CMA-CGM: HAS THE NOL ACQUISITION COME AT

A HEAVY PRICE?

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At Xeneta we believe there is an untapped potential for everyone in the industry, to systematically learn from our individual and collective efforts. We hold true that "if you cannot measure it, you cannot improve it". That’s why we think actionable metrics is the key to continuously evolve for every business, and ultimately the entire industry. Rethinking global logistics is the vision of Xeneta.

With international experience from the logistics industry, we have first-hand knowledge of the challenges related to high volatility and lack of transparency in the ocean freight market. By combining logistics background and information technology expertise, we found the solution to these challenges.

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IN 2016, MOST PROBABLY, NONE OF THE 20 TOP COMPANIES WILL BE

PROFITABLE, CONSOLIDATION WILL CONTINUE BECAUSE SMALL SHIPPING LINES WILL NOT BE ABLE TO SURVIVE; THE SMALL TO MEDIUM OPERATORS

WILL BE LOOKING FOR A BIG BROTHER TO ACQUIRE THEM

- Vice Chairman for CMA-CGM, Rodolphe Saadé

INDEED, CMA-CGM HAS FOLLOWED SUIT THIS YEAR AND REPORTED A FINANCIAL LOSS OF OVER $260 MILLION FOR THIRD QUARTER WITH AVERAGE REVENUE PER TEU DOWN 13.9% EXCLUDING NOL’S CONTRIBUTION. PLUS, IT MADE ITS LARGEST ACQUISITION TO DATE BY ACQUIRING NEPTUNE ORIENT LINES (NOL) AND ALSO SIGNED UP AS A MEMBER OF THE OCEAN ALLIANCE. HAS IT BITTEN OFF MORE THAN IT CAN CHEW?

NOL ACQUISITION

2016 HAS PROVEN TO BE A BUSY YEAR FOR THE

FRENCH CARRIER AS IT WORKS TO INTEGRATE NOL AND TRIM COSTS.

AS PART OF THE ACQUISITION, CMA-CGM

AGREED TO MOVE ABOUT ONE-THIRD OF ITS

TRAFFIC FROM THE KLANG PORT IN

MALAYSIA TO SINGAPORE AND HAS

ALSO MOVED ITS REGIONAL

HEADQUARTERS FROM HONG KONG TO

SINGAPORE.

IN ADDITION, CMA-CGM AND PSA SINGAPORE TERMINALS HAVE FORMED A JOINT VENTURE TO OPERATE AND USE FOUR CONTAINER BERTHS AT PASIR PANJANG TERMINAL PHASES 3 AND 4. ESTIMATED HANDLING CAPACITY OF 3 MILLION TEUS ANNUALLY, THE FACILITIES WILL BE USED AS DEDICATED CONTAINER TERMINAL FOR THE GROUP AND ITS SHIPPING AFFILIATES IN THE REGION.

TRIMMING THE FAT

SINCE THE FINALIZATION OF THE NOL ACQUISITION IN JUNE, CMA-CGM’S FOCUS HAS BEEN TO TURN THE LOSS-MAKING NOL AROUND WITH PLANS TO SELL US $1 BILLION IN ASSETS TO STRENGTHEN THE BALANCE SHEET

AS SUCH, CMA CGM ANNOUNCED IT WOULD SELL ITS APL CONTAINER TERMINALS. AS OF THE FIRST OF NOVEMBER, FIRST-ROUND BIDS REMAIN OUTSTANDING.

EVEN THOUGH THE SALE OF APL'S TERMINALS IS OFFICIALLY A STRATEGIC MOVE TO REDUCE DEBT, IT IS ALSO REFLECTS THE COMPANY'S INVOLVEMENT IN THE NEWLY ESTABLISHED OCEAN ALLIANCE, WHICH MEANS THE SHIPPING LINE WILL BE ABLE TO REDUCE ROUTE REDUNDANCIES AND THEREFORE DIMINISH THE NEED FOR OWNING AS MANY TERMINALS.

ANOTHER COST-CUTTING MEASURE IS ITS OUTSOURCING SOME OF ITS

GLOBAL FEEDER OPERATIONS. AS OF SEPTEMBER 16, CMA-CGM CUT ITS

FLEET OF SHIPS BETWEEN 600 TO 1,750 TEUS FROM 171 TO 133 UNITS IN THE PAST 6 WEEKS AS IT SHIFTS CERTAIN FEEDER SERVICES TO THIRD PARTIES.

2016 HAS PROVEN TO BE A BUSY YEAR FOR THE

FRENCH CARRIER AS IT WORKS TO INTEGRATE NOL AND TRIM COSTS.

AS PART OF THE ACQUISITION, CMA-CGM

AGREED TO MOVE ABOUT ONE-THIRD OF ITS

TRAFFIC FROM THE KLANG PORT IN

MALAYSIA TO SINGAPORE AND HAS

ALSO MOVED ITS REGIONAL

HEADQUARTERS FROM HONG KONG TO

SINGAPORE.

IN ADDITION, CMA-CGM AND PSA SINGAPORE TERMINALS HAVE FORMED A JOINT VENTURE TO OPERATE AND USE FOUR CONTAINER BERTHS AT PASIR PANJANG TERMINAL PHASES 3 AND 4. ESTIMATED HANDLING CAPACITY OF 3 MILLION TEUS ANNUALLY, THE FACILITIES WILL BE USED AS DEDICATED CONTAINER TERMINAL FOR THE GROUP AND ITS SHIPPING AFFILIATES IN THE REGION.

OCEAN ALLIANCE

THE OUTLOOK

IN APRIL, THE CMA-CGM GROUP, COSCO CONTAINER LINES, EVERGREEN LINE AND ORIENT OVERSEAS CONTAINER LINE ANNOUNCED THE FORMATION OF A NEW ALLIANCE. IN GENERAL, BY ENTERING INTO ALLIANCES COMPANIES CAN CUT OPERATIONAL COSTS.

THIS ALLIANCE WILL HAVE THE LARGEST MARKET SHARE ON THE ASIA-EUROPE LANE WITH 35% AND 38.9% MARKET SHARE ON THE ASIA-NORTH AMERICA ROUTE.

CMA-CGM IS CONSIDERED THE MAIN CONTRIBUTOR TO THIS ALLIANCE. IT WILL HAVE THE LARGEST SHARE WITHIN THE ALLIANCE, DEPLOYING A FLEET OF 119 VESSELS WITH A 35% CAPACITY SHARE. HAVE RECEIVED APPROVAL FROM US REGULATORS, THE MEMBERS ANNOUNCED THEIR PROPOSED NETWORK IN NOVEMBER.

MR. SAADÉ SEEMS TO HAVE WRITTEN OFF 2016 IN THE OPENING OF THIS ARTICLE AS HE LOOKS FORWARD TO IMPROVING MARKET CONDITIONS IN 2017.

RATES DO APPEAR TO BE TRENDING UPWARD AS CAPACITY CONTINUES TO BE REMOVED. AS SUCH, MANY CARRIERS ARE CAUTIOUSLY OPTIMISTIC FOR THE NEW YEAR AND IN PARTICULAR HAVE SET HIGH EXPECTATIONS FOR THE LAUNCH OF THE ALLIANCES IN SPRING 2017.

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