CEVA Takeover Affects CMA CGM’s Bottom Line

French container shipping major CMA CGM ended 2019 with significantly increased revenues due to the acquisition of CEVA but also a bigger net loss.

Full-year 2019 revenue rose by 29% to USD 30.3 billion from USD 23.5 billion seen in 2018.

As explained, the increase was driven by the acquisition of Swiss logistics company CEVA Logistics, which contributed USD 7.1 billion.

On the other hand, the group suffered a net loss of USD 229 million in 2019, against a net income of USD 34 million posted a year earlier. According to CMA CGM, this was mainly due to the negative IFRS 16 impact of USD 329 million, which will gradually decline over the years, and the USD 140 million negative contribution from CEVA Logistics.

In the fourth quarter of 2019, revenue was up by 19.4% and amounted to USD 7.5 billion, compared to USD 6.3 billion reported in Q4 2018.

CMA CGM posted a widened net loss of USD 122 million in Q4 2019, compared to a net loss of USD 15 million recorded in the corresponding quarter in 2018.

Shipping segment

The shipping business delivered strong growth in 2019, driven by an increase of more than 4% in volumes carried and a sharp decrease in the group’s operating expenses across the year.

Volumes carried grew to 21.6 million TEU containers in 2019 from 20.7 million TEUs in 2018. This performance was due mainly to growth in intraregional — short sea — business driven by the consolidation of Containerships and by strong growth in the CNC brand in intra-Asia as well as by the organic growth of Africa and Latin America lines, CMA CGM said.

Revenues were down by 0.8% and stood at USD 23.3 billion in 2019, against USD 23.5 billion in 2018. Net income rose sharply from USD 34 million in 2018 to USD 240 million in 2019.

Volumes carried in the fourth quarter stood at 5.3 million TEUs and were stable compared to the fourth quarter of 2018. Revenue dropped by 9.6% to USD 5.7 billion from USD 6.3 billion seen in the fourth quarter of 2018. Net income came to USD 13 million in Q4, compared to a net loss of USD 15 million reported in Q4 2018.

“CMA CGM’s shipping segment delivered a robust performance in 2019, with an improvement in profitability for the third consecutive quarter, thus outperforming our main peers in the fourth quarter. These results were driven by our development strategy, particularly in short sea lines, and our ability to cut costs,” Rodolphe Saadé, Chairman and Chief Executive Officer of the CMA CGM Group, commented.

2020 outlook & upturn in business in China

After an extremely robust month in January, the early part of the year has been marked by the COVID-19 crisis, according to the French company.

“The beginning of 2020 has been impacted by the Coronavirus epidemic. The Group has taken specific measures to protect its employees worldwide,” Saadé continued.

“This health crisis has also affected global trade and we have therefore adapted our shipping services. Thanks to CEVA, we have been able to provide alternative solutions to our customers to avoid disruptions to their supply chains.”

However, there has been an upturn in volumes and a major catch-up effect is expected once the health situation stabilizes, as Western countries will be seeking to rebuild their inventories. The group, therefore, expects to operate a normal capacity fleet as of mid-March.

“Today, we are seeing an upturn in business in China, with production ramping-up in factories and exports increasing,” CMA CGM CEO added.

Financial structure and liquidity plan

The group said it continues to implement the USD 2.1 billion liquidity plan announced on November 25. The plan aims to reduce net debt by more than USD 1.3 billion by mid-2020 and to extend the maturity of some credit facilities due in 2020.

As of December 31, CMA CGM had finalized circa USD 820 million of vessels sale & lease-back and vessels refinancing deals, enabling to repay 75% of the CEVA acquisition loan.

In late December, CMA CGM signed a firm agreement with China Merchants Port to sell a portfolio of ten port terminals to Terminal Link for USD 968 million in cash. The “most significant part” of the deal is expected to be closed in the next few weeks whilst the remainder should be finalized before the end of June, CMA CGM informed.

In March 2020, CMA CGM and Neptune Orient Lines (NOL) signed a three-year extension to the credit lines due in 2020 for a total of USD 535 million.

IMO 2020 and energy transition

To comply with the low sulphur rules applicable since January 1, 2020, the CMA CGM Group is focusing on using a low-sulphur fuel (0.5%) for its fleet.

In 2020, CMA CGM will take delivery of the first 23,000-TEU containership powered by liquefied natural gas (LNG) under a nine-vessel order.

As explained, using LNG for the company’s high-capacity vessels would reduce emissions of sulphur and fine particles by 99%, nitrogen oxide emissions by around 85% and carbon dioxide emissions by up to 20%.

“We have already reduced our CO2 emissions by 6% in 2019, thus demonstrating the effectiveness of the group’s proactive environmental strategy,” CMA CGM concluded.