CMA CGM to rationalise services as cost-cutting target increased

French carrier CMA CGM is to rationalise its brands in an effort to cut costs and simplify its business. The move comes as it adds another $300m to its cost-cutting target.

News ID: 80388

Date: 30 May 2019 - 09:49

First-quarter figures show improvement, but CMA CGM wants to transform itself for the challenges ahead

CMA CGM IS RATIONALISING HOW ITS SEPARATE BRANDS ARE UTILISED.

CMA CGM is to double down on efforts to rationalise its services and reduce its cost base as it seeks to adapt to a changing market.

Announcing its first-quarter results, the company said it would increase its cost-cutting target from $1.2bn to $1.5bn, and will rationalise its service offerings under its CMA CGM, APL and ANL brands.

“The scope of these two major group brands will evolve as of October 1, 2019, in order to strengthen the group’s overall performance and efficiency,” CMA CGM said in its results statement.

CMA CGM will become the only brand on the trans-Atlantic, Asia-Europe, Asia-Mediterranean, Asia-Caribbean and Europe-India/Middle East markets.

APL, which has a stronger position on the transpacific trade, will focus on that market and the Asia-Indian sub-continent, where it will be the group’s only brand, intra-Asia, Asia-Oceania, and US flag services. ANL will remain the lead brand for Oceania.

“The new organisational set-up will allow the group to simplify its offer, making it more legible to its customers, and benefit from the expertise of specialist companies from coherent regional groups, while reducing its costs,” the company said.

The Marseille-based carrier reported a 37% increase in revenues in the first quarter to $7.41bn. It was boosted by the acquisition of CEVA Logistics, in which the French carrier now holds a 99.4% stake. Without the CEVA contribution, revenues were up by a more modest 5.5% to $5.41bn as volumes increased by 4% to 5.2m teu.

Net losses improved from $77m in the first quarter of 2018 to $43m this quarter, but would have been net positive without adjustments for IFRS and losses incurred at CEVA.

Adjusted earnings before interest, tax, depreciation and amortisation came to $779m, of which $423m corresponds to the impact of IFRS 16 and $144m to the contribution from CEVA.

Excluding these two items, adjusted ebitda remained broadly stable at $212m, compared with $217m for the first quarter of 2018.

“Over the quarter as a whole, the rise in costs was contained, in line with revenue growth per teu,” CMA CGM said in a statement. “The group intends to reinforce its cost reduction programme during the coming quarters.”

The company said it had already achieved cost savings of $245m since it launched its programme, which it announced in March.

But it warned of continuing uncertainty over the global trade outlook and fuel prices, saying it would continue to closely monitor “current geopolitical tensions and the evolution of oil prices, and their impact on the world economy”.

Meanwhile, the line said it was “resolutely committed to CEVA’s financial recovery”, and had taken major structural decisions paving the way for CEVA’s “rapid return to profitability”.

Former APL chief executive Nicolas Sartini will take up his role as chief executive of CEVA on June 1 and has been tasked with implementing the third party logistics company’s turnaround plan.