A.P Moller - Maersk A/S

Welcome everyone and thank you for joining us on this earnings call today as we present our second quarter results for 2025. My name is Vincent Clerc, I'm the CEO of AP Mollermersk and with me in the room today is our CFO, Patrick Yanni. As usual, we start with the highlights from the quarter that just passed. In the second quarter of 2025, we demonstrated strong financial performance in a volatile external environment. We delivered EBITDA of 2.3 billion dollars and an EBIT of 845 million dollars driven by strong execution across all our businesses. This happened against the backdrop of a historically uncertain external environment which materialized already towards the start of the quarter as we discussed at our earnings call in May. The geopolitical volatility and low visibility into macroeconomic factors that we experienced this quarter were unprecedented. Nevertheless, in each of our business segments we have performed well. In logistics and services, we carried on with our progress delivering an EBIT margin of .8% towards our own targets of 6%. This reflects continuous improvements in relation to previous years and previous quarter. In Ocean, we successfully completed our transition to Gemini on our East-West network and posted strong volume growth and good profitability. All the while, we navigated significant volume and rate volatility, not the least on our Trans-Pacific service. June marked the first month in which Gemini operated exclusively with the -to-em network now fully phased out. We are thankful to all the teams who contributed to making this such a success. Terminals continued to perform strongly, supported by high volumes, higher revenue per move and high utilization. With the first half of the year now behind us, what does this mean then for our financial guidance? First, given the first six months and our view into Q3 as well, our outlook for the container market volume growth for 2025 has improved. We now expect growth to be between a positive 2 and positive 4%. While there is continued uncertainty for North America, market demand outside North America has proven to be more resilient than initially expected, allowing us to increase our volume outlook. Our view on the Red Sea situation remains unchanged, such that we still expect that the disruption will last for the full year. Ultimately, for our financial guidance, we now expect our full year EBIT to be between 2 and 3.5 billion dollars. This is up from the previous EBIT guidance of between 0 and 3 billion dollars. More details will follow later on the call. Now taking a closer look at each of our business segments, starting with logistics and services, we achieved an EBIT margin of 4.8%. This represents a -on-year improvement of .3% and brings us closer to our 6% target. This reflects also progress in our challenge products of air, middle mile and last mile, areas in which we have re-based our business as well as the cost base to improve profitability. The progress we have made on the operational front, however, was impacted by the uncertainty we have experienced in North America, which is our single largest region in terms of revenue in logistics. Regional revenue in North America was down 8% -on-year for the quarter. While we have advanced, there is more to be done and we will continue to take all necessary actions to improve profitability and achieve profitable growth. In ocean, we demonstrated strong execution, not least with Gemini now fully and successfully phased in. As you might have seen from the different reports, we have achieved already at this stage reliability score above 90% since the launch in February. Cost savings are also on track and we will be able to share more data on this on our next quarter's call. Despite the volume and demand volatility we experienced throughout the quarter, we showed strong volume performance with volume up .2% -on-year and 10% sequentially. This is a testament to the strength and agility of our network, not least our ability to manage vessel capacity swiftly and effectively to adjust to the demand changes we see in specific parts of the network. This has also led to good capacity utilization of 94%, which increased about 2% point sequentially. We continue to see the longer term trend for rates coming under pressure as the supply demand imbalance widens. Our average loaded rates were down 7% sequentially. Nevertheless, market spot rates at quarter end were 37% higher at the end of the quarter than they were at the end of the first quarter. This sets a good exit level for the quarter and a watermark to carry over into the next quarter. In terminals, we delivered another excellent quarter driven by record high volumes, supported by the extra volumes that Gemini has brought to our gateway terminals. Revenue per move increased -on-year, supported by storage revenue and price increases across the portfolio. The terminal ROIC also reached a record at 15.4%, well above the 9% target. And here our invested capital will increase in the coming quarters as we continue to invest in our portfolio, including the Port Elizabeth extension, which we announced back in March. Turning to our midterm targets, as you can see, we are full on all but two of the circles on the page. Needless to say, we are working to increase our profitability in logistics and services, which is trending in the right direction with sequential and -on-year margin improvement. We have made good operational progress in our challenge products of air, middle mile and last mile, while seeing good revenue growth in other products, more in line with our organic revenue growth targets. The message here is clear, however. We are progressing, but we are not satisfied with where we are. Our priority is to continue to improve in the coming quarters and double down on our efforts. Back in May, we expressed more cautious view on demand due to the geopolitical volatility and lack of visibility into macroeconomic factors. The strong market demand that we expected at the start of the year looked more uncertain and potentially worsening the supply and demand imbalance for the rest of the year. Nevertheless, the delay in the potential reopening of the Red Sea allowed us to maintain the original guidance communicated in February. In the meantime, we have seen stronger volumes in the first six months of the year and expected part of this momentum to carry into the second half. That said, the situation remains fluid and we continue to watch trade development as well as consumer demand patterns and inventory levels very closely. On other supply-side drivers, there was essentially no change. New industry delivery is fixed such that about 2 million TEU of capacity will continue to enter the global fleet for the full year. The Red Sea reopening looks unlikely and we still expect the disruption to remain with us for the full year with potential congestions to ensue. Similarly, our view on supply-side drivers in response to the Red Sea reopening remains unchanged from our expectations. Overall, the positive delta of strong market demand looking more uncertain allows us to increase our container volume outlook and ultimately our financial guidance. And that is a good segue into the next slide. As mentioned earlier, we now expect global container volume growth to be between positive 2 and positive 4% for 2025 given the more resilient demand that we are seeing outside North America. This puts us away from the scenario in which we could see a negative volume growth for the year and is an upgrade from the previous volume outlook of negative 1 to 4% from May. There is no change in our assumption of the Red Sea disruption, which we still expect to be with us for the full year and absorbing net supply in the industry. Against the backdrop of this factor, as well as a strong first half-year performance, we upgrade our financial guidance for full year 2025 to an underlying EBITDA of $8 to $9.5 billion, previously $6 to $9 billion, and our underlying EBIT from $2 to $3.5 billion, previously from $0 to $3 billion, and a free cash flow of negative $1 billion or higher, previously negative $3 billion or higher. Our CAPEX guidance of $10 to $11 billion for 2024-25 combined and $25-26 combined remains unchanged. And I will now hand over to Patrick, who will walk you through the detailed financial and segment-level performance.

