Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- A P Moller Maersk AS (AMKBF, Financial) reported a significant uptick in profitability with an EBITDA of $4.8 billion and an EBIT of $3.3 billion for the third quarter of 2024.
- The logistics and services segment showed recovery with an EBIT margin increase to 5.1%, driven by productivity and cost management.
- The terminal business demonstrated resilience with an EBIT of $338 million, supported by good volumes and top-line growth.
- The company upgraded its full-year guidance, expecting an EBIT between $5.2 billion and $5.7 billion, and a minimum free cash flow of $3 billion.
- Strong market demand and successful customer wins contributed to an 11% organic growth in logistics and services, surpassing market growth.
Negative Points
- The situation in the Red Sea remains a concern with high threat levels, impacting operations.
- Higher network costs were incurred due to longer sailing routes around the Cape of Good Hope, leading to increased bunker consumption and charter costs.
- The logistics and services segment, while improving, still faces challenges in achieving the target EBIT margin of above 6%.
- The transition to the new Gemini network poses potential risks of disruption during the initial phase.
- The company suspended its share buyback program due to uncertainties in the ocean market, indicating cautious capital allocation.
Q & A Highlights
Q: Do you see larger deals as something you have to do in logistics and services, and do you have the capability to execute and integrate them?
A: Vincent Clerc, CEO: M&A will continue to be part of our roadmap, but our approach is organic growth first. We are satisfied with the 11% growth this quarter and will continue to add capabilities. We prefer larger bolt-on acquisitions that are meaningful for strategic progression.
Q: Could you provide some insight on share buybacks and when they might be reinitiated?
A: Patrick Jany, CFO: We suspended share buybacks due to the uncertainty in the ocean market. We will consider reinitiating them once we have a clearer view of the market's development, particularly for 2025. Our priority is organic growth and capital allocation, and we have a history of returning excess cash to shareholders.
Q: What type of assets and regional exposure are you looking for in M&A?
A: Vincent Clerc, CEO: We focus on three lenses: regional, vertical, and specific capabilities. We aim to reinforce our offering in Europe and move towards industrial verticals. We also look for capabilities we don't currently offer but are important for our customers.
Q: How do you plan to achieve 90% reliability with the Gemini network, and what actions will be taken if reliability is less than expected?
A: Vincent Clerc, CEO: The Gemini network will be modular, reducing the impact of disruptions. We have integrated ships and terminals, and aligned operational philosophy with our partner. We have tested extensively and are confident in achieving 90% reliability.
Q: How sustainable is the current demand strength, and is it driven by any temporary factors?
A: Vincent Clerc, CEO: Inventory levels in the US are normal, suggesting no large pull-forward. Consumption supports current demand, and we see no signs of a major correction. In Europe, consumer-facing verticals are stable, though industrial verticals show some inventory increase.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
