Another container-line quarterly report, another surprisingly big profit announcement in the midst of the coronavirus pandemic. Second-quarter results of France’s CMA CGM followed the same pattern as Maersk. Volume down, revenue down, costs down even more, so profits up.
On Friday, CMA CGM reported net income for the group of $136 million for the second quarter of 2020 (Q2 2020) versus a net loss of $109 million in Q2 2019.
Shipping division performance
CMA CGM’s container-shipping division carried 4,781,000 twenty-foot equivalent units (TEUs) of volume in Q2 2020. That was down 13.3% year-on-year, bringing shipping division revenues down 10.9% to $5.318 billion.
Revenue per TEU was $1,112, up 2.8% year-on-year.
Unit cost per TEU in Q2 2020 was $892, down 4.6% year-on-year. Unit cost fell due to “the decline in oil prices, cost-cutting initiatives and the reduction in vessels and containers deployed,” said the company.
Thanks to lower costs and higher revenue per TEU, the division’s earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $1.052 billion, up 30% compared to Q2 2019.
“CMA CGM demonstrated its ability to rapidly adapt its deployed capacity to demand, in line with the discipline seen more generally across all industry operators,” the company said.
Q3 should top Q2
“Despite COVID-19, our group reported excellent results, thus strengthening our financial structure,” asserted CMA CGM Group CEO Rodolphe Saadé. He highlighted the company’s agility, synergies between shipping and logistics, and “significantly reduced” costs.
Expect more positive news in the current reporting period. “Third-quarter results should mark a new improvement in our performance,” predicted Saadé.
The company said, “The current strong momentum of the shipping market, driven by both volumes and freight rates, should allow the group to further significantly improve operating margin compared with the second quarter.”
Bonds rebound
Investor sentiment on CMA CGM’s liquidity position has greatly improved. Less than six months ago, some market watchers were worried about the carrier’s survival. In a research note on March 23, Stifel analyst Ben Nolan included CMA CGM on his insolvency “risk list,” noting that it had debt trading at 72 cents on the dollar.
CMA CGM’s 6.5% coupon bonds due in 2022 actually hit a low of 55 cents on the dollar on March 20. On Thursday, they closed at 99 cents — they’ve come all the way back to par. For someone who timed it perfectly, that’s a return of 80% over five and a half months. Click for more FreightWaves/American Shipper articles by Greg Miller
MORE ON CONTAINER SHIPPING: Why Maersk axed Safmarine and Damco: see story here. What trade war? US imports from China are booming: see story here. Maersk triples profits despite COVID: see story here. Q&A with BIMCO’s Peter Sand on what’s next for the global supply chain: see story here.