A.P Moller-Mrs Uns/Adr

Welcome, everyone, and thank you for joining us on this earnings call today as we present our fourth quarter and full year results for 2024. My name is Vincent Clercq. I'm the CEO of AP Mall and Maersk. And with me in the room today is our CFO, Patrick Yanni. We start with the highlights from the year that just passed. On the back of a strong fourth quarter, we closed the books for 2024 with a full-year EBITDA of $12.1 billion and an EBIT of $6.5 billion. This figure marked the best financial year in Maersk's history outside the pandemic-fueled boom of the years 2021 and 2022. As important as these financial results are the great strides that we have made internally in making the business better, stronger, and more resilient, notwithstanding the high uncertainty we saw in our external environment. And I want to thank all of the team for achieving this. We made clear and tangible progress in our growth segment, logistics and services, with a sustainable step change in margin during the year from 2.5% in the first half to 4.6% in the second half. This step change owes to our continued focus on productivity and cost management, while achieving close to 10% growth here in the last quarter. We are not yet where we want to be, but the operational improvements that we have made in Fulfilled by Maersk are starting to show results. Then we have Ocean, which demonstrated strong operations and, more importantly, agility in the wake of the Red Sea disruptions, as well as strong market demand. We responded to the changes in the operating environment decisively, while maintaining stable and reliable operation for our customers. Meanwhile, we continue to look forward and plan and prepare for our new Ocean network, Gemini. In terminals, we did not only maintain but surpassed the strong performance from the year prior. The portfolio of gateway terminals generated an impressive return on invested capital of 13.5%, all the while undertaking growth investments to expand and extend the portfolio for the future. As we look ahead to 2025, we have several things to feel excited about. But our ocean network, Gemini, in cooperation with Hapagloid, is one of these. Gemini marks the most innovative milestone in the history of Maersk and represents the first step in what we call the network of the future. The launch of Gemini last Saturday on February 1st is the first result of years of hard work and collaboration by our teams from designing the network to preparing our vessels and hub terminals. I will have a bit more to say about Gemini later in the call. But looking forward to 2025, we count on our operating skills and our agility to continue to deliver good results. We expect global volume growth to be around 4%, subject to any major trade disruptions, and for us to grow in line with the market. There has been much discussion about potential Red Sea reopening in recent weeks. We do, however, see no imminent indication of the reopening, but we will continue to monitor the situation closely. What all of this means for our financial guidance is that we expect an underlying EBIT for 2025 to be between breakeven and $3 billion. I will explain the context and the assumptions underpinning the guidance in more detail later on the call. With the books now closed on 2024, we can also announce the dividend proposal for the year just past. For 2024, the dividend proposals will be set by the APP Miller Board at the AGM on March 18 and is a dividend per share of 1,120 Danish kroners. This is equivalent to a 30% payout of our underlying net results in line with our dividend policy and higher than last year's payout. On the back of a better than expected 2024, the strong balance sheet bolstered by further cash generation in 2024 and an improved outlook for 2025, we are also in a position to reinstate the share buyback program, which we suspended this time last year. The program will start effective tomorrow with a size of approximately $2 billion and a duration of 12 months. This implies that the total cash return to shareholder will be approximately $4.4 billion, of which $2.4 billion is the proposed 2024 dividend subject to AGM approval and the remaining $2 billion the reinstated share buyback. This follows the TSR of 8% in 2024 that we achieved for shareholders through the cash dividend for 2023, the Switzer dividend in-kind, and the share buyback until the suspension last February. Looking further forward, we are confident to continue the share buyback in the years following 2025, given the balance sheet strength that we have today. As mentioned at the start, this quarter marked a strong finish to a financial year with strong performance and operational progress notwithstanding a very dynamic external environment. In logistics and services, we saw good revenue growth driven by air and LCL in our transported by Maersk service model, by warehousing and fulfilled by Maersk. We also continued to progress in improving the underlying performance in middle mile as well as last mile, who continued to track positively in the fourth quarter and would expect to see further improvement in the coming quarters. All in all, a good performance in logistics and services with an improved EBIT margin to 4.1, some one-offs driven also by strong margins in managed by Maersk and transported by Maersk. In Ocean, we experienced robust profitability despite rates coming off the peak set in the third quarter. Rates surprised on the upside as they eroded more slowly than expected during the fourth quarter. We ran a tight and efficient ship with strong asset utilization at 95%, and much of our efforts in Ocean in the last quarter went into preparing for the new Gemini network. Finally, terminals continued its streak of excellent performance as reflected by a significant increase in revenue per move while keeping cost per move at bay and driving strong volumes throughput throughout the portfolio of gateways. All of these factors combine to make this quarter the strongest ever fourth quarter and a year which in all quarter exceeded EBIT of $300 million. The segment achieved a last 12-month ROIC of 13.5%, well above our mid-term targets of 9%. Before I dive into the scorecard, let me take the opportunity to announce the date for our next Capital Markets Day. We are pleased to announce that the Capital Markets Day will be held in London on November 13th, later this year. We hope to see many of our analysts and investors at the event, at which we intend to share our progress towards becoming an end-to-end logistics provider, and further details will follow. Together with the executive leadership team at Maersk, I look forward to seeing you there. Now on the scorecard for the fourth quarter. With the throw of the normalization that we saw in 2023 now falling out of the last 12 months period, we see a much brighter scorecard highlighting our good delivery and on most of our strategic targets. But where we still fall short is within logistics and services. The job for us there is clear and simple. We must achieve profitable growth towards the 10% organic revenue growth and 6% margin targets that we have set for ourselves. We have made good strides in improving the quality of our