CMA CGM thrives in 2017 on the back of APL acquisition
Date: Monday, March 19, 2018
Source: American Shipper
CMA CGM posted improved earnings, revenues and container volumes in 2017 from the prior year.
The French carrier reported a net income of $701 million in 2017 compared with a $452 million loss it reported in 2016.
Revenues for 2017 totaled $21.12 billion, up 32.1 percent from $15.98 billion in 2016.
Core earnings before interest and taxes (excluding asset sales and depreciation and non-recurring elements) in 2017 stood at $1.6 billion, compared to just $29 million in 2016.
In addition, 2017 was the first full year to reflect CMA CGM’s acquisition of APL, which was completed in mid-2016.
CMA CGM said APL's services contributed $340 million to its operating income (or EBIT), as well as 5 million TEUs to its container volumes handled in 2017.
In all, CMA CGM carried 18.95 million TEUs in 2017, 21 percent more than the 15.64 million TEUs carried the year before.
“The momentum of the volumes transported in 2017 is expected to continue in 2018,” the company said. “The group should continue to benefit from this trend, thanks to its worldwide presence and its portfolio of brands covering the East-West, North-South and intra-regional trades."
The company's freight rates rose last year and it saw the average revenue per TEU rise 9 percent when compared to 2016.
CMA CGM said it was able to control rising costs in 2017. The company said unit costs rose only 1.6 percent despite a 42 percent surge in fuel prices when compared to 2016.
Last April, CMA CGM joined with COSCO, OOCL and Evergreen Line to launch the OCEAN Alliance, and the company said that will be upgraded next month with its “Ocean Alliance Day Two” product.
CMA CGM also acquired two small carriers in 2017, which included Sofrana in the South Pacific in October; and Mercosul, a Brazilian domestic carrier, in December.
In November, CMA CGM ordered nine 22,000-TEU ships, which will be powered with liquefied natural gas.
The company also said it has accelerating “digitization” efforts in 2017 and highlighted its investments in the New York Shipping Exchange (NYSHEX), a digital marketplace for ocean freight contracts, and in e-dray, a software platform designed to improve drayage operations in port terminals.
Earlier this month at the TPM 2018 conference in Long Beach, the company unveiled what it said was a "customer centric strategy" with a group of new products.
• A new finance solution to help customers expand their business abroad;
• A “digital agency” allowing customers to interact with CMA CGM entirely online, noting how an online customer service in the U.S. and France will include a chat application, online dispute and claims, document self-service, one-step booking, and mobile follow-up, and a new reporting dashboard and more user-friendly interfaces;
• An online payment system that is being developed worldwide;
• A personalized assistant to help customers reach new markets;
• And advanced hubs “to accelerate our customers’ supply chain as well as enhanced inventory visibility and accuracy.”
CMA CGM said it will also make smart containers developed in partnership with TRAXENS available to customers. The containers can provide information on geographic position, external and internal temperature variations, humidity variations, shocks and door openings.
Mathieu Friedberg, senior vice president of sales, e-commerce and marketing at CMA CGM said that CMA CGM believes a customer-centered focus will be “one of the main strategic pillars in the years to come - We call it ‘caring beyond shipping.’”
He said CMA CGM is planning to roll out a group of products called “Serenity” that will allow customers to manage supply chain risk more efficiently. The company said its Cargo Value Serenity product “covers any kind of cargo incident no matter who is responsible.”
Speaking at the TPM conference earlier this month, Friedberg said, “Take a shipper who has cargo value of about $100,000. It will cost him probably about $40 to subscribe to Cargo Serenity. If anything happens, he gets reimbursed for the cargo value within 30 days and we take care of the rest.”
He said the product “takes away the usual way of interacting with insurance… if anything happens, whatever, you get reimbursed and we take care of it. We basically manage the risk behind it. We play on the fact that we have a massive inflow of containers, so the mass allows us to provide this kind of service.”
APL has expanded its "Eagle Guaranteed" products that provide guaranteed loading of containers, expedited discharge and inland services for cargo moving to the U.S. from Asia.
Friedberg also pointed to REEFLEX, a new container technology for the refrigerated carriage of liquids.
He noted the container shipping industry has spent billions of dollars building bigger ships in order to bring economies of scale to the market. He said that “90 percent of what we have done in terms of economies of scale basically went to the shippers, which is nice for the shippers but has been quite challenging for us carriers.
“Along that journey, we lost track of what we are actually in, we forgot about the fact that we are mainly a service industry," Friedberg added. "We are all part of alliances, we try to provide the best possible products, but nevertheless we probably need to work on differentiation a bit differently from what we have been doing in the years before.”
He said CMA CGM wants to “get out of the commodity corner we’ve been living in for quite some time and come back with some more valuable offers to the market and try to differentiate our services to our customers.”
Friedberg said he looks to the hotel industry as a model the shipping industry can emulate, understanding customers for the value they bring to their company.
In order to do that, he said CMA CGM needs to empower its agents around the world. The company has about 700 offices around the world and will have 800 in a few years. However, he said, "It is useless having people on the ground who cannot take action.”
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