Maersk Line chief defends restructuring

AP Møller-Maersk’s troubled container businesses have been focusing too heavily on growth and too little on filling ships with profitable cargo, according to the division’s chief executive.

Eivind Kolding told the Financial Times on Wednesday that a planned restructuring of the businesses would address the problems by allowing the company to focus more clearly on each individual strand of the business and reducing complexity and bureaucracy.

Mr Kolding was speaking after the FT revealed on Tuesday that Maersk planned to change the division’s strategy in an effort to turn round its profitability and that a number of senior executives were being moved to other roles.

The changes were announced to members of staff in letters sent on Monday in which Mr Kolding pointed out that other container carriers had kept control of their costs much better than Maersk Line, the company’s container line, were better at attracting the highest-value cargo and had higher utilisation rates, which is a measure of how close to full ships are on an average sailing.

The letter says that if Maersk Line had the same cost structure, types of cargo and rates of utilisation as APL, the container line owned by Singapore’s Neptune Orient Lines, it would have made more than $5.5bn in profit over the past three years, instead of an actual $2bn.

The container business is to be split into three divisions: Maersk Line, the logistics business, which takes charge of customers’ overall transport and logistics needs; other container businesses, such as container manufacture and repair; and the ERS Railways rail business.

Mr Kolding refused to comment directly on the internal documents but he said the new measures were mainly aimed at improving profitability; the container businesses are set to make a second successive annual loss this year.

“They should be reflected in the bottom line, I would say,” Mr Kolding said of the measures. “Separating our logistics business gives us a better focus on that business and Maersk Line – and, of course, a reduction in bureaucracy and complexity should enable us to improve the bottom line.”

Only once profitability returned would Maersk Line be able to reverse the current decline in its market share. “Becoming more profitable is really the licence to grow,” Mr Kolding said.

Mr Kolding accepted there was a potential contrast between his aspiration to fill his ships and the desire to find higher-value cargo. It could prove impossible to find enough high-yield cargo to fill a ship.

“That’s the beauty of doing business: you have to make the right trade-off,” Mr Kolding said.

“It’s not an unusual business situation to be in, but we have been focused more on volume growth in isolation and not enough on utilisation.”

The division had been working on the new strategy since before Nils Andersen took over as the group’s first externally appointed chief executive on November 4, Mr Kolding said, but Mr Andersen had been involved since then.

Source:FT.com