CEO: Damco back in black next year

Damco's the top line has improved during the past year, though the company's bottom line did not follow in step. But it will next year, where CEO Hanne B. Sørensen expects a profit, she tells ShippingWatch.

Damco has not been the Maersk Group's biggest jewel in recent years. The logistics group has suffered a deficit that can be traced all way back to the separation from Maersk Line in 2009. But this development will now be turned around.

"We'll make a profit next year. That's absolutely our goal," Damco CEO Hanne B. Sørensen tells ShippingWatch.

"Our challenge has been the fact that while Damco has generally been an amazing growth story for the past five years, where the top line has grown 50 percent, the costs have not seen the same development in the sense that they've been too high. Other companies would envy our growth, but it's not so unusual that when you go through the kind of journey we've been on, there's a cost to be paid on the bottom line," says Hanne B. Sørensen.

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She arrived at Damco in January this year from Maersk Tankers, where she also served as CEO, and she has since then been busy implementing the plan laid out for Damco: A restructuring process named "One Damco."

Restructuring plan

One Damco has consisted of several initiatives in the company, which has more than 11,000 employees. First of all, a new system for freight forwarding operations which has so far been implemented with 80 percent of the system's users, alongside a reduction of the number of operating offices, from 315 to 50, of which 47 have now been established.

The company has also introduced a lean management strategy aimed at strengthening Damco's efficiency and quality on the long term, and thus also generally strengthening the company's business from eight geographic regions to instead four, due to work force considerations.

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All of this might sound like easy management talk, but the process has also cost 550 jobs and is expected to bring Damco savings of USD 35 million annually from cost reductions going forward.

"The operation has taken a very big hit, but it's been necessary. We have big global customers that need to be treated in the same manner no matter where in the world they contact us. This means we've hard to train our operation hard. It's something we're spending a lot of time on right now, but I don't think this is unusual for these kind of projects," says Hanne B. Sørensen.

Low growth in sea transports

Damco's business areas include supply chain management, freight forwarding - which covers air and sea transports - warehousing and distribution, customs brokerage and other local services.

"In air and sea transports we're experiencing massive competition from our competitions across the board. This means that we've elevated the freight forwarding products up to where they answer directly to me, and as such we've strengthened our organization in that regard," says Hanne B. Sørensen.

Supply chain management activities represent the company's biggest business, and these activities have also been thoroughly scrutinized by the new CEO. The segment is experiencing the biggest growth by far at Damco, at 13 percent last year and what looks like 12 percent this year.

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"We have a major customer portfolio and an increasing number of companies are looking at us positively. There's no way of knowing if this growth will continue, but we believe that we'll be able to maintain a high growth rate for a long time, as we have a good product," she says.

However, the growth in Damco's freight forwarding business is not quite in line with the market growth, which reached three percent of the first half of this year.

"The good thing here is that we can do something about the areas where we're not performing very well. We're not going to sit around and wait for the market, rather we're in a position where we can bring a new project on board," says Hanne B. Sørensen.

Customers in the various areas include Nike, Adidas, Walmart and Schneider Electric. Damco is biggest in the two segments the company refers to as retail and lifestyle, but Damco is looking to grow in industrial - which for instance includes products from Schnerider Electrical - in technology, with customers such as HP, and in chemicals.

One Damco is hard work

The CEO explains that she, since arriving at Damco, has not experienced major challenges or surprises.

"There's a lot of work to do at Damco. Sometimes I wish that things would happen faster than is actually the case, but we're many employees and that means that things take time. A very positive thing is that we have many very talented employees. I'm super optimistic, it's hard work and there's a lot of it, but I'm sure that things will work out well," says Hanne B. Sørensen.

Damco is part of the Maersk Group's fifth core business unit APM Shipping Services. Damco had a revenue of USD 3.2 billion in 2013 and suffered a deficit of USD 31 million.

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