logistics and services business over the past 12 months, but we are not done yet. And our mission is to deliver in logistics and services in the year ahead. And that's actually a good segue into the next slide. As we move into 2025, we have set these strategic priorities around our main business segment. In logistics and services, we maintain our bearings towards profitable growth, namely achieving 6% EBIT margin and continuing the growth trajectory we have set for ourselves in 2024. A main element to achieve this will be to continue the recovery momentum we have achieved in Fulfilled by Maersk, specifically in middle mile and warehousing. And finally, across the board in logistics and services, we maintain our relentless focus on productivity and cost to become a best-in-class logistics operator. In Ocean, our number one priority is to successfully phase in Gemini and reach 90% schedule reliability, which will both deliver better service to our customers and a more agile and cost-effective way to operate our fleet. That will allow us to grow our volumes and reduce our cost per unit with the same equipment. Finally, terminals will provide the world-class hub terminals. hub terminals, in which we have invested $3 billion to increase capacity by about 30%, and capabilities such as IoT technology and digital twin modeling, all to facilitate effective and second-to-none transshipment. On our gateway specifically, we seek to grow in line with the market on our existing portfolio while expanding the portfolio opportunistically through securing of new concessions. You've heard me mention Gemini numerous times now, and that is perhaps a testament to how excited we all are at Maersk about our plan to transform the ocean industry in the quarters to come. Last Saturday, we hit the launch button on the new network after switching our bookings over from the existing network to the new Gemini network from December 2024. Customer feedback and retention have been very positive with bookings into the new network continuing as planned. As we phase in the new network and phase out of the old, there will be a period of 12 to 15 weeks, or about one calendar quarter, representing a typical east-west cycle during which the two networks will run in parallel. June will therefore be our first month in which Gemini will run on its own and alone, and therefore be fully phased in. Leaning on the operational strength of our hubs, we can design a network with more density, higher asset turn, while we maintain the same geographical coverage and competitive transit times for our customers. Those were guardrails principles we had set for ourselves during the design exercise. Gemini represents a more efficient network with benefit for customers and for us. The goal of higher scheduled reliability for more than 90% on-time arrival, such that the ocean cargo is more likely to arrive on time and onwards to the customer supply chain than anywhere else. For us, it represents better asset utilization, leading to decreased cost of approximately half a billion dollars, mostly from lower bunker consumptions. It's horse for course. Smaller vessels on shuttle services calling a smaller number of ports feeding into hubs and the larger vessels on the main liners serving and calling mostly the very big ports and hubs, many of which operated by APMT. This mainliner service will therefore have fewer stops than the shorter loops at the extremities of the old loops and will be serviced by shuttle services. On the right-hand side of the slide, you have an example of how cargo from Shingeng to Bremerhaven will flow in the new network. With the old network, the point-to-point route would have had seven stops. With Gemini, we can simplify this to only three stops across the entire route. The fewer the stops, the lower the risk that cargo will experience and accumulate portside delays. Furthermore, with six out of the eight hubs terminals that we rely on operated by APMT, there will be a better real-time planning, prioritization, and turnaround of vessels so as to neutralize any delay accumulated earlier in the journey and to prevent delays from accumulating during the transshipment. Overall, Gemini represents a rare phenomenon of quality, namely better schedule reliability for the customer, that is also more efficient for us to service. It's a win for customers and a win for us. Throughout the course of 2024, we spoke much about the significant oversupply challenge and the high uncertainty surrounding the duration and degree of the Red Sea disruption. Fundamentally, the supply-demand imbalance that we could have seen in 2024 has likely been pushed back to 2025. However, we think that the outlook from where we stand today is much more nuanced and benign than what we had in front of us just a year ago before the outbreak of the Red Sea disruption. If we first look at the supply side, the new deliveries that will come online throughout 2025, representing a capacity increase of about 2 million TEUs, On top of this will come a potential reopening of the Red Sea, which would remove the supply chain disruptions that we and our customers have experienced over the past year, but would also cause a capacity release of anywhere between 1.5 and 2 million TEUs, all representing about 5 to 6% of the global fleet, as vessels need to sail shorter routes through the Suez Canal. On the other hand, the increase in supply will be partially offset by other supply-side drivers, such as scrapping of vessels that are near or have passed their end of life, and slow steaming out of the environmental and financial consideration. Further, in the short term, potential congestion could ensue from a potential reopening of the Red Sea and from port congestions from vessels bunching and arriving simultaneously at destination, the one via the Cape of Good Hope and another going the faster route through the trans-sewers. Another change compared to last year's assessment is that we can count on improved demand. We are looking into continued strong market demand in 2025 on the back of a strong 2024, which can further net off an increase in supply of about one to one and a half million TEUs. All these factors point towards a supply demand imbalance that is likely not as bad as what we faced 12 months ago. So what does this mean for the guidance? Well, first, we expect the container volume growth, as I mentioned, to remain robust at about 4% and for Maersk to grow in line with the market. As far as our broader financial outlook is concerned, we present to you a range that depends on the timing of the potential opening of the Red Sea as a variable. The low end of the range assumes a mid-year reopening in the Red Sea, while the high end represents a year-end opening, implying no financial impact from the reopening in 2025. Considering these factors and assumptions, we expect the full year 2025 underlying EBITDA of $6 to $9 billion, an underlying EBIT of break-even to $3 billion, and a free cash flow of negative $3 billion or higher. On CapEx, we maintain our CapEx guidance for 24 to 25 of 10 to 11 billion dollars and confirm the same level for 25 to 26. I would now like to pass over to Patrick for a closer look at the financials.

