The shipping sector continues to suffer

The latest numbers from the French based container shipping giant CMA GGM were as to be expected. Although revenue was up by a third to €4.47bn for Q3, the big jump was driven by the acquisition of Neptune Orient Lines (NOL) earlier in the year. The underlying revenue picture saw a fall of 16.3%, whilst the underlying profit picture was worse with negative ‘core’ EBIT (Earnings Before Interest, Tax), a loss of €42m. Including the NOL contribution there was a loss of €82m. On a consolidated basis the quarter saw a loss of €268m.

Although container volumes rose strongly, driven by the NOL acquisition, on an underlying basis TEUs (Twenty Foot Equivalent Units) moved fell by 2.7% to 3.2m for the original CMA CGM vessels. This fall in volume was driven by attempts to focus on better yielding cargo. Despite this, revenue per TEU for the core CMA CGM business fell by 13.9% year-on-year, although the company said that it rose 3.8% quarter-on-quarter “bringing an end to a downward trend that had lasted for more than a year”. What has made the results somewhat better than they might have been was a focus on unit cost reduction which delivered a 9.7% improvement, along with lower bunker fuel costs.

The picture described by CMA CGM is hardly surprising, indeed the distress felt by other companies is likely to be more acute. For example, the Taiwanese government has confirmed a Wall Street Journal report that it is organising a US$1.9bn credit-line to the Taiwan based shipping-lines, Yang Ming Marine Transport Corporation and Evergreen Marine Corporation at an advantageous interest rate of 2.9%. It is also reported that the two lines had discussed merging their two businesses, however no decision had yet been taken.

Of course, all shipping lines, from CMA CGM, to Evergreen to Yang Ming have seen major increases in their capacity. The Wall Street Journal reported that Evergreen alone has 11 super post- panamax vessels with a capacity of 18,000 TEUs each still on order.

Source: Transport Intelligence, November 23rd 2016

Author: Thomas Cullen