French container shipping company CMA CGM reported a net loss of USD 100 million in the first quarter of 2016 in an environment characterized by strong pressure on freight rates, with average revenue per TEU fall of 17.6%.
This is a substantial drop from USD 406 million profit posted in the corresponding quarter in 2015.
CMA CGM’s revenue came in at USD 3.4 billion for the period, down from USD 4 billion when compared to first-quarter 2015 when the group benefited from particularly favourable freight rates and volumes.
However, the company saw a 2.9% increase in volumes during the first quarter, to 3.2 million TEU, beating the market which grew by 1.2%.
CMA CGM mainly attributed the increase to growth in the Transatlantic and Transpacific lines operating to and from the United States, which offset the decrease in volumes carried between Asia and Europe, where the group had scaled back its capacity in response to weaker demand.
“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. We will continue our strict financial discipline, including the implementation of a significant cost reduction plan. In addition, we are moving forward on our strategic projects, namely the proposed acquisition of NOL and the creation of a new operational alliance OCEAN with a launching anticipated in April 2017,” says Rodolphe Saadé, Vice-Chairman of CMA CGM.
CMA CGM’s acquisition of NOL has already received some of the required clearance from the relevant regulatory authorities, namely the European Commission as well as Indian authorities.
In addition, prompted by tough market conditions the company has initiated a new plan to cut costs by USD 1bn within 18 months. The program will be rolled out in 2016.
Looking at the market conditions CMA CGM pointed to recent trend on the Asia-Europe and Asia-Mediterranean lines shows a slight improvement in its freight rates since 1 May 2016, but the environment remains fragile.