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Moeller Maersk AMKBYupdate Aug. 19th, 2020 

This is not a recommendation or proposal to do anything. The data written in this article is not guarranteed. It is my private personal opinion. I`m not independing as I own a position of Moeller Maersk shares. 

Moeller Maersk is the world biggest shipping company with revenues of about 40bn $/yr, EBITDA 5 bn$, capex 2 bn$ not sufficient to keep the capacity(2019). Maersk moves about 18% of all containers world-wide and is considered a barometer of the global trade. Moeller Maersk was due to low shipping rates and high bunker fuel prices in its key business till q2 not profitable and is actually not profitable as well. It was till not long ago a conglomerate with an oil&gas business. This business was sold recently. The oil&gas drilling activities were put on the stock exchange separatly.  

Potential motivation to buy Moeller Maersk shares is a bet on a turnaound of the world economy and the specifically the container shipping market with higher freight rates hope sooner or more realistic later.  

Chances & Risks

MM managed to increase its profitablility despite of the corona rampage of the politicians. Revenues decreased, capex decreased. It is insufficient to replace the wear out of the ships. 

Moeller Maersk has 303 own ships plus 401 chartered ships in service (31.12.2019) but no new ships. Container ships have a lifetime of 20 - 25 years. That means it would require about 15 new ships/yr. to keep the actual capacity. 

The actual risk are the US trade sanctions against China. The main risk in the longer term is that countries like China support their shipbuilding and shipping business without considering profitability. 

Moeller Maersk aims to become a player in the logisitic market. There are already plenty of independent players in the market. Actually this division is not profitable! I do not think this move will become the most successful one. It would be more promising if MM would focus on an optimization of the shipping core business.   

A challenge for sea shipping are new emission control regulations as of 2020. These regulation are a cost burden for all players in the market. Maersk's key focus will be to use low sulfur fuels including blended ones that are compliant in all geographies," This does not imply that Maersk will not use scrubbers at all -- it plans to invest an overall $80 million in its scrubbers related initiative, Pedersen said (7).

Another risk is that Moeller Maersk as success in the core business is rare put the focus on green religious nonsense. Actually most articles about Moeller Maersk in Europa are about such nonsense (2). The target is to make MM COneutral by 2050. This is not an issue as it is easy to make promises for 2050. But Mearsk stated to have spent already 1 bn$ in the last 4 years on energy efficiency (8). It is to hope that it created savings > 1 bn$. I would rather appreciate if Moeller Maersk would focus on such opportunities as establishing LNG as bunker fuel. It would help to reduce costs and fullfill "environmental requirements (sulphur emissions)". Due to its size and the the operatorship of terminals and harbour equipment it is in the ideal position to establish a new fuel. 

It seems as well that MM did not realize the negative economic situation yet. MM tightens its ship recycling procedures that means not using the inexpensive recycling yards in Bangladesh(12). That means creating unnessecary costs while the unit is not yet profitable. 

All in all it seems as the MM management is acting in a world away from real life. It is to concentrate on the core business and make it profitable again.  

 

Data & Information (16)

Ships

                                        2019             2018

Own Ships                          307              303

Tonnage TEU mio.                2.21            2.13

New Build                            0                 6

Chartered Ships                   401             407

Tonnage  TEU mio.              1.92             1.88

 

Exchange rate 1 $ = 6.84 DKK (Feb. 11, 2020)

                                       2018    Q3/19      Q4/19        2019     Q1/20  Q2/20  Q3/20

Revenue mio. $                39257   10,050      9700        39000     9600   8997    9900

EBITDA/mio. $                               1656        1500         5712      1521   1697

Free Cash Flow (mio.$)                                  1100         6800      500     1051
 
EBIT (mio. $)                   409         737          342           1900      552     751
 
Capex mio$:                    3219                                       2035      300     362
 
Profit/Loss (mio. $):                       506          -61            509       209     427
 
Eps $/share                                     32          -3               25        10       21
 
 
CAPEX for 2020-2021 was expected to be USD 3.0-4.0 bn. for  both years! This was already before corona not sustainable! (2017 Capex 4050 mio. $)

