Søren Skou: "We're now back as a growth company"

After a couple of years focused on divestments and adjusting the future container business, CEO Søren Skou says Maersk is now once again a growth enterprise. 2019 in particular will prove if he is right.

Photo: Ritzau Scanpix/Mads Claus Rasmussen

Maersk's last couple of years have largely been focused on divestments, closures and the streamlining of its business units.

First up was Maersk Tankers. Then Maersk Oil, and next up is Maersk Drilling, which becomes the last major oil business to be spun off, effectively ending the Danish company's reign as a shipping and oil conglomerate.

But the Maersk Executive Board, headed by the trio of CEO Søren Skou, COO Søren Toft and APM Terminals CEO Morten Engelstoft, has also spent countless hours shaping the new Maersk's container business.

We're now once again a growth company and we expect to reach a revenue of USD 40 billion


APM Terminals has sold terminals and booked considerable depreciations on its terminals. Maersk Container Industry has closed its factory in Chile, resulting in an impairment of USD 140 million. And the group had to work to reap the rewards of its acquisition of Hamburg Süd, which this year alone contributed that exact figure, USD 140 million.

All in all, Skou believes that a first milestone has been reached, and that Maersk can now once again be described as a growth enterprise, with a new revenue target of USD 40 billion.

"We're now once again a growth company and we expect to reach a revenue of USD 40 billion. Of this, Hamburg Süd contributes half, and the rest will come organically," said Skou at a press conference at Maersk's Copenhagen headquarters Friday.

Ocean boosted result

The growth will first and foremost come from the areas outside of the core Maersk Ocean business, which mainly covers Maersk Line and the biggest ports under APM Terminals. In other words, Maersk wants its customers to buy more services, since they are already doing business with the liner company or use one of its ports.

This process was launched already back when Maersk created its future business unit Transport & Logistics. The shipping companies that call in the ports are encouraged to use Maersk's towage company Svitzer, competitors should preferably buy containers from Maersk Container Industry – especially if they also use Damco as freight forwarder.

My optimism is built on a future scenario, where in 2019 in particular, we will experience a much better balance. Partly because new vessels will arrive on the market


Add to this the new digital businesses, for which Maersk is looking to bring as many stakeholders on board as possible.

The Ocean unit accounts for 70 percent of the revenue, but this will look different going forward, so the extra services account for a bigger share, though Skou declines to name a specific number or a target.

Could you not worry that the Ocean business is being overtaken by competing liner companies, especially from Asia, which are investing big-time in growth?

"No, I don't. Our ambition is to maintain our current market share of close to 20 percent. This gives us the economy of scale we need. We won't get more economy of scale if the market share increases to, for instance, 22 or 23 percent," said Skou.

Focus on earnings

In addition to the objective to grow organically within the non-core-business, the company equally hopes to deliver strong earnings, which Søren Skou will now present. Maersk is not yet there, as can be seen from its quarterly report.

2018 has seen a mix of freight rates that are sitting low and a rising bunker price which is holding the celebrations back.

On the other hand, Skou is pleased that Maersk has been able to generate a significant reduction in costs, something analysts have long called a difficult task.

Looking at the development in supply and demand, however, there do not appear to be compelling arguments available for Skou or competitors, as the recent quarters have not at all developed as the industry had hoped.

"But it is coming. My optimism is built on a future scenario, when in 2019 in particular, we will experience a much better balance. Partly because new vessels will arrive on the market," he pointed out.

"Maersk is back on track"

One key insider within Maersk and the global container market is Lars Jensen, CEO of Seaintelligence Consulting. He believes that the best description of the report is that "Maersk is back on track," and that things are going better for the carrier compared with several of its competitors.

"On operational earnings [EBITDA, -ed.] they are performing a little better than Hapag-Lloyd, which has done okay in this context, as the market is really bad and everyone is losing money. But relative to how the industry is, they have done quite well," says Lars Jensen to ShippingWatch.

There are not completely back where they were in the second quarter of 2017, but they have clearly improved relative to the first quarter and you can see that one off costs, besides the influence of fuel costs, have improved rather significantly," he says.

He points out that Maersk is in the same process as Hapag-Lloyd, which is concerned with improving earnings ahead of buying their way into growth via acquistions or building more vessels. "This is in direct contrast to, for example, Yang Ming and Hyundai, which have grown quickly but which have also been loss-generating," he says.

English Edit: Daniel Logan Berg-Munch & Lena Rutkowski

Maersk Ocean strained by dire container market 

Maersk will spin Drilling off and list it separately 

Maersk lowers expectations for full-year result 

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