Thank you Vincent, and hello to everyone on the call. Q2 2025 was another quarter with strong financial performance across the Group, delivering results broadly in line with our previous year performance, despite a much more volatile operating environment. We reported EBITDA of $2.3 billion and EBITDA of $845 million, resulting in an EBIT margin of 6.4%, compared to last year's EBITDA of $2.1 billion and an EBITDA of $963 million. Sequentially, performance declined moderately, as expected, driven by the softening of rates in OCEAN due to the increased supply across trade lanes. The erosion in OCEAN was, however, cushioned by our other businesses, with increased performance in logistics and services, benefiting from operational gains, and continued excellent performance in terminals. Net profit after tax was $639 million, leading to a strong return on invested capital of 13.7%, driven primarily by the high earnings in Q3 and Q4 of last year. Free cash flow for the quarter was negative $373 million, owing to the slightly lower profitability combined with ongoing OCEAN and terminal investments and an increase in working capital. Our capital structure remains strong, and we returned $864 million cash to shareholders during the quarter, including $514 million through share buyback. Our buyback program is well on track, and we are committed to continue returning cash to shareholders while also investing in our strategic priorities. Total cash in deposits stood at $19.9 billion, with net cash at $2.5 billion. Our balance sheet remains, therefore, healthy and well above our maximum leverage thresholds. Let's take a closer look at cash flow on slide 11, where we can see that cash flow from operations increased to $1.9 billion in the second quarter, driven by a higher -on-year EBITDA of $2.3 billion, which was partially offset by a networking capital increase of $332 million, half of which was currency related. This led to increased cash conversion of 81%, up 5% compared to Q2 2024. Capitalized lease installments increased to $1 billion, impacted by the concession extension of our terminal in Port Elizabeth in New Jersey, while gross capex remained sequentially stable at $1.3 billion and in line with our multi-year guidance as we continue investing into growth in terminals and LNS and maintain our fleet renewal program in Ocean. You can also see the impact of our $687 million acquisition of the Panama Canal Railway Company that was made on April 1st and our $864 million return to APMM shareholders during the quarter. Turning to our Ocean segment on slide 12, Ocean delivered a solid operational performance in Q2, despite an extremely volatile trading environment, continued softening of rates and elevated cost pressure. At the same time, the business successfully transitioned to the new Gemini network with initial reliability scores in line with our ambition. Volumes were strong, growing 10% -on-quarter across all trades and .2% -on-year. This growth supported a high utilization rate of 94%, up .8% points compared to Q1. Loaded freight rates continued decreasing in line with expectations down .6% -on-year and .9% sequentially, with increasing volatility through the quarter as market dynamics shifted rapidly. This was partially mitigated by active capacity management and strong cost control. From a financial standpoint, Ocean generated an EBIT of $229 million, equivalent to a .7% margin and an EBIT of $1.4 billion, which is broadly in line with the same period last year and reflects strong execution on costs and volumes despite rate erosion. EBIT was impacted by higher depreciation and amortization costs following continued capacity investments, and comparatively, the absence of gains on vessels and container sales of $202 million that we had in Q2 2024. Slide 13 illustrates all the main elements of Ocean's -on-year EBITDA development. On the left, you can see the large negative impact on profitability from the .6% low rate rates, cushioned by the tailwind of .2% increased volumes. Ocean saw a positive impact of $271 million from lower bunker prices compared to last year, while container handling and network costs increased slightly. EBITDA was also supported by detention and emergency revenue, together with a large technical impact from the timing effects of rates as we are comparing to a period of steep rate increases back in Q2 2024. All in all, these offsetting factors brought Q2 2025 EBITDA in Ocean to $1.4 billion, a .6% increase -on-year. Let's now have a look at the Ocean KPIs on slide 14. The Ocean business' solid performance in the second quarter is highlighted in these metrics, with a strong volume growth helping to offset a dynamic rate and cost environment. Loaded volumes increased .2% -on-year, reaching 3.2 million FFEs, as demand remained resilient on key trade lanes, including Asia-Europe, Middle East, Europe, Latin America, and Intra-Asia. Sequentially, volumes were up 10%, supported by a strong network execution and growth across all regions. As stated earlier, our average rate rates declined .6% -on-year and .9% compared to Q1, reflecting the adverse sequential rate development. This rate erosion is a direct result of excess capacity and pricing pressure in the market. During the quarter, however, volatility was high and exit rates were significantly higher than the average