After reporting a $229 million full-year loss for 2019, CMA CGM’s chief financial officer says the company is on track to pare down debt levels that stood at $17.8 billion at the end of 2019 by deferring a significant repayment due this year.
“We are ahead of the plan, despite the coronavirus,” Michel Sirat told JOC.com. “With the coronavirus, we will have to spend more time with our banks explaining how we are managing this in China, but we are still enjoying a very good relationship with the banks.”
Sirat’s message of confidence comes after Bloomberg News and other shipping publications such as Trade Winds reported that CMA CGM’s debt plan was at risk due to the impact of the coronavirus disease 2019 (COVID-19). CMA CGM required a financial bailout in 2012.
“We are refinancing our debts in 2020 with the NOL repayment, which is way above what was expected from us just three months ago,” Sirat said.
The carrier earlier this month extended its $535 million credit lines with Neptune Orient Line for another three years, giving the carrier a little breathing room. That comes after CMA CGM said in November it was aiming to raise $2 billion from asset sales and refinancing over the next few months.
Revenue flat, excluding CEVA contribution
The company’s revenue was virtually flat last year, excluding business from its acquisition of CEVA Logistics, which was finalized in April. However, CMA CGM’S profitability improved in 2019 from 2018, with its operating margin higher by 12.4 percent, Sirat said in an interview. That operating margin was delivered by CMA CGM’s earnings before interest, taxes, depreciation, and amortization (EBITDA) that reached $3.8 billion.
The group reported a 2019 net loss of $229 million, with IFRS 16 accounting rules, in which leases are accounted for on balance sheets, contributing $329 million of that total that CMA CGM expects to “gradually decline over the years,” and a $140 million negative contribution from CEVA Logistics. CMA CGM recorded a 29 percent increase in its 2019 revenue — but without CEVA Logistics, acquired in 2019 and contributing $7.1 billion, the group’s full-year revenue was down 0.8 percent.
“It is very different this time because I will have $1.6 billion in cash at the end of 2019, I am going to close an additional nearly $1 billion cash injection within the next few weeks,” Sirat said. “That is the main difference, and it is material.”
He was referring to CMA CGM’s liquidity at year-end 2019 that stood at $1.6 billion, according to the earnings statement, up almost $300 million compared with the previous quarter.
Net debt reached $17.8 billion at the end of 2019, with the new accounting rules making up $7.6 billion, the acquisition of CEVA in 2019 $1.1 billion, and consolidation of CEVA’s debt comprising another $1 billion.
Moody’s Investors Service in September downgraded the corporate family rating of CMA CGM, lowering its probability default rating, and then in February changed its outlook for the carrier from stable to negative. In its rationale for the downgrading, Moody’s said the rating followed the acquisition of CEVA Logistics, and that CMA CGM’s large capex program and a difficult market environment would continue to put pressure on the company's liquidity profile.
Although the ratings agency believed cash flow generation should be stronger in 2020 compared with 2019, it cautioned in a Feb. 4 note that CMA CGM “faces sizeable debt maturities during the next 18 months that could be a drag on liquidity should refinancing prove to be difficult.”