Thank you, Vincent, and thanks to everyone on the call for joining us today. With the fourth quarter driven by good results in all our segments, we had a strong finish to our fiscal year 2024, a year defined in large parts by the ongoing uncertainty about the Red Sea disruption and strong volumes. When we announced our initial guidance back in February of last year, we expected a loss for the year driven by a significant impact of the oversupply situation in ocean, which we saw materializing in the Q4 a year ago, together with the limited impact of the Red Sea disruption. As it became increasingly evident that the Red Sea situation became entrenched and that demand picked up more than we anticipated, we were able to raise our guidance on multiple occasions, reflecting the improving outlook for the year. In that context, our full year numbers with an EBIT of $6.5 billion, a free cash flow of $5.1 billion, and a ROIC of 12.3% reflect both a stronger environment and a great operational performance and cost control of our businesses. Looking closer at the first quarter, The improved year-on-year performance across all segments resulted in significantly higher profitability compared to the fourth quarter of 2023. The business delivered an EBITDA of $3.6 billion and an EBITDA of $2.1 billion compared to an EBITDA of $839 million a year ago and an EBITDA loss of $537 million. Consequently, net profit after tax increased to $2.1 billion and free cash flow increased to $2.2 billion for the quarter, supported by favorable working capital development, a stark contrast to the free cash flow loss in the fourth quarter of 2023. Given the fourth quarter results, our total cash increased to $24 billion with a net cash position of $7.4 billion, up both sequentially and year-on-year. As mentioned earlier by Vincent, our strong balance sheet allows us to relaunch the share buyback program. And looking past 2025, we are confident to be in a position to continue to return cash to shareholders while continuing to invest in the growth of our business despite quite volatile times ahead. When considering both the significant dividend and the announced share buyback, we will be returning 4.4 billion to shareholders, equivalent to 18% of the market capitalization. Let's take a closer look at our cash generation in the fourth quarter on the next slide. Cash flow from operations was $4.4 billion, a significant increase from $166 million in Q4 last year, driven primarily by the increased business performance and by the positive impact of $837 million from net working capital. The improvement in working capital came mainly from better collection and a favorable currency impact. All in all, cash conversion for the quarter increased significantly to 123%, representing an increase both sequentially and year-on-year. As we highlighted in the last earnings call, we had higher capex in the fourth quarter, with growth capex amounting to $1.7 billion. Of this, $1.2 billion relates to ocean, with 60% going to installments of the vessels we ordered during the summer, and the remaining 40% relating to our equipments and hubs. Overall, capex remained tightly managed and below the original yearly guidance. Of the $2.2 billion free cash flow in the quarter, most of the net proceeds were reinvested into short-term deposits. Now let's move on to our segment, starting with Ocean on slide 50. The Ocean business has another strong quarter with high freight rates supported by strong demand, resulting in a significantly better performance than the fourth quarter of 2023. Volumes increased 0.8% year-on-year, while sequentially decreasing 1.3%, following the ordinary seasonal pattern where the third quarter is usually stronger than the fourth in terms of volumes. While freight rates remained high compared to 2023, they have come down from the peak in the third quarter as expected, but erosion was slower than expected, with some pick-up in rates throughout December, which supported business performance in Q4. Operationally, we were able to ensure further sequential improvements to schedule reliability, while running close to full capacity and handling the ongoing impact of reroutings. Consequently, profitability increased, delivering an EBIT of $1.6 billion compared to a loss of $920 million last year, and equivalent to an EBIT margin of 16.2%. Moving on to the Ocean Ebitda Bridge on slide 16, here we can clearly see the large impact of higher freight rates compared to the fourth quarter of 2023, while a reduced bunker price helped to compensate for the higher bunker consumption, which is given due to the rerouting around the Cape of Good Hope. Finally, there was a positive contribution from higher detention in marriage revenue, as well as a mechanical impact of revenue recognition. Now let's look at our KPIs for Ocean on slide 17. As I've touched upon previously, freight rates were significantly up year on year, averaging $2,659 per FFE in the quarter, representing an increase of 38% compared to Q423, but an 18% sequential decline as we moved beyond the freight peak. We successfully kept operating costs, excluding bunker flat year-on-year, offsetting inflation and all the additional costs relating to the reroutings. As in every quarter in 2024, unit costs at fixed bunker increased though year-on-year, given the higher bunker consumption due to the longer sailings. Our average operating fleet increased 6.4% year-on-year, mainly on additional chartered vessels. This reflects our approach of strategically injecting capacity to meet market demand and maintain the necessary agility in the network, which can be seen in light of our continued high vessel utilization. Volumes increased 0.8% in the fourth quarter, driven by a strong demand in Asia-Europe and inter-Asia, amongst others, in marking a 3.6 volume increase for the full year. While our 2024 volume growth was below our estimated global container market growth, it's important to note that our vessels have been sailing at full capacity throughout the year, with vessel utilization at an excellent 96% for the full year. Now, let us now turn on logistics and services on slide 18. Financial performance in the fourth quarter highlights the improvements made to the business since the trough reached the first quarter of the year. Revenue increased by 9.9% year-on-year to $3.9 billion on the back of a solid development in all regions and in most of our products, supported in particular by strong year-on-year growth in warehousing, less than container load, and air. Profitability also increased year-on-year with an EBIT of $158 million, which is more than twice the amount delivered in Q4-23 and equivalent to an EBIT margin of 4.1%. While this represents a sequential margin decline from the third quarter, mainly due to the business mix and some one-offs, the margin recovery throughout 2024 shows that our logistics business is strengthening and that our cost initiatives are paying off. There is still some way to go as we pursue the 6% EBIT margin, but we are confident we are moving closer to reaching our ambition. We continue to invest in CAPEX as well as we pursue organic growth and optimizing product offering. The $232 million CAPEX in Q4 related mostly to air and our contract logistics business. Looking closer at the performance by product family, it managed by where revenue increased 20% to $584 million in the fourth quarter, driven by solid growth in project logistics and lead logistics. Revenue, together with stronger operational performance across most products, resulted in an overall EBITDA margin of 20.6%. Fulfilled by also-so year-on-year growth in almost all regions, with the largest revenue gains coming from warehousing and in particular from the North American market, Despite increased revenue and improved margins in warehousing, lower results and operational one-off costs in last mile and ground freight contributed to an EBITDA margin decline to minus 5.5% for the quarter. Revenue also increased in our largest product family, transported by, where solid volume growth in most of our products together with the higher rates in LCL and air resulted in a 9.9% year-on-year increase, to a total of $1.8 billion. Meanwhile, refocusing on customer profitability and unit cost savings from route optimization and procurement in air, we supported and ebbed our margin increase to 9.5%. Let's move on to our terminals business. On slide 20, terminals delivered another quarter of excellent results, with Q4 2024 marking the best fourth quarter in the segment's history and closing off the best-ever year in that business. Top-line growth was strong as revenue increased 17% to $1.2 billion, driven by higher volume growth and revenue per move. Volumes grew 6% year-on-year, particularly from strong growth in Los Angeles, while revenue per move increased 9% from inflation offsetting tariff increases, better product mix, and higher storage revenue. Cost per move increased 1.1%, reflecting an inflationary impact together with depreciation and product mix. With stop-line growth outpacing higher costs, EBIT logically increased 44% to $338 million and resulting in a return on invested capital of 13.5%. Finally, CAPEX decreased to $158 million this year as the investment into Pier 400 and Port Elizabeth, which we have mentioned last year, have been completed. Turning on to the terminals EBITDA bridge on the next slide, starting from the left, you can see the profitability impact from the 6.7% like-for-like increase in volumes, with growth coming from the mainly external customers and as well as regionally driven by North America. The 9% higher revenue per move made the largest contribution to profitability, more than offsetting the increased cost per move together with high utilization. And with this, I conclude the financial review of our fourth quarter earnings, and we shall proceed to the Q&A section. Operator, please go ahead.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questionnaires on the phone are requested to use only handsets while asking questions. Please limit yourself to one question. For any further questions, you may queue up again. Anyone who has a question may press star and one at this time. The first question comes from the line of Alexa Dugani from JP Morgan. Please go ahead.

