AP Moller-Maersk expects to deliver average returns of more than 12% for the next five years, according to chief executive Soren Skou.
Speaking at its annual Capital Markets Day, Skou said the Danish shipping giant would achieve the higher returns by bringing together “significant and tangible synergies” of its logistics, ocean and terminal businesses.
“We are confident that we can continue to deliver shareholder returns that are value generating above 7.5% return on invested capital [ROIC]," he said.
"And for the next years returns averaging above 12% given the very strong starting point of 2021.”
The Copenhagen-based company has radically transformed its core ocean business and was in the middle “of transforming the culture of the company and our technology platform”, Skou said.
Not done yet
The transformation had the objective of making Maersk “a profitable growth company again”, Skou said.
“Over the last couple of years, we have built a record of strongly improved financial performance, delivering ROIC above our target,” he said.
“But we’re not done."
"The coming quarters and years will be about achieving superior performance for our customers, delivering high and profitable growth, and to finish our technology and our cultural transformation.”
Maersk had delivered good returns despite “headwinds”, including a cyber-attack, trade sanctions, IMO 2020 and volume losses due to the pandemic.
“It makes me very confident we’re on the right track,” Skou said.
“We’ll only succeed as a company long term if our ocean business can deliver stable and resilient earnings at scale.”
Soft landing
Skou said the pandemic had showed the importance of having integrated logistics solutions and end-to-end control of shipments.
He added that close collaboration between Maersk’s ocean, logistics and terminal divisions had driven volumes and productivity up.
“In past four years, we have radically improved the fundamentals of our ocean business, built a powerful growth engine in logistics, and our terminals are once again delivering strong return.”
“Over the next years our focus is on stabilising the earnings in ocean at value generating levels, by continuing to strengthen the business and ensuring a soft landing from the current elevated freight rate levels,” said Skou.
That would be helped by Maersk’s increasing investments in in-house digital portals such as Maersk.com and Twill.net that provide an increasingly important competitive advantage, Skou said.
He said that the booming freight market had provided a tailwind for the industry “that will disappear in time”.
But the company had last year proven capable of hiking freight rates to deal with IMO 2020-related fuel hikes and manage capacity to keep prices stable.
Once freight rates normalise, Maersk’s ocean business will still deliver Ebit margins above 6%, which was "well above past historical lows", Skou said.
