AP Moller-Maersk is getting close to making a number of acquisitions to bulk up its land-based logistics business after the world’s largest container shipping group strengthened its balance sheet.
The Danish group transports one-fifth of all seaborne freight but sells land-based logistic products to fewer than 20 per cent of its ocean customers, according to chief executive Soren Skou.
“We need to accelerate the land side, we need to grow it, we need to make some bolt-on acquisitions . . . We are getting much closer to the point where it starts to make sense,” Mr Skou told the Financial Times.
Maersk has undergone one of the biggest transformations in European industry in recent years, jettisoning its oil and other energy businesses to focus purely on Maersk Line, the world’s largest container shipping group, as well as its port terminals and logistics units.
Mr Skou has underscored for more than a year that Maersk needs to boost its land logistics business offering services such as supply chain management, truck freight, and running warehouses so that it could “become the global integrator from factory to distribution centre”.
But the Danish group has long been constrained by its stretched balance sheet after Moody’s cut its credit rating to the lowest possible investment grade a year ago. It remains at that level at Moody’s, with a stable outlook, while rival Standard & Poor’s gives it a rating one step higher.
“We have been building up our balance sheet. It’s much stronger than a year ago,” said Mr Skou, who pointed to figures showing Maersk’s net debt at the end of the third quarter was $12bn compared with $18.8bn a year earlier.
Mr Skou added that it had been difficult finding the right companies in land logistics as Maersk did not want to gain too much forwarding business — which involves coordinating different types of freight carriers — as that was often its customers’ business.
Maersk, widely seen as a bellwether for global trade, has been buffeted by tariff tensions, especially between the US and China.
But in recent months it has been able to brush aside those concerns, raising its full-year profit guidance in October after profits for the first nine months jumped by more than a half compared with a year earlier.
“What is important to understand is that when we talk about trade tensions between China and the US, for us it doesn’t really matter if the goods are moving from China or from Vietnam or Indonesia to the US. It’s US consumer spending that matters,” he said, pointing to signs that US companies had shifted production to other Asian countries.
He added that Maersk had also planned for low growth keeping capacity low and thus avoiding a perennial problem in the container shipping industry.
Maersk overhauled its management structure in mid-December after losing two of its most senior executives within weeks of each other.
Soren Toft, the former chief operating officer, left Maersk to become chief executive of rival Mediterranean Shipping Company while chief financial officer Carolina Dybeck Happe took on the same role at General Electric.
“The misfortune here was the timing and they came so close together . . . I don’t see it as a sign of difficulty with me or the strategy,” said Mr Skou.
Alongside Mr Skou and the chief financial officer, the new management board will consist of the heads of Maersk’s three main business areas — Vincent Clerc for ocean and logistics; Morten Engelstoft for APM Terminals; and Henriette Hallberg Thygesen for towage, manufacturing and other businesses.