Good morning. Thank you for taking my question. Really, it's about competition. Obviously, your largest competitor is pulling ahead in terms of size, and it seems that it has started crossing the Red Sea more recently. How should we think about your use of cash? I mean, clearly, you've decided to do a share buyback. Could you have considered M&A again in logistics and services? And if no opportunity is there, could you look at doubling down on container shipping again to close the gap with your largest competitor? Thanks.

Thank you, Alexa. So first, I think it's true that MSC and CMA have a very ambitious investment program in New Fleet. uh it's true also that we have been very clear on on uh what we want to do with the with ocean shipping which is to stay where where we are because we don't see any correlation between uh between between size and and increased margin or so there is no more correlation there so therefore With the Gemini network, we have the most competitive and the cheapest network to serve our customers, and that's really what matters. So that's, I think, one key point. It has been true for the past years, and it will continue to be true for... Then I think to the last point with respect to capital allocation, I think we're hopefully pleased with the decisions that we have made on both dividends and share buyback and our communication on this respect. And the balance sheet that we have today allows us to be both generous to our shareholders and to continue the execution of the strategy that we have. So when the time comes and we feel that we have the right solidity in the platform, both from a profitability, from a control and from a tech perspective, we will see when it's time to re-engage on M&A. But that will be on the logistics side or the terminal side, but it won't be by doing something big in shipping, which would close a gap that has no impact on profitability.

