CMA CGM Books $248 Million Q1 Net Loss, Expects Full-Year Profit

CMA CGM booked a $248 million net loss in the first quarter, but the French ocean carrier said it was breaking even in April and expects to make a full-year profit due to higher freight rates and cost cuts.

Revenue grew 2.6 percent from the first quarter of 2011 to $3.6 billion and traffic was up 13.4 percent at 2.6 million 20-foot equivalent units.

The Marseille-based carrier lost $31 million before interest, tax, depreciation and amortization.

CMA CGM expects better results in the second quarter. “Oil prices are coming down and we have seen a 300 percent increase in Asia-Europe freight rates and a 70 percent increase in Asia-U.S., so we are confident Q2 is going to be good,” said Michel Sirat, the carrier’s CFO, in a conference call with reporters. He said CMA CGM is also confident it can deliver a “positive year” in 2012 as a result of the strong second quarter.

The world’s third largest container line cut costs by $96.5 million in the quarter, ahead of its initial target, and expects to achieve total savings of $400 million by the end of the year.

Sirat said the carrier is also targeting asset sales in the second half of the year. The group is in negotiations with a number of investors about buying a minority stake in Terminal Link, its terminal-operating subsidiary. “We don’t expect closing before year-end,” he said. He declined to speculate on whether Turkey’s Yildirim Group would exercise its option to invest another $250 million to expand its minority stake in the carrier.

CMA CGM said its performance has improved “sharply” since the beginning of the second quarter due to a significant rebound in ocean freight rates and lower fuel oil prices. The recent softening of freight rates on the Asia-Europe trade has led some carriers, including Maersk Line, to postpone a planned peak season surcharge on June 1. “We haven’t made any decision yet on the peak season surcharge and are looking at what is going on in the market,” Sirat said.

Carriers idled as much as 6 percent of total capacity through the first quarter, Sirat said, but they have since put more capacity back, which has brought idle capacity down to 3-5 percent. If rates continue to slide, “there will be room to idle more ships and to absorb more capacity through slow-steaming on trades that have not yet adopted this practice,” he said.

CMA CGM, which is talking with its bankers about restructuring its $5 billion debt, swung to a $30 million loss in 2011 from a $1.6 billion profit in 2010. “We are hopeful we will have an agreement with our banks by summer time,” Sirat said.

Photo: Michel Sirat. Courtesy CMA CGM.

Contact Bruce Barnard at brucebarnard47@hotmail.com. Contact Peter T. Leach at pleach@joc.com. Follow him on Twitter @petertleach.