revenue decreasing 1.4 pct. to USD 9.9bn. The performance increase was based on a stringent costs control, agile capacity management, strong focus on customer offerings with further traction in uptake of digital services, and some benefit from a sequential demand recovery compared to the second quarter.

 “Despite COVID-19 negatively affecting activities in most of our businesses, our disciplined execution of the strategy led to solid earnings and cash flow growth in Q3. At the same time, we managed to further integrate and simplify the organisation in Ocean & Logistics, we closed the acquisition of KGH Customs Services and continued the integration of Performance Team, supporting our strong financial performance in Logistics & Services,” says Søren Skou, CEO of A.P. Moller - Maersk.

The main performance driver this quarter was Ocean which, despite decreasing volumes of 3.6 pct. improved profitability by USD 511m to USD 1.8bn, reaching an EBITDA margin of 25.4 pct. on the back of a continued agile capacity deployment, lower costs and a temporary spike in short-term freight rates due to a sudden demand pick-up on some routes.

Cash return on invested capital (CROIC), last twelve months, increased from 9.9 pct. to 13.9 pct.  due to stronger cash flow from operating activities and lower gross CAPEX. Return on invested capital (ROIC), last twelve months, from 3 pct. to 5.9 pct. as earnings improved and invested capital declined slightly.

The free cash flow generation of USD 3.0bn in the first nine months of 2020, allowed the company to return cash to shareholders, finance acquisitions and reduce debt with net interest-bearing debt decreasing further to USD 10.8bn by the end of Q3 compared to USD 11.7bn by the end of 2019. 

Søren Skou adds:

Throughout the pandemic, our main priorities have been keeping our employees safe, keeping our global network and ports operating to serve our customers and supporting the societies we are part of. This continues to be our focus as demand has begun to partially recover. Our progress in earnings and in our transformation allows us to look confidently past the extraordinary 2020, however we remain well aware of the high level of uncertainty the pandemic and associated lock downs continue to pose in the coming quarters.

Share buy-back programme

Given the strong performance and cash generation, the Board of Directors has decided to initiate a new share buy-back programme of DKK 10bn (approximately USD 1.6bn) over a period of up to 15 months, the first tranche of which (USD 500m) is expected to start in December. The remaining part of the share buy-back is subject to shareholder approval at the next Annual General Meeting in March 2021.

Guidance for 2020 and CAPEX

Given the current momentum across the business, A.P. Moller - Maersk expects, as announced on 17 November 2020, EBITDA before restructuring and integration costs in the range of USD 8bn to USD 8.5bn from previously between USD 7.5bn to USD 8bn as announced on 13 October 2020.

The global demand growth for containers is expected to contract by 4-5 pct. in 2020 due to COVID-19.

Organic volume growth in Ocean is now expected to be slightly below the average market growth from previously in line with or slightly below the market.

For 2020, the guidance on capital expenditures (CAPEX) is expected to be USD 1.5bn, and with the expectation of a high cash conversion (cash flow from operations compared to EBITDA).

For 2021-2022, the accumulated guidance on capital expenditures is expected to be between USD 4.5bn and USD 5.5bn with the expectation of a high cash conversion.

Highlights Q3

Revenue

USD million 2020 2019
USD million

Manufacturing & Others

2020

324

2019

339

USD million

Terminals & Towage

2020

976

2019

999

USD million

A.P. Moller - Maersk consolidated - continuing operations

2020

9,917

2019

10,055

USD million

Logistics & Services

2020

1,891

2019

1,702

USD million

Unallocated activities, eliminations etc.

2020

-392

2019

-408

USD million

Ocean

2020

7,118

2019

7,423

EBITDA

USD million 2020 2019
USD million

Ocean

2020

1,805

2019

1,294

USD million

Manufacturing & Others

2020

48

2019

39

USD million

Unallocated activities, eliminations etc.

2020

-15

2019

-83

USD million

Logistics & Services

2020

131

2019

91

USD million

Terminals & Towage

2020

328

2019

315

USD million

A.P. Moller - Maersk consolidated - continuing operations

2020

2,297

2019

1,656

CAPEX

USD million 2020 2019
USD million

Ocean

2020

147

2019

209

USD million

Manufacturing & Others

2020

5

2019

7

USD million

Unallocated activities, eliminations etc.

2020

1

2019

-2

USD million

Terminals & Towage

2020

104

2019

106

USD million

A.P. Moller - Maersk consolidated - continuing operations

2020

280

2019

343

USD million

Logistics & Services

2020

23

2019

23

Sensitivity guidance

A.P. Moller - Maersk's financial performance for the full-year 2020 depends on several factors and is subject to uncertainties related to COVID-19, bunker fuel prices and freight rates combined with the weaker macroeconomic conditions and other external factors. 

Based on the expected earnings level and all else being equal, the sensitivities for the rest of 2020 for four key assumptions are listed in the table below:

Factors Revenue Effect on EBITDA
Rest of year
Factors

Bunker price (net of expected BAF coverage)

Revenue

+/- 100 USD/tonne

Effect on EBITDA
Rest of year

+/- USD 0.1bn

Factors

Container freight rate

Revenue

+/- 100 USD/FFE

Effect on EBITDA
Rest of year

+/- USD 0.3bn

Factors

Foreign rate of exchange (net of hedges)

Revenue

+/- 10% change in USD

Effect on EBITDA
Rest of year

+/- USD 0.0bn

Factors

Container freight volume

Revenue

+/- 100,000 FFE

Effect on EBITDA
Rest of year

+/- USD 0.1bn

About A.P. Moller - Maersk.

A.P. Moller - Maersk is an integrated container logistics company working to connect and simplify its customers’ supply chains. As the global leader in shipping services, the company operates in 130 countries and employs roughly 80,000 people.
 

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