CMA CGM, the world's third-largest container line, has reported a net profit in the fourth quarter of last year, supported by a recovery in freight rates and efficiency measures taken during a prolonged downturn in shipping.
The French group reported a net profit, including Singapore-based NOL acquired last year, of US$45 million for the fourth quarter, compared with a $46 million net loss in the same period of 2015. For the full year, it posted a net loss of $452 million including NOL, against a $567 million net profit in 2015.
In a financial results statement, the carrier said that the shipping market had continued to see improvements at the start of 2017, but the sector remained fragile and as a result it was not ordering any new vessels in the near term.
The news comes after German liner Hapag-Lloyd recently announced its full-year operating profit dropped in 2016 only to rise significantly in Q4, 2016, echoing Maersk Line’s results that were published earlier in 2017, and adding to the evidence that the maritime sector's economic landscape is changing for the better.
CMA CGM has also delayed taking delivery of three vessels scheduled for this year until 2018, after already postponing an unspecified number of deliveries from 2016. Its fleet size decreased to 453 ships from 462 in 2015.
The shipping industry has been plagued by vessel overcapacity and uncertain economic growth, prompting CMA CGM's $2.4 billion takeover of NOL.
CMA CGM also launched in the second half of last year a savings plan aimed at reducing costs by $1 billion within 18 months. This has helped lower unit costs by 5% on a like-for-like basis, excluding fuel, in 2016.
Its full-year operating margin was slightly positive at 0.2%, or 0.5% excluding NOL.
Shipped volumes rose 20.4% last year including NOL, but were down 1.3% excluding the acquisition, with CMA CGM citing as previously a focus on profitable volumes and Q3 2016 results released by CMA CGM revealed a net loss of $268 million.
Market leader Maersk Line last month reported an underlying operating loss of $384 million in 2016, but parent company A.P. Moller-Maersk forecast a $1 billion improvement in underlying operating profit this year at its shipping unit, helped by signs of a market recovery.
CMA CGM will start leading the Ocean Alliance on April 1, 2017, which has the most services at its disposal with a total of 40 loops spread across seven East-West trades, followed by THE Alliance with 32 services and 2M with 25.
The carrier line is also seeking to raise $1 billion from asset sales following the NOL takeover.
Rodolphe Saadé, CMA CGM CEO, said: “2016 has been a landmark year in the history of our development, with the strategic acquisition of NOL and the creation of Ocean Alliance, which will fully contribute to the Group’s performance in 2017.
“In 2016, we succeeded in maintaining a slightly positive core EBIT margin, despite historically low freight rates, focusing on the volumes generating the highest contributions.
“With the increase in freight rates observed in recent months and the operational discipline that we apply quarter after quarter, we recorded a positive result in the 4th quarter and delivered one of the best performances in the industry.
“In 2017, the market is expected to continue its recovery. CMA CGM will pursue its strategy of development and innovation, in order to consistently offer its customers more high value-added services and thereby differentiating ourselves from the competition. In this context, the digital transformation that we are implementing within the Group will be a strategic tool to achieve this target.”