CMA CGM pushes logistics strategy forward with closer ties to Ceva
- After acquiring a 30% stake in Ceva Logistics in October, CMA CGM is selling its freight management company CMA CGM Log for $105 million to the Swiss company, according to multiple outlets. The deal is expected to close in the second quarter of 2019 pending regulatory approval.
- "Via a takeover bid, we hope to obtain the majority of CEVA's share capital and unleash its full potential,” said CMA CGM CEO Rodolphe Saadé in a statement announcing CMA CGM's third quarter earnings. CMA CGM has laid out a plan to boost revenue to $9 billion, or 5% growth per year.
- The deals come amid improved profitability for both companies. CMA CGM posted 6.3% growth in revenue despite the increasing impact of tariffs on shippers in the third quarter, the company announced in a press release. Increased revenue and shipping volumes (up 5.5% YoY) lead the company to increased profitability.
"By strengthening the partnership with CEVA, CMA CGM is actively engaging its logistics strategy," said Saadé. The French carrier is not the only ocean shipping line to expand deeper into ground logistics. Maersk CEO Søren Skou said on the company's recent earnings call that it would be expanding existing secondary services like supply chain management, warehousing and distribution.
Profitability has been a struggle for ocean carriers in recent years, and upcoming challenges — including tightening International Maritime Organization (IMO) sulfur emissions in 2020 and increased tariffs on $200 billion in Chinese imports Jan. 1, 2019 — may explain why the ocean carriers are looking to diversify.
CMA CGM has already priced the fuel and ship upgrades necessary to comply with the increased IMO standards at $160 per TEU and expressed intentions to pass all of this on to customers.
The carrier attributes the growth in volumes of late to its transpacific, India/Oceania and Africa lines and told Reuters that there has been no sign of tariffs hitting the industry so far. Relief from fuel hikes helped CMA CGM achieve profits growth above its peers in the third quarter.
Skou, on the other hand, described palpable effects on his earnings call earlier this month, including a dip in backhauling out of U.S. ports, and stakeholders expect that recent strong volumes won't last.
It is hard to say at this moment whether the narratives coming out of Maersk and CMA CGM describe true operational differentiation or simply a difference in story-telling.
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