French carrier raises cost-saving targets and reports a smaller net loss in the first quarter of 2019.
CMA CGM said that in order to adapt to a changing market it was “taking a new step in its transformation by consolidating its development and implementing an ambitious cost-reduction program.”
Among the steps the company outlined in an announcement on Wednesday:
• Implementation of a turnaround plan for CEVA Logistics, which it acquired earlier this year. CMA CGM now owns 99.4% of the logistics company and said it was “committed to CEVA’s financial recovery and has already taken major structural decisions paving the way for CEVA’s rapid return to profitability.” Rodolphe Saadé, chairman and chief executive officer of the CMA CGM Group, has been named chairman of the CEVA board of directors; Nicolas Sartini, currently the CEO of APL, will be CEVA’s CEO as of Saturday. A CEVA operations center will be set up in Marseilles, bringing together CEVA’s management teams and support functions for a total of 200 employees.
• Intensification of a cost-reduction program. In March the company had said it was seeking to reduce costs by $1.2 billion. On Wednesday it said it had already achieved savings of $245 million and was raising that target to $1.5 billion. It said it expects to meet the goal mainly by streamlining its organization and its maritime routes. The company already has reduced expenses through rationalization of some services, greater operational efficiency, lower logistics costs, new partnerships with suppliers and technical solutions to reduce energy consumption by its fleet.
• CMA CGM said it will continue to rationalize its various brands. As of Oct. 1, CMA CGM will be its only brand in the transatlantic, Asia-Europe, Asia-Mediterranean, Asia-Caribbean and Europe-India/Middle East markets. APL will focus on the transpacific, Asia-Indian Subcontinent, intra-Asia (with CNC) and Asia-Oceania markets. APL also will continue to operate its U.S.-flag services. ANL will remain the lead brand for Oceania.
In reporting its first-quarter results, CMA CGM said it had a smaller net loss in the first quarter of 2019 — $43 million — than the $77 million loss it reported in the first quarter of 2018.
The French carrier had a big jump in revenue: $7.41 billion in the first quarter of 2019, 36.9 percent more than the $5.41 billion reported in the first quarter last year. Cargo volumes were 5.16 million TEU in the first quarter, 4.4 percent more than in the first quarter of 2018. Revenue per container increased slightly in the first quarter of 2019 compared to the first quarter of 2018, particularly on the routes serving the United States and Africa.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came to $779 million, of which $423 million corresponds to the impact of IFRS 16 and $144 million to the contribution from CEVA. IFRS 16 is a new lease accounting standard issued by the International Accounting Standards Board that went into effect this year. CMA CGM noted that excluding those two items, the adjusted EBITDA remained broadly stable at $212 million, compared with $217 million 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. The Group intends to reinforce its cost-reduction program during the coming quarters,” the company said.
