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CMA CGM boosts profitability amidst fall in volumes

CMA CGM boosts profitability amidst fall in volumes
CMA CGM chairman and CEO Rodolphe Saade

CMA CGM improved profitability in all its business activities during the second quarter of 2020 as it adapted fleet capacity to demand and maintained cost discipline, mitigating a pandemic-related 13% decrease in container volumes carried.

Average revenue per teu was up by 3% to US$1,112 aiding the carrier’s financial performance, while unit cost by teu dropped 5% to US$892 due to the decline in oil prices, the group’s cost-cutting initiatives and the reduction in the fleet of vessels and containers deployed.

The French company managed to off-set a 9% drop in revenue to US$7bn, posting a net income of US$136m, which compares favourably to a US$109m loss in the equivalent quarter of 2019. EBITDA also improved by 26%, reaching more than US$1.2bn.

Rodolphe Saadé, chairman and CEO of the CMA CGM Group, said: “Thanks to our agile business model and synergies between our shipping and logistics business activities, we were able to adapt our service offerings to meet our customers’ fast-changing needs.

“We have also significantly reduced our costs and benefited from the drop in oil prices. CEVA Logistics’ turnaround plan is underway and in line with our expectations.”

Container traffic volumes decreased for the first time since 2009 as a result of lockdown measures in several countries, which resulted in the shutdown of production units, particularly in China, during the first quarter. This was followed by a sharp downturn in global consumer demand in March and April.

All supply chains were able to adapt to avoid disruption and deliver supplies—especially medical equipment. As lockdown measures were gradually lifted, carried volumes bounced back strongly as of May under the combined effect of inventory rebuilding and the sharp recovery in the consumption of goods, notably in the US.

The company believes that its strategy to offer complementary shipping and logistics services has been vindicated during the COVID-19 pandemic, with CEVA Logistics’ commercial airfreight and warehousing solutions helping boost the logistics segment’s EBITDA contribution to US$153m.

These results benefitted from the strong airfreight business thanks to air charters compensating the absence of regular capacity.

Ground activities progressed further on their recovery, offsetting the weakness of sea freight, while the results of contract logistics were affected by the pandemic, which led to the closure of many sites.

CMA CGM expects the recovery in container shipping, seen since April, to continue during the third quarter of 2020 for most routes, driven by faster recovery in the consumption of goods than of services, the growth of e-commerce, and usual seasonality.

These factors recently drove freight rates to historically high levels, in particular on trans-Pacific routes.

Saadé added: “Third quarter results should mark a new improvement in our performance.”