CMA CGM: CEVA turnaround top priority

CMA CGM: CEVA turnaround top priority

CMA CGM is building towards its goal of becoming a global logistics force now that it has acquired most of CEVA Logistics. Photo credit: Shutterstock.com.

GENEVA, Switzerland — First priority for CMA CGM after sealing the acquisition of almost 98 percent of CEVA Logistics will be to restore the loss-making service provider to profitability.

Control over CEVA will open new logistics doors for the carrier, which aims to become a global force in integrated supply chain services, but getting CEVA back into the black is the most immediate goal, according to Rodolphe Saade, CEO of CMA CGM.

“Logistics, just like container shipping, is experiencing consolidation,” he told JOC.com. “We see opportunity to further build our presence in logistics, but before we consider any further acquisitions, CEVA must be restored to profitability. That is our first priority.”

The public tender offer that was launched on Feb. 12 has ended, and the CMA CGM Group will hold 97.89 percent of the outstanding shares and voting rights of CEVA upon settlement of the tendered CEVA shares on April 16. At that point, the carrier plans to delist CEVA from the Zurich Stock Exchange.

The operations center for CEVA will be moved to CMA CGM’s homebase of Marseilles, consolidating the management of the two companies in one place.

“The senior management of CEVA was very spread out and our plan is to create an operational center of CEVA in Marseilles with 200 people located not far from our corporate headquarters,” Saade said.

The carrier executive said that although the two will remain separate brands, the purchase will allow CMA CGM to offer more integrated logistics services. “We will run CMA CGM and CEVA as separate companies within the group, but through them will be able to offer customers end-to-end solutions,” he said. “We are already seeing that being able to offer services such as warehousing is opening up more senior level conversations at some major customer and BCO [beneficial cargo owner] companies.”

Strategic differentiation

CMA CGM and Maersk are often mentioned in the same breath as carriers pursuing a broader logistics vision, but the announcement today shows that there are clear differences. Maersk still owns the Damco forwarding business, for example, but has distanced itself from that unit, locating Damco in the Netherlands. At the same time, Maersk is fully integrating supply chain management functions, such as origin logistics and customs brokerage, into its core transportation business, a big step that is mostly without precedent in liner shipping.

CMA CGM, by contrast, is keeping the CEVA business, including forwarding, together as a discrete unit within the group. And although it is relocating the CEVA headquarters to Marseilles, the two will be housed in different buildings. CMA CGM will get to its vision of offering end-to-end solutions not through a single branded business, like Maersk, but rather by bringing together the capabilities of different service providers within a closely knit, family-owned group.

CMA CGM’s strategic plan is to improve commercial synergies by proposing CEVA solutions to CMA CGM customers, and vice versa, integrating CMA CGM’s logistics activity into CEVA. This will increase the logistics provider’s footprint in ocean freight forwarding and allow economies of scale to provide cost reduction with pooled operations, such as purchasing and shared services.

CMA CGM acquired 24.99 percent of CEVA after its April initial public offering (IPO) on the Zurich exchange and later in the year increased its stake to 33 percent. The partnership has already been paying dividends for the loss-making logistics company.

In 2018, CEVA managed to reduce its net debt levels by 43 percent and grow revenue by 5.2 percent to $7.3 billion, and the company late last year outlined ambitious growth plans tied into its partnership with CMA CGM. CEVA has set a target of exceeding $9 billion in revenue in 2021, which will require 5 percent average annual organic growth and a contribution of $630 million from the carrier’s prior forwarding unit, CMA CGM Logistics.

 

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