Maersk Group: Stops shipbuilding, shifts to acquisitions

2016-09-27 09:00

Maersk Group's post-divestiture strategy is clear. As an industry leader, with the industry trending towards further consolidation, Maersk will cease ordering new vessels. The Maersk Group, with $12 billion in acquisition funds ready, will use its financial strength to acquire competitors.

Will stop ordering new ships and shift focus to acquisitions

Maersk Line, the world's largest container shipping company, will stop ordering new vessels and instead focus on industry acquisitions. In recent years, Maersk Line, together with Asian shipyards, has continuously broken world records for giant container ships (ship type, shipyard, buying and selling), but all this will end.

Maersk Group Chairman Michael Pram Rasmussen said, "Continuing to order new ships is of no help to Maersk's growth. Maersk already has too many ships, so if we want to continue to develop, we can only do so through acquisitions."

Maersk currently still has orders for 27 ships, equivalent to 12% of its current fleet.

Currently, the shipping industry is experiencing significantly reduced freight rates due to overcapacity and slowing global trade growth. Hanjin Shipping, South Korea's largest container company with 97 ships, has also declared bankruptcy.

In 2015, Maersk Line signed construction contracts with Daewoo Shipbuilding & Marine Engineering and Hyundai Heavy Industries. These ships are expected to be delivered in 2017 and 2018. Among them, the 11 19,630 TEU container ships built by Daewoo Shipbuilding & Marine Engineering cost approximately $180 million each. These second-generation Triple-E class container ships will continue to set records in the future.

Rasmussen said, "Ordering large ships is indeed important, but the growth rate of global trade is not keeping pace with the increase in orders. We are well prepared to stop building ships and turn to acquisitions."

Nearly $12 billion in acquisition funds are ready

The Maersk Group's board of directors officially announced last week that it has decided to restructure the group's business into two independent business units: transportation and logistics, and energy. This will ensure that the shipping and logistics company can continuously promote synergistic development and expand new products and services, while oil and oil-related businesses can explore structural solutions separately.

Following the financial crisis, the global shipping industry has not recovered from a severe recession and overcapacity for nearly a decade, and the Maersk Group is also facing this predicament. In the second quarter of this year, Maersk Group's net profit was only $101 million, far below analysts' predictions of $196 million.

Rasmussen said, "Our second-quarter performance was poor, but there are others worse off than us, such as Hanjin Shipping."

Rasmussen predicts that the recent wave of consolidation will intensify, and Maersk is prepared to use its strong financial foundation of nearly $12 billion in cash reserves to acquire competitors.

Rasmussen said, "Chinese shipowners are also under pressure and are uniting their forces. In the long run, no one will find it interesting to operate a loss-making business."

Maersk Group stated that through effective growth, the company is expanding its market share every year, but acquisitions will achieve faster development.

Rasmussen added, "If we want to grow through non-organic means, the path is to acquire existing assets. By the end of this year, there will be at least four fewer shipping companies than at the beginning of the year, and I think we will see further consolidation."

However, Maersk has not yet disclosed any specific acquisition targets. Hyundai Merchant Marine, which has joined the 2M Alliance, is considered the most likely target for Maersk to acquire, but Maersk has not confirmed industry speculation.

Petrobras plans to order six offshore platforms

August 2016 Global Shipbuilding Industry Monthly Report

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