CMA CGM announces loss as volumes, rates still falter

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The CMA CGM GEORG FORSTER in Hamburg

The CMA CGM GEORG FORSTER in HamburgGlobal container shipping company CMA CGM experienced a loss of US$268 million in the third quarter of the year, swinging sharply from a $51 million consolidated net profit in the same period a year earlier.

Not including expenses from the company’s September acquisition of Neptune Orient Lines (NOL), parent of APL, the French liner’s loss amounted to $202 million, its third straight quarterly deficit.

Without NOL, volumes carried in the third quarter totaled 3.2 million TEUs, down 2.7% year-on-year, attributed to the group’s strategy of focusing on “high contribution freight.” Including NOL’s volumes, the total increased nearly 36% to 4.5 million TEUs.

Describing the market environment as “shaped by continued pressure on freight rates,” the carrier said in a statement that average revenue per TEU, excluding NOL, was down 13.9% from third-quarter 2015, but up 3.8% on second-quarter 2016, bringing an end to a downward trend that had lasted for more than a year.

This raised revenue to $4.47 billion, an increase of nearly 34%.

Core EBIT margin stood at a loss of 1.9%, representing a slight improvement on the negative 2.3% reported in the second quarter of 2016.

“CMA CGM’s operating performance, although unsatisfactory, was among the most resilient in the industry thanks to operating discipline, which notably involves keeping a tight rein on costs and being selective about the freight carried,” said the company.

Cost control measures helped to drive a year-on-year reduction in unit costs of 9.7%, excluding NOL, owing to the combined impact of lower bunker prices and strict expense management.

During the quarter, CMA CGM was able to pay in advance the full acquisition loan for NOL on two sale and lease-back transactions completed on November 16 that amounted to $880 million and involved 11 vessels.

The process of integrating NOL into the group continued during the quarter and delivered its first commercial and operating results, with more than 20 new shipping alliances set up between APL and CMA CGM and the deployment of a synergy and rationalization program.

The full reorganization of the APL and CMA CGM lines will be completed with the deployment of the Ocean Alliance next April, said the statement.

The group is pushing ahead with the roll-out of Agility—its global plan to improve operating performance launched on July 1, 2016—in line with the savings objective for year-end 2017.

CMA CGM and its partners Cosco Container Lines, Evergreen Lines, and Orient Overseas Container Lines announced the details of their Ocean Alliance operating partnership in Shanghai on November 3.

“The biggest operating agreement ever signed in the shipping industry, the alliance will offer 40 services on East-West routes and provide its customers with an unrivalled level of service,” the group stated.

Shipping companies have continued to take measures to adjust the deployed capacity, resulting in a better alignment between effective capacity and volumes carried. Freight rates have improved slightly but remain nonetheless at historic lows, said the company.

“Against this backdrop, the group will continue to focus on the integration of APL, additional cost savings and the quality of service provided to its customers,” it declared.