Thank you. The next question comes from Don Yogo Jensen from Carnegie. Please go ahead.

Yes, thank you, and congrats with the strong finish in 2024. One question on unit costs with a utilization of 95%. What are the levers, so to say, to improve the unit cost going further? I can understand, of course, the bunker argument when you start to sell shorter. But with this utilization, what are the levers to further drive down unit costs? Thanks.

Yeah, Dan. So I think you have, I would put this in two buckets. One, so obviously at 95% for the year across the network, higher utilization is a bucket that is pretty much exhausted. This is actually a higher utilization that we had during COVID. So that's a tribute to the team. They've really done something amazing to have this new efficiency frontier. So I think this one is pretty much maxed out. So I think we have two ways to do it. One is through what I would call operational efficiency, which is what Gemini is about. How do you create more density in the network? How do we create better asset turns? Having fewer port calls and having the coverage that we're building now together with Hapagloid. will achieve these $500 million of savings. You can see the volumes that we have. You can see how meaningful it is on a per FFE basis to bring the unit cost down. I think this is one of the things that we have. The second will follow more... I think the return to the Red Sea is we will see some of the inflation that there has been in some of the cost items, such as the charter rates and so on. That will come down as this gets renewed, and that will continue to bring our unit costs down as just the input into our network gets to be cheaper. So I think it's these two buckets is where there has been inflation. As you see the situation loosen up, you will see this inflation revert on leasing, on container leasing, on ship leasing, and on procurement as well, terminal capacity and so on. There will be maybe some opportunities to do some plays there. And then the operational efficiencies, and I think a big one there is – It's Gemini, but we will continue every year to find new ways of getting more effective on how we design our network. There is still, on the asset turn, there is still a lot to go there.

Can you maybe give some guidance? What are we talking about here in percentage terms per annum, just to get a flavor?

I think I'll give you the guidance that it's a $500 million annualized with Gemini. And you will have half a year of Gemini this year. So I would certainly expect $250 million in the second half year and a minimum of $500 million the following. And then after that, we'll need to continue to dig into that toolbox to see how much more we can get. I think maybe that will be one of the topics we will be happy to talk to in a little more detail when we get to our capital markets day. I think it needs a bit of time to be unpacked.

That's good. Thanks a lot.

The next question comes from Robert Doinson from BNP Paribas. Please go ahead.

Good morning, Vincent and Patrick. I'll focus my question on the bigger picture, if I may. The context being that it's now been more than eight years since the global integrated strategy was announced, over which time I think it's fair to say progress has been slower than expected. And it's certainly true that Maersk has consistently ranked its competitors in terms of profitability. So, looking forward, I think part of the problem for the Maersk investment case is that investors don't know what the integrated strategy will look like when it's completed. They don't know when it will be completed, and they don't know what investment or M&A spend will be required to get there. So, if you could provide some color on latest thinking around those issues, I think that would be super helpful. And also, just in that context, with the stock trading pretty close to historic lows and actually quite a wide range of metrics, even after this morning's bounce, To what extent do you take into account valuation when thinking about the future strategy and future actions? Thank you.

That's quite a wide question. So let me try to give a couple of thoughts on this. And I think some of the things that you allude to is also something that is, I think, better parked into a capital markets day where we can, again, unpack the different elements. But let me start by saying that, obviously, valuation is something that weighs when we consider what we need to do and where we take the strategy. So let me take it – besides that, let me take it from the other side. If you look at the way the world is going with all the disruptions and all the changes that there has been, there's no doubt if you talk to any companies that has – that produces goods – that these disruptions in the supply chain is going to make logistics an area where there is more value to add by supporting customers and being good at doing the job. So for us to continue the diversification and the development of capabilities for the long run in logistics makes more sense today than it did eight years ago when we started the strategy. And that's why it continues to be our direction. Now, You point to the fact that the progress have been slower than expected. I think that for me, there are two reasons for that. One is fairly mundane. In some cases, it's... There are some operational pains that comes into growing into the scale that we need to have. It sounds easy to do M&A, but there is a lot of difficulties with that. It sounds easy to go full organic, but there is also some difficulties to go with that. And I think that this is what we're getting on top of. The second has been the huge volatility of having had to go through both COVID, especially COVID on the way. and the many disruptions, it does create something where actually because of the abnormally high profitability of Ocean in the last five years and a huge volatility in the market in general, the progress that have been made in logistics and services are not really coming through because the volatility on Ocean is taking a lot of that light. But there is... The direction is the right one. The destination that we have is still the same. And I think to unpack a little bit more what does that look like when we get there, I would like to park this to the Capital Markets Day. I think that's one of the key reasons why we feel it's important to hold such an event and to be able to really take you through how does that look like and why do we think that we're in a much different place today than we were just a couple of years ago with respect to actually getting that executed.

If we just have to think about the integrator strategy in a simple terms, let's say it was a football match. Are we at halftime yet? Is that a fair assessment or maybe not?

