New Maersk Line CEO cries 'slow down - we're destroying shareholder value'
2012 03 07
- Details
THE container shipping industry is consistently destroying shareholder value and needs to rein back fleet growth to improve returns, says Maersk Line's new CEO Soren Skou.
Mr Skou, who took over in mid-January, made the comments in London shortly after parent company, AP Moller-Maersk, announced a net loss of US$537million from its container activities division in 2011, against a $2.64 billion net profit the previous year.
Nils Andersen, AP Moller-Maersk's chief executive, has accepted that Maersk helped to accelerate last year's industry-wide fall in rates by introducing a daily service from the main Asian ports to the main northern European gateways, reported London's Financial Times. The Daily Maersk service considerably increased ship capacity on key trade route at a time of already weakening demand.
But Mr Skou said Maersk had captured enough market share to fill the extra capacity and now needed to improve profitability.
"We were particularly pleased to see the uptick we had in volume after we launched," he said. "On the volume, we're where we need to be in order to be competitive. Now it's about trying to get better paid."
Mr Skou pointed out that ocean liners had achieved, on average, operating profit margins of just two per cent over the past seven years and only earned "acceptable" margins of 12 per cent in 2010.
The new chief executive, who was previously CEO of Maersk's tanker division, refused to say what level of returns the industry should seek, but said: "What I can say is that, unless we get industry returns up to eight or nine per cent, we're definitely destroying shareholder value."
The Danish shipping group could do nothing to control the reaction of the other carriers to the rate slump, but would defend its market share if necessary by cutting prices, Mr Skou said.
But the shipping line would aim this year to grow by only the three to four per cent annual rate given the anticipated for demand to ship containers. The carrier has already cut capacity on its Asia to Europe services nine per cent in an effort to return to profitability.
He denied, however, that the shift represented a wholesale change of strategy. "In the last couple of years, in order to be able to offer, among other things, Daily Maersk, we have been growing significantly faster than the market," Mr Skou said. "The big change is really in our growth aspirations."
Source Shipping Gazette - Daily Shipping News
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