The Strategist

Maersk to split off transport unit



09/22/2016 - 15:24



Danish conglomerate A.P. Moller-Maersk Group said that it is going to divide the business into two separate divisions: transport and energy. The conglomerate explained this decision by crisis in the sphere of cargo transportation and low oil prices.



cuxclipper via flickr
cuxclipper via flickr
Maersk Line, the largest division of the company and the world's largest operator of container terminals in terms of power, will lead a new transport and logistics unit, and an energy division will represent vast petroleum interests of the group.

Transport and Logistics Division will consist of Maersk Line, APM Terminals, Damco, Svitzer and Maersk Container Industry. Maersk Line was tasked to increase the company's share on the market, including through acquisitions.

Four entities in the energy division (Maersk Oil, Energy Maersk Drilling, Maersk Supply Service (office supplies) and Maersk Tankers) will remain part of Maersk Group, or will be separated in the form of joint ventures, through merger or listing. The decision will be taken within two years.

Maersk Oil will focus on a smaller number of geographical regions. In particular, it is planned to strengthen the company's portfolio in the North Sea through mergers or acquisitions. Exploration work and costs will remain low.

"Separation of the transport and logistics business, and oil and non-oil, into two independent units will allow us to focus on their respective markets," - Head of Board of Directors Pram Rasmussen said in a statement.

"Both [branches] are faced with very different fundamental factors and competitive environment", - said Rasmussen.

Maersk found itself in problems after the world oil quotes started to decline, resulting in decrease in prices for freight transportation. Earlier, the conglomerate announced a reduction in net profit in II quarter, compared to last year. Suffered not only freight business - all Maersk’s units received lower income.

Situation in the industry as a whole is not too comforting. Most of the largest marine carriers are experiencing hard times: 11 out of 12 companies are counting huge losses. Moreover, some of the participants found themselves on the verge of bankruptcy.

Bankruptcy of South Korean Hanjin Shipping, one of the market's largest players in the world, became the most striking evidence of this difficult situation. Many terminals refused to let ships of the company in, therefore 66 ships with cargoes at $ 14.5 billion stuck in the seas. 

French CMA CGM, the third largest in the world, in the first half counted $ 128 million of losses. The market leader Danish Maersk Line during the same period has lost $ 107 mln. Experts point out that the company was losing $ 11 on each container. However, the losses look not so great compared to Hanjin Shipping, which figures reached $ 100.

source: reuters.com




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