So I'll take another metaphor. It's a bit difficult because, as you know, in business, we never get the end whistle that says we can go rest and think about next week's game. It's a continuum. But what I would say is in my book, we've gone through the hard stuff, which is all the building, the foundational capabilities. On the technology side, on the job side, on some of the side side, on the connecting the different parts. All of this is stuff that is not visible and that is super hard to do. And that is what we have spent actually most of the time in these past few years doing. We are in a position today that is completely different from what we're looking at. We have a couple of areas such as middle mile and last mile where it's dragging us down in our Fulfilled by Mars compared to where we need to be from a profitability. So I think. The first thing that we need, going back to the slide that I had, we need to get to the 6% next year because that means that all that foundation is done and that we have what it takes then to accelerate the execution of this. So I can't give you a percentage, but I would say the foundational, the hard stuff is done. Now we need to continue the work. But I think we've done the hardest part of what there is in our strategy.

Thank you, Vincent, and I look forward to catching up tomorrow.

The next question comes from Omar Nocta from Jefferies. Please go ahead.

Thank you. Good morning. Just a question on the contracting so far. How would you say the Asia-Europe season went in terms of securing contracts for this year? and any kind of color you can give on what percentage was put under contract and how it fared in relation to 24, and then also maybe kind of what the setup is for the Trans-Pacific contracting season. Thank you.

Yes. So on the contracting, I have two or three points that I want to make. So first of all, at the overall level, we're going to be around the same percentage of contract as spot. I think when the market weakens, it's a good idea to lean into contracts because they tend to adjust lower than the spot. So I think this is something we're continuing to execute. The contracting so far has been progressing quite well. Volumes are in line with the guidance that we have made with respect to volumes, so what customers expect at this stage. Rate levels are also at a fairly decent level. Now, I have to stress that with the fact that contract levels have been adjusted a couple of times up during the last year, we should expect that if rates on the spot market move significantly, customers will be also more willing than usual to come to the table and say, we need to relook at this. So I think Given how much we have adjusted in 2024, we should expect also that the stabilizing effect of contract will maybe erode a little bit compared to what it has been in the past. In Pacific, it's the same thing. Actually, from a market growth perspective, customers are very positive on market growth. They expect that the incoming administration will be good for consumption. and therefore they are talking about fairly strong volumes. It's too early to talk about rate levels there on the Pacific, but at least from a volume perspective, this is continuing to look positive. And then a final note on emerging markets. So the wider south, it also looked like there is some good resilience and some good demand for transport still.

Okay. Thanks, Matthew.

The next question comes from Lars Heindorf from Nordea. Please go ahead.

Yeah, thank you. It's also on Gemini. I'm just wondering, so with you and HAPEC now entering into this hub spoke, why do you believe that none of the other carriers think this is a good idea? Is the cost in terms of the savings that you have mentioned now, the 500 million there, are the cost cheaper to run the Gemini network compared to a point-to-point? And last but not least, are the customers, are they willing to pay a premium for the service that you offer?

So I think, let me start with the last point that you have on customers. I think we're going to need to prove it before we can even entertain conversations on premium. The customers have been educated to having low reliability. I think they're going to need to feel the good stuff before they can actually draw benefits from it. So that I think is the most important, is a very important point. We are doing this. For the reasons that I mentioned in my presentation, it's good for the customer because it will deliver 90%, and it's good for us because it is cheaper to run. The reason why others are not doing it, I think there is one good reason and one not so good reason. One good reason is if you don't have 100% operational controls of your hubs, you can't do it. So we have worked three years in reviewing all the working processes and all the integration of technology between the operation of the hubs and the operation of the shipping line in order to transform hubs into a point that helps you be more on time rather than a point that creates delay. You need to control the hubs. If you rely on third-party hubs, your incentives between the hub operator and the shipping line destroy the ability that you have to deliver what we deliver. So I think that's the good reason why some of them are saying they don't believe in it. because they can't do it. The second is I think that it's an industry that has not invented anything fundamental in quite a long time and therefore there is quite a lot of caution when somebody tries something new as to whether it's going to work or not and that's a bit the default position and I don't think it's a great position but that's the position that they have. Today it's a matter of opinion whether Gemini is better or not. The good thing is On the second half of the year, we will show it in fact, and it will be a matter of fact whether it's better or not. We will see it on the reliability and we will see it on the cost. And I think for us now, you know, we worked on it for three years. We started to get into it. So we can't wait to look at the results in the second part of the year. I think it's the most innovative thing that has happened in this space in a couple of decades.

Next question comes from Alex Irving from Bernstein. Please go ahead.

Hi. Good morning, gentlemen. My question follows. What needs to happen for you to start reshaping your network and returning to the Red Sea and Suez Transits, please?

