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Logistics & Services reported a decrease in revenue
A.P. Moller - Maersk has closed Q1, 2019 with a 33.0% increase in earnings before interest, tax, depreciation and amortisation (EBITDA) to US$1.2 billion while revenue grew by 2.5% to US$9.5 billion compared to Q1, 2018. Operating cash flow improved significantly to US$1.5 billion and free cash flow was US$3.5 billion, including sale of shares in Total S.A.
Profitability in Ocean increased. EBITDA grew 42/0% to US$927.0 million compared to same period last year, mainly driven by a 3.9% increase in average loaded freight rates and an improvement in total operating cost of 2.8%. Revenue increased to US$6.9 billion despite lower volumes which declined 2.2%, impacted by the frontloading seen on the Pacific trades in Q4, 2018 and weak demand on Latin America and Oceania trades.
Looking at terminal profitability, the opening of the Moin terminal, Costa Rica and positive underlying volume growth in gateway terminals had a positive impact on terminal profitability in Q1. Terminals & Towage reported an increase in revenue to US$991.0 million from US$911.0 million and in EBITDA to US$267.0 million from US$244.0 million compared to same quarter last year.
Logistics & Services reported a decrease in revenue in Q1, 2019 by 0.5% to US$1.4 billion driven by lower air freight forwarding revenue. EBITDA increased to US$51.0 million from US$45.0 million in Q1, 2018.
The strategic transformation also progressed. In Q1, Maersk delivered combined synergies of US$130.0 million. Cash return on invested capital (CROIC) improved to a positive 6.7% from a negative 5.9%, driven by higher earnings, strong cash conversion and a reduction in invested capital.
Non-Ocean revenue and gross profit in Logistics & Services grew, but needs to accelerate in the coming quarters.
Non-Ocean revenue grew by 3.8% in Q1 when adjusted for the closing of production facilities in Maersk Container Industry. Logistics & Services improved gross profit by 2.2%, positively impacted by growth in intermodal and from warehouse facilities.
Looking ahead, subject to the current risk of further restrictions on global trade and other external factors impacting freight rates, bunker prices and foreign exchange rates, A.P. Moller - Maersk reiterates its guidance of an EBITDA of around US$5.0 billion, including effects from IFRS 16. Furthermore, guidance on CAPEX of around US$2.2 billion and a high cash conversion is maintained with an estimated organic market growth in volumes in Ocean of 1.0%-3.0% for 2019.
The Company is still facing considerable uncertainties from weaker macro numbers as well as the risk from trade tensions and implementation of IMO 2020. In Q1, volumes on trans-Pacific trade between Asia and North America have shown signs of decline and new tariffs can potentially reduce expected growth in global container volumes by up to one percentage point.