By Costas Paris
The world's biggest commercial shipping operator plans to add
extensive new capacity -- but it won't be on the water.
Danish shipping giant A.P. Moller-Maersk A/S instead wants to
buy warehouses, container terminals and customs brokerage firms to
boost its logistics services capabilities, part of a strategic
shift toward a landside business the company hopes will produce
half its revenue in two years.
"Today up to 80% of our earnings comes from container shipping,"
Maersk Chief Executive Soren Skou said in an interview. "Hopefully
a couple of years from now will be much closer to a 50-50 scenario
between ocean and nonocean services."
Mr. Skou's plan would extend a transformation of the
115-year-old maritime business that began when he became CEO in
2016. Since then, the sprawling Danish conglomerate has disposed of
its oil and tanker businesses to focus more closely on building a
singular company with container shipping at its center that
provides transportation and logistics services to big customers
like Walmart Inc.
Mr. Skou said the stronger focus on inland logistics comes as
the company continues to feel the aftereffects of the 2008
financial crisis, which dealt a blow to global trade, and as the
Maersk Line container ship operator faces new challenges from the
growing trade dispute between the U.S. and China.
"To put in perspective, in 2011 our turnover as a group was
around $60 billion and in 2016 our turnover had declined to around
$35 billion, so we were not in a good trajectory," he said.
Maersk Line has around 70,000 customers at sea, moving around
20% of all container capacity. Clients include a range of
businesses, from U.S. retail chains and car makers to furniture
suppliers, electronics companies and clothing importers.
But less than a quarter of those customers use the company to
move their goods from ports to warehouses and distribution
centers.
For Maersk and some of its oceangoing rivals, the business of
managing goods before and after they move on ships is looking
especially attractive after several years of sagging freight rates
have eaten away at profit margins.
France's CMA CGM SA, the world's fourth-largest container ship
operator, this year bought Switzerland-based freight services
provider Ceva Logistics AG for $1.7 billion. Chinese shipping
heavyweights Cosco Shipping Holdings Co. and China Merchants
Shipping and Enterprises Co. have poured billions over the past
decade into terminals, rail links and road infrastructure as part
of Beijing's One Belt, One Road initiative to control supply chains
from Asia to Europe.
Maersk is faced with a market "that ultimately views its
services as commodities, so it's got to find a way to add value to
make sure it's a shipping line of choice," said Nick Bailey, the
head of research at U.K. based Transport Intelligence Ltd.
"Providing a service which appeals directly to shippers,
potentially as an alternative to forwarders, seems to be its
solution to this."
Maersk's APM Terminals unit operates a network of 76 ports in
more than 100 inland cargo-handling locations around the world. In
North America, it runs along with Damco, Maersk's freight
forwarding unit, 20 warehousing and distribution facilities in
places such as California, New Jersey, Texas and Georgia.
By contrast, global logistics providers such as Switzerland's
Kuehne + Nagel International AG, Deutsche Post AG's DHL Supply
Chain and Denmark's DSV A/S typically have hundreds of warehouses
around the world. Ceva Logistics says it has 1,000 logistics
facilities world-wide and 130 in the U.S. and Canada.
Those companies handle business for big customers such as
Walmart, Amazon.com Inc. and Home Depot Inc. that source goods from
scores of vendors across Asia, which are delivered to warehouses in
China and then packaged and shipped to the U.S. and Europe.
"We want to do that. We want to run the warehouse, receive the
goods, staff it into containers, ship it to the U.S. and provide a
data feed that says the yellow swim trunks are in that box," Mr.
Skou said. "Then we take it out of the containers," and send the
goods by trucks to distribution centers closer to the final
delivery point.
Maersk already is a big player in port-to-port transportation
for retail and lifestyle supply chains. Mr. Skou said he is looking
for rapid growth in automotive logistics and chemicals, where
Maersk would run the process from customs clearance to distribution
center deliveries. The carrier won't be a last-mile supplier so it
isn't looking to invest in trucks. Instead, Mr. Skou said he is on
the lookout for brokerage firms and supply chain management
companies in the automotive industry.
The company bought U.S. customs house brokerage Vandegrift
Forwarding Co. earlier this year, and Mr. Skou said there may be
more such acquisitions.
The company also acquired a freight-booking startup, Loadsmart
Inc., last year, and this month launched an online tool called
Maersk Spot aimed at simplifying booking with the shipping
line.
Still, Mr. Skou said, some senior managers continue to debate
whether it's better to get on the phone with customers they've
known for years and negotiate freight rates, or let them book ship
space on digitized platforms.
It is a sign of the challenge in turning around a business that
grew from a company formed early in the 20th century that grew into
an umbrella group overseeing investments from ships to
supermarkets. Mr. Skou says the business now needs to approach its
corporate customers "with one sales force and one customer-care
office and one delivery organization."
He said he plans to complete Maersk's makeover by 2021.
Write to Costas Paris at costas.paris@wsj.com
(END) Dow Jones Newswires
June 26, 2019 16:44 ET (20:44 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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