So... Let's just be clear. There are two things that I'm looking for. First, it needs to be safe because I have colleagues that I need to send in the Red Sea on board those ships. I want to make sure I don't put them in harm's way when I send them through that. It's true for our colleagues. It's true also as an expectation for all the cargo and the assets that we have. So safety is number one. The second thing that we have is it costs actually a lot of work and money to redo the network, redo all the birthing lineups in the US, in Europe, in the Mediterranean, so that we can cater for this new service that arrives suddenly at different times. I need to be sure that it's not only safe for the first time that I send it, but I have reasons to believe that this is going to be safe for the foreseeable future. Because if it's not, and I risk to flip back three months, six months, even a year later, to go back to the Cape of Good Hopes, that's hundreds of millions of dollars of cost to us, maybe more. And it's huge disruptions to the customers. And I think I'm engaging with customers a lot. They're all eager to go back, but they all have always that caveat. We don't want to go and flip-flop back and forth. You get one shot at going through Suez. And therefore, I think you need to look at the situation on the ground and say, are the Houthis either... no longer capable or as what gives them the willingness to attack is no longer there. That's one of the two things that would need to happen. So it's either a full degradation of their capabilities or there is some type of deal, permanent deal on Gaza and permanent deal between the U.S. administration and Iran that takes away the incentive for them to do something like that. And then I think it will be safe for us to go back.

Thank you.

The next question comes from Ulrich Bach from SED. Please go ahead.

Yes, hello, Vincent Patrick. Thank you for taking my question. It's on the ocean volume growth. In Q3 and Q4, your growth has been between 0% and 1% while market growth has been 4% to 5%, according to my figures. Now you state that you want to grow in line with the market in 2025. So considering that your order book is lower than most of the top 10 carriers, how will you achieve bridging that gap between the underperformance in Q3, Q4, and in 2025? Thank you.

So, Ulrik, it's quite simple. It's Gemini. Geminis, because it increases the asset turn, it frees ships that you can dedicate to growth while maintaining a higher asset turn. So as I mentioned before, from a utilization perspective with the old way of designing network, we're pretty much at the max of what we can do. Thanks to Gemini, we're freeing the possibility for us to grow in line with market for the coming years.

Perhaps just a follow-up then. So in the contracting season you've had on the Asia-Europe, is that also supporting your view that Gemini will be increasing the growth for you? Yes. That's very clear. Thank you.

Next question comes from Paris Jane from HSBC. Please go ahead.

Thank you for taking my question. I have two, if I may. And with respect to your 6% logistic business margin, in terms of the building blocks, is it much to do with the self-help with respect to looking at your cost? Or you think it will still depend upon the market dynamics in your logistic supply chain? And second question with respect to Gemini, while it certainly will free up your main vessels in terms of the turnaround, who will be responsible for the feeder vessel network? Would it be only two of you, or you will rely on the independent players to do the heavy lifting with respect to connecting the cargoes to your hub network? Thank you.

Yeah, thank you. I think to your first questions, the big delta, as we've mentioned throughout the year, is on what we call fulfilled by Maersk. So it's both. We need to continue the progress that we have made in contract logistics, and we need to continue the progress that we have made in especially middle mile. The big problem that we have there is a problem of asset utilization and density. So we have too much white space still in our warehousing network. So we need to – this is why I actually – We don't want to say only margin and then growth because the growth is when we target it in the right place is part of the solution. So we need to have to utilize the white space that we have and bring that white space percentage significantly down. That's one big part. And then the other part, our ground freight, it's actually the density that we have in the network of freight stations that we have across North America is way too low. So here, too, we need to increase density and increase traffic so that we get higher utilization of our assets and higher utilization and higher density on the loads, the trucks that move around. So a lot of it now is really focused on FBA, on transported by Maersk and managed by Maersk. We are... At the margins that we need to be in Fulfilled by Merck, we need to continue the progress that we have made just this year. And that's the part that needs to get us and lift us above the six. And there are some cost items that we need to address, but the biggest building block there is higher asset utilization and more density across the network. For Gemini, I want to be clear, most of what you call the heavy lifting of the shuttles, it will be executed by us. As we have done always in the past, there is a few corridors and a few services where we rely on third-party feeder service providers. It was true in the old network, it will continue to be true in the new one, and we have actually worked very strategically with them on service-level agreements and so on, so that what they deliver to us... We can expect it to be at the same level of quality as what we can produce ourselves.

Okay, that's very helpful. Thank you, and have a good day.

The next question comes from Jakob Lacks from Wolf Research. Please go ahead.

Hey, good morning. Thanks for taking my question. So as things currently stand, do you see any risk of demand destruction from U.S. tariffs on China? It didn't really sound like it based on your comments around Trans-Pacific expectations, but just wanted to get your thoughts there. And then did you see any pull forward ahead of the tariffs in the near term and port labor, or has demand on the trade lane held pretty steady in your view?

