CMA CGM unveils growth plans, investments
Marseilles-based CMA CGM unveiled Tuesday an investment program that will add 66 percent more capacity to its fleet in the next four years, as it reported a doubling of its net profits to 410 million euros ($531 million) for 2004.
Ranked as the fifth-largest container shipping line in the world today, CMA CGM in 2005-2008 will add to its fleet 55 newly built vessels on order, of which 29 will be owned and the rest chartered. The new ships will add some 21,000 TEUs in capacity this year, 137,000 TEUs in 2006, 67,000 TEUs in 2007 and 46,000 TEUs in 2008, representing a total of about 270,000 TEUs, or about 66 percent of the carrier’s fleet capacity at the end of last year.
The French carrier already increased its slot capacity 28 percent to 409,000 TEUs in 2004, when it took delivery of 12 new ships.
The family-controlled company’s 2004 profit was 104 percent higher than its 2003 earnings of 202 million euros. Revenue increased 36 percent to 4 billion euros ($5.2 billion) last year, as the carrier shipped 3.9 million TEUs, up 36 percent on 2003, at a higher average revenue per unit.
“Last year was favorable for CMA CGM and for the shipping industry as a whole,” said Jacques Saade, chairman of CMA CGM. Saade expects CMA CGM will top 5 billion euros ($6.5 billion) in revenue this year, with net profits at least matching those of 2004.
CMA CGM will invest 2 billion euro ($2.6 billion) in ships, containers and real estate during 2005-2008. “The profits made (last year) will not be paid out and will be reinvested,” Saade said.
While the carrier expects a continuation of the strong shipping market this year, Saade predicted the growth of ship capacity will exceed traffic growth in 2006. “Our predictions for 2006 are that there will be pressures on freight rates,” he said. “I do not expect there will be a big shock, but there will be a certain fall in freight rates.”
The carrier’s first 9,200-TEU ships, its largest on order, will join its fleet starting from the summer of 2006 and will be deployed in the Asia/Europe trade in a joint service with a yet-to-be-named partner. This service may call at the ports of Shanghai, Le Havre, Zeebrugge, Rotterdam and Hamburg.
However, Saade has no plans to invest in ships as large as 13,000 TEUs that are thought to be the next size step for the industry.
“We have set a limit on 9,200 TEUs as the maximum, not because of size but because of profitability,” he said. Larger vessels would incur very high transshipment and feeder costs and would be restricted in which ports they can call, Saade added.
In a separate development, the credit rating agency Standard and Poor’s has upgraded its rating for CMA CGM to “BBB-“, described as investment grade by investors, from “BB+”, considered junk bond status. CMA CGM expects that the change will lower its future cost of borrowing.