CMA CGM and CEVA use crisis to recover

The performance of CMA CGM over the past quarter, indeed the past six months, has been similar to most of the other large container shipping lines. Revenue was down year-on-year by 9% in the second quarter but Earnings Before Interest, Depreciation and Amortisation (EBITDA) jumped by 26.3% to $1.2bn and the operating profit margin doubled.

Of course, the basis of this improved performance was lower costs. Despite some evidence that CMA CGM has been less aggressive in the rationalisation of its operational fleet, the company reported a year-on-year 13% fall in the number of containers carried. Yet still, costs per TEU fell by 4.6%, although a major part of this fall was the effect of lower fuel prices. Never-the-less, this does imply noticeably lower levels of available capacity.

The other part of CMA CGM’s performance, is, of course, CEVA. Here things were less dramatic. Revenue did fall over the quarter by 4.7%. Yet EBITDA rose by 4.1%. CEVA’s accounts have long been complex and debt still remains an issue, however, on the face of it CEVA appears to be recovering its health.

Slightly surprisingly CMA CGM ascribed the success of CEVA to “the strong airfreight business thanks to air charters compensating the absence of regular capacity. Ground activities progressed further on their recovery”, suggesting that CEVA has been agile in exploiting market opportunities. The company said, in contrast, its sea freight forwarding business was weak. Less surprisingly the contract logistics business was “penalized during the quarter by the pandemic, which led to the closure of many sites”.

As a result of the performance of both businesses, the financial position of CMA CGM has improved noticeably. In contrast to the first half of 2019 CMA CGM is in the black by $195m, although debt servicing is still a substantial $667m for the period.

CMA CGM’s management has very optimistic for the immediate future, commenting that “the recovery in container shipping seen since April should continue during the third quarter of 2020 for most routes, driven by faster recovery in the consumption of goods than of services, the growth of e-commerce, and usual seasonality. These factors recently drove freight rates to historically high levels, in particular on transpacific routes where the Group is the world leader”. If true, this will put the company on a new trajectory and its acquisition of CEVA may look to be sustainable.

Source: Transport Intelligence, September 8, 2020

Author: Thomas Cullen