So from a labor perspective, I think we're – The negotiation on the East Coast has been concluded so that we don't expect more disruptions. And as far as we can see, we don't plan on any major or we're not expecting any major disruption. With respect to tariffs, I just want to start by saying that nobody knows at this stage what's going to happen on the tariff front. So what I'm going to say here is, of course, with a pinch of salt. But the way customers are thinking about this and the reason why they're very strong still when I look at how many purchase orders have been placed for the coming months despite the toxin tariff is two things. They think that the new administration came in because the American people was tired with inflation and therefore that they are very aware that whatever they do, reigniting a bout of inflation is going to be very detrimental politically also. And that creates a lot of confidence amongst retailers and companies that they can continue to count on. on high level of consumption, because that's what has been promised to the U.S. consumer. Now, there are some tariffs that are implemented. The other thing that feeds a lot for our customers is the fact that when the first round of tariffs were implemented under the first Trump administration, actually, Forex movements between the renminbi and the dollars compensated for the tariff so that in In U.S. term, the U.S. consumer could basically pay the tariff without filling it in U.S. term when he was going to his department store to buy the goods. And I think there is some expectations that as long as the tariffs are measured and as long as the administration stays true to the fact that they're going to do something on tariff but with an eye on inflation, that things will be okay and will not have a huge impact on volume. Of course, if things turn completely and somebody slaps 60% tariffs overnight, then this will have an impact. But that is not what seems to be the dominant scenario so far. And we're seeing actually a more measured... implementation and also a more measured response from China, which leads us to believe that, at least so far, there is some balance. But that, of course, is subject to a lot of things neither you nor I can really forecast accurately, I think.

Very clear and helpful. Thank you.

The next question comes from Muniba Kayani from Bank of America. Please go ahead.

Yes, good morning. So, just on your balance sheet, and as you've thought about the $2 billion buyback, and you said that you expect to continue that beyond this year, kind of how do you see your balance sheet evolving at the end of this year? And, you know, in the scenario that 26 is tougher, like, what are the buffers in there, as you've thought about the balance sheet over not just this year, but beyond that?

Yeah, thanks, Moniva. So, indeed, we do have a balance sheet today which is even stronger than it was last year, while we are actually more confident in terms of the... the impact of imbalance of supply and demand in ocean, that makes us more confident that actually we will be able to continue to return cash looking past 2025, so also 26, and onwards in the scenarios that we have today, because we can indeed have a necessary buffer to absorb a bit of volatility in ocean, which will come. We just talked about macroeconomics, which none of us can really forecast precisely now but overall the demand is solid there is a way out of the supply demand situation which is more benign than we thought a year ago And therefore, I would say we do have the strength to both continue to return cash to shareholders and to invest in growth, whether it's organic growth, and as Vincent earlier mentioned as well, when we are ready and have the right opportunity as well in logistics. So from that point of view, I think we are in a good position now to... to continue and accelerate as well the implementation of our strategy. You have to see the balance sheet is strong, and actually we just had the third year best ever. We have Ocean, which runs operationally in a new dimension with Gemini, which we talked about a lot during the call. We have LNS, which is actually starting to perform and generate cash. And we have terminals, which is actually at best ever. So the operational picture is actually pretty good, and there's clear progress here in the implementation of our strategy.

If I can follow up, when do you think the industry would react? You know, you have this estimate around scrapping, idling, slow steaming. What is needed to trigger that response from the industry?

Muneeba, that's an inexact science, but I can say that, you know, as Patrick said, because we have visibility basically four to five years out on the supply side with the order book of the yard, and because the delivery of new ship was very front-loaded in 24 and 25, and actually quite low in the years that follow, we think that the situation actually is much more benign than what we were facing last time, A, because we have absorbed quite a bit of that capacity, and because also the market has been much more resilient. The demand side has been much more resilient than we have. Now, there was one other slide. There's still 2 million capacity coming, and there's about one and a half that will eventually be freed when we go back through the Suez. There is also pent-up demand for scrapping. There is a lot of ships that can be returned. So I think the tools are there. But you should probably expect two to three bumpy quarters when that happens, because it takes a bit of time for the leasing contract to expire and being able to return tonnage. It takes a bit of time to actually act on some of the scrapping to secure the positions and so on. So I think the outlook... It's much more benign if you take, you know, the three to five year view. But it doesn't mean that there won't be a couple of quarters here and there where things will get a bit more bumpy. That is as we deal with some of the supply shock, for instance, from from sailing back through through Suez. I'm not. I've not factored in here any type of demand shock, back to the previous questions on if there is like a big tariff impact and so on, that we would also have to deal with through the same measures, like we have done at the beginning of COVID, like we have done before.

Ladies and gentlemen, in the interest of time, that was the last question. I would now like to turn the conference back over to Vincent Clerc for any closing remarks.

Thank you, everyone, for all of your questions. I would like to make a few final remarks before wrapping up the call. We closed the year with a really strong finish in the fourth quarter, and 2024 marks the best financial year in the history of Maersk outside this pandemic fuel boom that we had in 21 and 23. Overall, we saw strong business performance across all segments on the back of strong demand and operational progress. Specifically, we saw tangible progress in the form of margin improvement in logistics and services, strong operation in ocean, as we responded decisively to the Red Sea disruption and captured strong market demand and high performance in terminal as well, confirming the new normal that we had set for ourselves at the end of the previous year. The financial performance in 2024 translates into a proposed dividend per share of 1,120 kroners for 2024, while our wider financial position and outlook for 2025 support the reinstatement of the share-buy-back program of approximately $2 billion over the next 12 months. Overall, our strong business, our agility to respond to changes and our financial position makes us confident that we can continue to progress and grow further in 2025 at a time where resilient supply chain are more important than ever for our customers. We also look forward to seeing many of you in our upcoming roadshows and investor conferences. Thank you for your attention and see you soon. Bye-bye.