rates of the quarter. On the cost side, operating costs excluding bunker rose 9.3%, largely due to higher handling charges and network-related costs. Unit costs at fixed bunker was up .8% -on-year at $2,409 per FFE, but improved .1% sequentially, reflecting the benefit of higher volumes. Bunker costs were down 16% -on-year due to both lower full prices, but also increased efficiency, which allowed for reduced consumption despite higher volumes. The average operated fleet grew 7.1%, reaching 4.6 million TUs, in line with our planned vessel deliveries, and the strategic injection of capacity to meet the strong demand. Capacity utilization also remained high at 94%. In Q2, we maintained a balanced mix between short-term and long-term contracts, with 48% of volumes on long-term agreements. For the entire year, we expect a 50-50 term split. Let's now turn to our logistics and services business on slide 15. In the second quarter, logistics and services delivered revenue of $3.7 billion, up 1% -on-year. This was driven by growth across most products, particularly in lead logistics, warehousing and first mile, which continued to see strong customer demand, while the executed rebasing of our middle mile and first mile activities impacted the previous year comparison. Geographically, as we alluded to before, logistics and services saw growth from all markets outside of North America, with strong -on-year growth in particular from Latin America and India, Middle East and Asia. However, the operational growth made across the broader portfolio was partially offset by continued headwinds in the segment's largest markets, North America, where performance was sluggish during the second quarter. EBIT improved to $175 million, representing a 39% -on-year increase, and the EBIT margin rose to .3% percentage points from Q2 last year. The increased EBIT reflects ongoing profitability and productivity gains in multiple products, and a core component was the slow but steady improvement in our middle mile, first mile and air businesses. Now, let's have a look at the product-level breakdown with logistics services on slide 16. Starting with our freight management offerings, revenue were year-increasing by .3% -on-year to $522 million, with the EBIT margin improving to 21.7%, up from .1% last year. This performance was driven by strong contributions of the upselling of value-adding services in logistics and strong performance of court-chain logistics. In fulfillment services, refocusing efforts in middle mile and last mile in North America, together with the continued momentum in warehousing, led to improvements in profitability with only modest impact to the top line. Revenue declined slightly by 1.7%, reaching $1.4 billion, whereas the EBIT margin improved to minus .1% from minus .2% last year. Revenue rose moderately in our road and air transport activities to $1.8 billion, equal to a .7% increase -on-year and supported by higher volumes in first mile than transportation. EBITDA margin remained flat at 7.4%. We round off with our terminals business on slide 17, where terminals delivered another strong quarter, continuing the positive trend seen across the last several quarters. Revenue grew by 20% -on-year to $1.3 billion, driven by higher volumes, improved tariffs, and higher storage revenue. Volumes increased .9% with a strong uplift across all regions and supported by our new Gemini network, as volumes from our ocean business alone increased 29%. The higher volumes boosted utilization, which rose to 86%, with several terminals operating close to maximum capacity. Revenue per move increased 8.9%, reflecting an improved terminal mix, pricing, and storage revenue. Meanwhile, cost per move increased by 12%, largely due to significant labor inflation, but partially mitigated by the increased utilization. EBIT increased by 31% -on-year to $461 million, with a margin of 35.3%, up .9% points from Q2 last year and 3.3 points higher sequentially. This was supported not only by the strong operational result, but also by higher income from joint ventures and associated companies and one-offs. Sequentially, the operational performance has stabilized at the current high level. ROIC rose to a record 15.4%, underlying the strong return profile of this business, despite a continued high level of investment. CAPEX for the quarter came in at $141 million, with an increase driven by construction and expansion of new terminals. Turning to the breakdowns of the terminals EBITDA on slide 18, terminals delivered an increase EBITDA of $50 million from $408 million to $458 million, which was driven by the growth in volumes and the increased results from GVs and participations. The revenue per move also increased significantly, allowing to fully offset the $103 million headwind from higher cost per move primarily due to labour inflation. And with that, we have finalized the review of our business segments and we are ready for the Q&A. Operators, please go ahead.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their 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 then 2. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. In the interest of time, please limit yourself to one question. Anyone who has a question may press star and 1 at this time. The first question from Alexia Dugani, JP Morgan. Please go ahead.