Shipping group CMA CGM targets US$1 bil savings in tough market

PARIS (May 20): France' s CMA CGM, the world' s third-largest container shipping firm, reported a first-quarter net loss on Friday and targeted US$1 billion ($1.4 billion) in cost cuts to keep operating margins positive during the current market downturn.

Weak freight rates in the past year have left many lines operating at a loss.

The Marseille-based company is in the process of acquiring Singapore' s Neptune Orient Lines (NOL) for US$2.4 billion in its biggest-ever deal, and last month announced a global vessel-sharing alliance with three Asian lines.

CMA CGM posted a net loss of US$100 million for the first quarter, compared with a US$406 million net profit in the same period of last year, it said in a statement.

Core operating profit fell to US$3 million, also from US$406 million a year ago, while sales declined by 15.3% to US$3.4 billion.

Increased volumes, which rose 2.9%, and an unspecified fall in unit costs partly offset weak freight rates to bring the operating margin to 0.1%.

" In a very difficult environment, we have in the first quarter recorded an increase in volumes above the market average, while maintaining a positive core EBIT margin," Vice-chairman Rodolphe Saade said in the statement.

" We will continue our strict financial discipline, including the implementation of a significant cost reduction plan."

The group said it plans to launch later this year an 18-month programme to lower its costs by US$1 billion. A spokesman declined to give details on the measures involved.

CMA CGM' s group costs were US$14.4 billion last year.

Earlier this month market leader Maersk Line announced a return to profit in the first quarter, helped by cost cuts.

Container shipping has been weakened by oversupply of vessels ordered during a previous boom, along with faltering global economic growth.

CMA CGM said freight rates on Asia-Europe and Asia-Mediterranean routes had improved slightly since the start of May 2016 but the market " remains fragile" .

Volumes growth in the first quarter was mainly due to routes to and from the United States, which outweighed a decline in volumes between Asia and Europe, the company said.