French group remain cautiously optimistic about the future

CMA CGM moved back into the black in the first quarter, thanks to the sale of terminals, and the carrier remains bullish about the outlook despite the impact of Covid-19 on its liftings.

The French transport and logistics group recorded a $48m net profit for Q1, compared with a loss of $37m the year before – but this was only achieved due to a $185m gain from the disposal of eight port terminals to joint-venture Terminal Link.

4.6% Q1 decline

CMA CGM saw its volumes decline by 4.6% in Q1, to 4.93m teu, dragged down by coronavirus in China and the resulting extended new year holiday.

And following the virus developing into a global pandemic, shuttering many economies around the world, the carrier said it anticipated a 15% contraction in its liftings in Q2.

Nevertheless, chairman and chief executive Rodolphe Saade remained upbeat.

“Despite the uncertainty around the global economy, thanks to our operational flexibility and our discipline in terms of cost control, we anticipate an improvement during the second quarter,” said Mr Saade.

Cautious optimism

Commenting on the CMA CGM result, the final Q1 result from the major carriers that publish their financials, SeaIntelligence Consulting founder Lars Jensen said: “Simply put, market conditions are poor but profits are up.”

“CMA CGM is thus another carrier demonstrating the efficiency of active usage of widespread blank sailings in a weak market environment,” he added.

This was further evidenced by CMA CGM’s liner revenue, which fell by only 3.3%, compared with Q1 2019, to $5.52bn, against the 4.6% volume decline in the quarter.

CEVA “continues to make progress” despite sharp fall

Meanwhile, its logistics arm, CEVA, contributed $1.7bn of revenue to the group during the quarter, but recorded a further net loss of $37m.

However, CMA CGM said CEVA’s “turnaround and transformation plan continues to make progress” and added that a new phase in the plan to return the forwarder to profitability had been launched.

“The execution of this plan includes revitalising business development, reducing costs and modernising industrial assets and systems,” said CMA CGM.

State loan

The carrier bolstered its liquidity during the pandemic with a €1.05bn loan from a consortium of three banks, 70% guaranteed by the French state. The loan has an initial one-year maturity with an extension option of up to five years.

Chief financial officer Michel Sirat said the loan was “a precaution” and confirmed that the group was not planning any further asset sales.

The impact of the state-backed loan was seen as positive by the credit rating agencies Moody’s and S&P, and will also have reassured CMA CGM’s customers concerned about the financial position of carriers to withstand the pandemic.

Blank sailings

“The group continues to adjust its capacity and logistical resources to meet the needs of its customers in order to preserve its profitability and protect its cash flow and its liquidity,” said CMA CGM.

Ocean carriers have adopted a judicious strategy to adjusting capacity to meet the reduced demand, cancelling 28% of their Asia-Europe and 19% of Asia-US sailings in May, according to eeSea data.

The aggressive blanking programs of the three east-west vessel sharing alliances have not only supported freight rates but led in some cases to rate increases as shippers have scrambled to book space.