APM Terminals lost $168 million in 2017, cites challenging markets

APM Terminals.

APM Terminals said that despite signs of stability in some markets, it expected what it described as “industry-wide market challenges and rate pressure” to continue in 2018. Photo credit: Shutterstock.

APM Terminals reported a net operating loss of $168 million in its full-year 2017 result, sharply down from theh $438 million profit booked in 2016.

The loss came despite a rise in year-over-year volumes handled at facilities owned and operated by the world’s fourth-largest container terminal operator to 39.7 million TEU on an equity-weighted basis — a 6.5 percent increase from 2016. 

In its earnings report announcement, the Hague-based company attributed the loss to impairments of $621 million in what it called “commercially challenged markets.”

“APM Terminals faced various commercial challenges in 2017, which resulted in rate pressure, leading to lower revenue per move and impairments in challenged markets,” the company said.

Volume growth was driven by the strong performance of terminals in North Asia, Latin America, and because of additional throughput gained from its sister company, Maersk Line

Average terminal utilization fell 3 percent year over year to 66 percent, on a consolidated basis, or 71 percent, excluding new terminals that started operations in 2017 and divested terminals.

Revenue totaled $4.1 billion, down slightly from 2016. Revenue was negatively impacted by the loss of services in North America and exchange rate losses related to its terminals in Africa.

“The average port revenue per move, based on the consolidated revenue excluding construction revenue, decreased to $193 per move [down from $198 per move], mainly due to market rate pressure and the rate-of-exchange impact at some of the African terminals,” the company said. The average cost per container move in 2017 was $172.

The company said that despite signs of stability in some markets, it expected what it described as “industry-wide market challenges and rate pressure” to continue in 2018.

Upcoming customer-side mergers of “K” Line, MOL, and NYK, and Cosco and OOCL may result in continued rate pressure across the market, the company noted.

Earlier in the year, APM Terminals announced a major shift in commercial strategy with the intention to increasingly focus on inland services for beneficial cargo owners.

“Liner customers are rapidly becoming fewer but there are thousands of landside customers large and small for us to also focus on. We have always done business with these customers and it is important for us to serve them well and ensure a better flow through the whole supply chain,” said chief commercial officer Henrik Lundgaard Pedersen.

Pedersen said it was unlikely APM Terminals would invest in new deepsea terminals over the coming years and it was focused on completing pipeline terminal projects including those in Italy, Costa Rica, Morocco, and Ghana. 

“We have put a lot of capital into the ground over the past number of years and we will take a breather from this for a while.  We have such a massive portfolio that we will continue to divest non-core assets, but overall we are still a net investor [in deepsea terminal infrastructure],” Pederson said.

Meanwhile, Dubai-based port operator DP World hinted last week of a stronger focus on investment in upstream supply chain activities that complement its global terminal network. 

“We continue to seek opportunities in complementary sectors in the global supply chain and will maintain capital expenditure discipline by bringing on capacity in line with demand,” chairman/CEO Sultan Ahmed Bin Sulayem was quoted as saying in its results announcement for 2017.

At the same time, fueled by policy support under the Belt and Road program of the Chinese government and access to low interest rate loans, China’s global terminal operators are expanding their global footprints.

China’s two largest container terminal operators reported strong volume growth in 2017 driven by high levels of containerized trade growth in their core mainland China market and new overseas acquisitions.

Throughput at overseas terminals invested in by Cosco Shipping Ports (Cosco) rose to more than one-fifth of total throughput for the first time, despite strong growth at facilities in mainland China. The overseas contribution to non-equity weighted throughput at China Merchants Port Holdings was one-quarter of the total.

APM Terminals recently divested its majority shareholding in its Zeebrugge operation in Belgium to Cosco, whose shareholding in the 1 million TEU annual capacity terminal rose to 100 percent.

APM Terminals also divested its facility in Dalian, China last year, while its facility in Tacoma in the United States ended operations. 

Operations at three new terminals — Lázaro Cárdenas, Mexico, Izmir, Turkey, and Quetzal, Guate Mala — commenced in 2017. 

Contact Turloch Mooney at turloch.mooney@ihsmarkit.com and follow him on Twitter: @TurlochMooney.

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