 

 Business Segments (mio. $)

           Mio.$               Revenue                   EBITDA      EBITDA Margin       CAPEX

                           2019     2018        2019      2018      2019      2018        2019      2018              Ocean mio. $       28,418  28,366      4,356     3,782     15,3%    13.3%     1,172      2,279      Log. & Services     5,965   6,082        238         191        4%        3.1%      128          47        Term. & Tow.        3,894    3,772      1,107        998       28%        26%      530         556      Manu. & Others     2,172    2,787       205         163       9.4%      5.8%      204         358    Others                -1,559   -1,750      -194       -136                                      1        -21          Total                   38,890   39,257    5,712      4,998       14.7%    12.7%   2,035       3,219             

The terminals division is the only division that is really profitable. It depends indeed on the usage by the ocean division. Logistics that MM plans to become a big player is not profitable at all. Potentially it would make sense to get rid of the logistics. 

 

Dept (2018):                            8.7 bn$

Total assets (2019)                 55,399 mio. $ 

Dividend (paid 2019):               150  DKK

Total Shares                              Treasury                  Outstanding

10,756,262 A-shares                                    261705                                 10.494557

10,060,398 B-shares                                   1,046,749                                 9.013.649

Total                                                                                       19.508.206 July 21.  2020

 

 

Shareholders

                                                                            Share                     Votes

                                                                          Capital

A. P Møller Holding A/S, Copenhagen, Denmark      41.51%                  51.45%

A.P. Møller og Hustru Chastine Mc-Kinney

Møllers Familiefond, Copenhagen, Denmark            8.84%                    13.12%

Den A.P. Møllerske Støttefond, Copenhagen,

Denmark                                                             3.11%                     5.99%

 
 

Source Marketscreener (5)

Some News

2019/05/07 Maersk Supply Service has revealed that it will reduce its onshore organization. The company said it will cut its onshore costs by 30 percent “in response to the negative development in the oil and gas industry” (22)

2019/05/25  A.P. Moller-Maersk warned that rising U.S.-China trade tensions could cut container growth by as much as a third this year. "New tariffs can potentially reduce expected growth in global container volumes by up to one percentage point," from Maersk's current projection of 3% growth. Even if the U.S. and China reach a deal, "It won't be the end of the trade war," "We'll just see the U.S. turning its attention toward Europe, where there is an unresolved issue with German automakers and other things." (15)

The Maersk product tanker division increased revenues in 2018 to USD 647.0 million, the company recorded a loss before tax of USD 35.0 million and a negative free cash flow of USD 27.7 million(13)

Maersk Green Bullshit

Mearsk plans to let the Mette an 18,000 twenty-foot equivalent unit (TEU) on a return journey using up to 20 percent sustainable second-generation biofuels that will save 1,500 tons of carbon and 20 tons of sulfur in a single voyage (10). This is the food equivalent of 500 poeple one year that is burned for green religious purposes. Cost are most probably much higher as if the ship would use bunker fuel. From a non religious point of view using LNG instead of bunker fuel would be preferable. Another option could be to use a nuclear reactor as the russian SVBR100 to power the ship.  

The Container Shipping Market 

Actually  low demand has lead to a drop of the FAK rates. MM and others hope that FAK rates will increase in for the rest of 2019 

A report by BIMCO estimates that 2018  250.000 TEU will leave the market while the new built is forecasted to 1.05 mio. TEU. That means a capacity increase of 3.9%. The demand is estimated to grow 4 - 4.5% (1). It does not look like a tighter market with higher rates in the near future.  

bei einer Weltflotte von rund 60.000 größeren Schiffen

LSF2020 Low Sulphur Fuel Regulation

The IMO (International Marine Shipping Organization) is going to implement a new regulation that comes in effect Jan., 01. 2020 to reduce the sulphur emission of international sea shipping. This regulation is based on the green amageddon dogma of "Acid Rain" or "Waldsterben". This green amageddon dogma was popular in the 1980ies and still generates real costs on manhood. 

The easiest way to handle this regulation is to use bunker fuel with < 0.1% sulphur

It is estimated that this regulation will increase the costs per TEU by 10% or 100$/TEU.

