Monday 21st Aug 2017 - Logistics & Supply Chain

Maersk targets $250m savings from capacity cuts

Maersk Line plans to cut its annual sales, general & administration (SG&A) cost run-rate by $250 million over the next two years by reducing network capacity, postponing investment in new capacity, and reducing operating costs.

It expects to save some $150m in 2016 alone.

Soren Skou, CEO of Maersk Line.

Soren Skou, CEO of Maersk Line.

“We are on a journey to transform Maersk Line. We will make the organisation leaner and simpler. We want to improve our customer experience digitally and at the same time work as efficiently as possible,” said Søren Skou, CEO of Maersk Line.

Maersk Line currently has 23,000 land based staff globally and expects to reduce its global organisation by at least 4,000 positions by the end of 2017. It said the aim was to minimise redundancies through managing natural attrition.

“We are fewer people today than a year ago. We will be fewer next year and the following year. These decisions are not taken lightly, but they are necessary steps to transform our industry,” said Skou.

Network capacity will be reduced in the fourth quarter of 2015 and throughout 2016. The line has already decided to close four services:

ME5: Indian sub-continent to Mediterranean

AE9: Asia to Europe

AE3: Asia to Europe

TA4: Europe to North America

The line has also decided not to exercise options for six 19,630 TEU vessels and two 3,600 TEU feeders and will postpone decision on the optional eight 14,000 TEU vessels.

Maersk Line saw EBITDA fall from $1.18bn in the third quarter of 2014 to $765m in the third quarter this year. Revenue was down to $6bn of the quarter, from $7.1bn last year.

As a result net operating profit fell from $685m to $264m.

Maersk said the global container fleet has grown by almost nine per cent compared to Q3 2014 and at the end of Q3 2015 it stood at 19.7m TEU of which 4.0 per cent were idle.

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