 

Maersk Block Chain Technology

Some reasons that Maersks logistic platform might not perform successful.."There are fantastic benefits to be had from a blockchain-enabled shipping platform: cost savings, reduced error, increased profit, etc. However, these benefits can’t outweigh the undeniable reality facing Maersk’s competitors: to join the TradeLens network is to make Maersk more profitable....Another obvious issue is that Maersk owns the intellectual property that the TradeLens platform is built on. Even assuming safeguards are put in place (to ensure that unfair advantage is not taken by Maersk or its agents), the optics are terrible." (3)

 

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A few references

(22) 2020/05/07 https://www.rigzone.com/news/maersk_supply_service_cuts_onshore_jobs-07-may-2020-162014-article/

(21) 2020/03/05 https://www.globenewswire.com/news-release/2020/03/04/1994851/0/en/Initiates-third-phase-of-share-buy-back-program.html

(20) 2020/01/29 https://seekingalpha.com/article/4319933-rough-market-conditions-offer-great-entry-point-for-maersks-turnaround?dr=1&utm_medium=email&utm_source=seeking_alpha#alt1

(19) 2019/11/15 https://ml-eu.globenewswire.com/Resource/Download/738fe2a6-0867-419b-89df-e11a555ee688

(18) 2019/10/21 https://www.benzinga.com/news/19/10/14629674/improved-ocean-freight-results-boost-maersks-2019-outlook

(17) 2019/08/06 https://www.globenewswire.com/news-release/2019/08/05/1896706/0/en/Transactions-in-connection-with-share-buy-back-program.html

(16) 2019/05/25 https://ml-eu.globenewswire.com/Resource/Download/26adfa0f-4e09-44aa-9ff1-dfd043ea394a

(15) 2019/05/25 https://seekingalpha.com/news/3466875-maersk-sees-new-tariffs-weighing-global-container-volume-growth

(14) 2019/05/16 https://www.hellenicshippingnews.com/container-rates-alert-asia-europe-low-demand-leads-to-maersk-rate-drop/

(13) 2019/04/11 http://en.portnews.ru/news/275268/

(12) 2019/04/09 https://www.hellenicshippingnews.com/maersk-tightens-its-ship-recycling-procedures/

(11) 2019/04/03 https://seekingalpha.com/news/3447943-maersk-needs-time-turnaround-say-chairman-top-shareholder?app=1&dr=1#email_link

(10) 2019/03/26 https://www.benzinga.com/news/19/03/13414917/port-report-maersk-aims-to-beat-the-regulatory-clock-on-carbon-free-shipping

9. 2019/02/22 https://ml-eu.globenewswire.com/Resource/Download/3b5d6bab-974e-44bb-abaa-97fbabde11c5

8. 2018/12/11 https://www.electrive.net/2018/12/09/maersk-will-seine-schiffflotte-bis-2050-co2-neutral-machen/

7. 2018/11/19 https://www.spglobal.com/platts/en/market-insights/latest-news/shipping/111918-interview-maersk-group-favors-low-sulfur-fuels-working-on-new-bunker-adjustment-factor-exec

6. 2018/11/15 https://www.bloombergquint.com/business/an-8-billion-payout-from-maersk-raises-questions-for-creditors#gs.HaJSnZs

5. https://de.marketscreener.com/AP-MOLLER-MAERSK-1412885/unternehmen/

4.https://seekingalpha.com/article/4222042-p-moeller-maersk-sa-2018-q3-results-earnings-call-slides

3. 2018/11 https://www.hellenicshippingnews.com/how-maersks-bad-business-model-is-breaking-its-blockchain/

1. https://www.seanews.co.uk/container-shipping-market-an-outlook-for-2018/

2. https://seekingalpha.com/news/3387060-maersk-tests-wind-power-cut-shipping-fuel-costs?ifp=0&v=1535715900

http://www.themaritimepost.com/top-10-biggest-shipping-companies-world/

https://steelguru.com/logistic/ap-moller-maersk-takes-next-steps-in-integration-to-improve-customer-experience/521652

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