A.P Moller - Maersk A/S

Welcome everyone and thank you for joining us on this earning call today as we present our first quarter results for 2026. My name is Vincent Clercq, I'm the CEO of Epimolar Maersk and I would like to introduce our new CFO Robert Ernie who is joining me here in the room for the first time. Many of you will no doubt have the opportunity to meet Robert on the upcoming roadshows and conferences. Let me start with the overall highlights for the quarter. At the macro level, we continue to see strong demand growth across all of our segments and most regions. The big exception was North America, which has remained weak since the start of the trade tensions about a year ago. This resilient level of demand is easily observable in our own number, but it wasn't enough to stabilize the ocean freight rates. The supply overhang there has worsened, as the many new vessels delivered throughout 2025 and into 2026 have outpaced this strong demand. The Middle East conflict has required also operational adjustments, but it did not have a material financial impact in this quarter. This is mainly due to the delayed recognition of revenues and costs in ocean. I will elaborate on this shortly on the following slides. Overall, we delivered an EBITDA of $1.8 billion and an EBIT of $340 million, impacted overwhelmingly by the lowest rates in ocean year-on-year. Lower earnings led to free cash flow of negative $874 million for the quarter. Looking ahead for the full year, notwithstanding the disruptions that the Middle East conflict have brought, we are maintaining our guidance given what we can see right now. On the basis of container volume markets of 2% to 4%, we guide for underlying EBIT of between negative $1.5 and positive $1 billion, and a free cash flow of negative $3 billion or better. The Middle East conflict is not expected to have a material impact at this stage through the use of both operational and commercial levers. Our maintaining the guidance and the range reflects the fluid environment that we are in, but it also speaks to the agility and resilience of our business, such that we can withstand such large disruptions without materially changing our financial outlook. And that is a good segue into the next slide, where I'll add a few more words on the Middle East conflict. It is important to highlight that the outbreak of this conflict is primarily impacting ocean. Logistics and services and terminals have not been and we don't expect will materially be impacted. Thanks to our strategy put in place over the last decade, we have a much more diversified and resilient revenue and cash flow streams today that will cushion the impact on our results that the ocean markets is faced with. Let me start by saying that we have over 6,000 colleagues in the affected countries, and we currently have six vessels stuck in the Persian Gulf, comprising own and time-charted vessels with crew on board. We also have our gateway terminal at APMT Bahrain, our hub in Salalah, we have warehouses and offices, and all the colleagues are safe and accounted for. Safety of our peoples, vessels and assets is our number one priority. This means right now that operations also in and out of the Strait of Hormuz have been suspended based on our continuous security assessment. The Gulf region, before the outbreak of the conflict, represented about 2-3% of global containerized trade, so direct volume impact is limited on the global scale. The situation in the Strait of Hormuz has also impacted the situation in the Bab el-Mandab Strait, and we have reversed and halted the gradual return to the Red Sea transits for safety reasons since the beginning of the hostilities. We have seen rate spikes since the outbreak of the conflict, which averages on spot rates up to about 40% since the end of February. It is important to note that this rate increase has been roughly in line with the cost increase we have faced. Operationally, the modularity of our Gemini network has helped us pivot with volumes back to pre-war levels and limit the disruptions to our volume delivery and service quality. We have been able to isolate part of the network impacted by the conflict and carry on with our operation while maintaining the highest reliability and in-delivery. While the oil prices have surged and bunker availability has become under pressure, we have been able to maintain bunker supply through available reserves on board vessels and in storage facilities on land. We have a coverage at this time of minimum for a quarter ahead, which is in line with normal coverage. We have responded to fuel shortages in certain parts of our network, most notably in Asia, by redistributing available fuel from North America and Europe to ensure that our vessels can bunker before departing again for their head hold. The cost impact of this energy shock is unprecedented both in terms of size, the speed at which it has unfolded, and the dislocations it has created in the market. For us so far, it represents approximately half a billion dollars in extra cost per month that we must find a way to pass through. If these elevated bunker prices persist, which seems likely, we will expect to deploy more slow steaming to reduce the cost impact. we remain confident that the impact of the shock can effectively be contained between a combination of commercial and operational measures. In terms of the numbers, there is limited financial impact from the conflict in the first quarter given the accounting effects of delayed recognitions of both revenue and costs. The increased costs that will flow through the P&L in Q2 and beyond are being recovered through higher spot rates and a successful implementation of commercial levers with our contracted customers, most notably surcharges and bunker formulas. As mentioned, this is about $500 million of extra cost per month, which we are recovering in full today, even in an oversupplied market. Overall, despite heavy disruptions to energy markets, Maersk is well diversified and stands well positioned to weather these challenges and take advantage of the opportunities that will undoubtedly arise. You may recall the strategic priorities we set for Ocean as well as the other segments back in February. Looking at Ocean first, on Protect, our high asset turn, we have delivered a 6 percentage point overperformance on volume growth versus fleet growth, driven by Asian exports, which is comfortably above market. This has allowed us to increase our asset term and bring down our unit cost. This follows similar outperformance we saw in the third and fourth quarter of 2025. It is the new baseline now that we have created through Gemini and the one that we must continue to improve on going forward. We also demonstrated strong operational performance by filling our vessels to reach a utilization of 96%, reflecting discipline in fleet deployment. On Grow, with an above-market growth of 9%, we delivered a strong quarter and ensured that we leveraged the agility created by Gemini to maximum impact. The strong volume performance was delivered against the backdrop of continued downward pressure on rates, with rates down 14% year-on-year. This came from contracts re-rating at the start of 2026, driven by this industry oversupply. Finally, on the focus on profitability, we have demonstrated a sustained decrease in unit costs notwithstanding the Middle East conflict, owing to our strong operational performance. This I'll return shortly to on the next slide. As mentioned, commercial levers are helping us to recover the cost increase from the Middle East conflict. The benefits of Gemini are on track and will incrementally benefit the P&L until the end of quarter two. From quarter three, it will become part of the baseline. As mentioned, our strong operational performance is also reflected in the sustained decrease in unit cost driven by our modular network, which I am particularly pleased with and is due to the hard work of our teams. Since Gemini's inception, we have delivered 7% year-on-year decrease in unit cost at fixed energy. What makes this particularly impressive is that we have sustained this trend in this quarter, even in the wake of the Middle East conflict and the operational disruptions it has brought. Cost leadership remains central across all of our businesses, but especially in ocean with tougher times and more disruption. We will continue to roll out initiatives such as potentially slow steaming or restarting operation through the Red Sea in this regard to ensure that we protect our profit and margins going forward. In logistics and services, our priorities in 2026 are twofold, accelerate the margin improvement and improve on our growth performance. So I am very focused on margin expansion and productivity as these will drive better performance this year. On the first priority, we have demonstrated clear improvements in our challenge product, especially air freight and middle mile with higher year-on-year margins in both. These improvements have come from productivity gains as well as more effective revenue management. Looking at margins more broadly, this quarter marks the eighth consecutive quarter with year-on-year EBIT margin improvement, reflecting the operational progress we have made across the portfolio. This quarter, we improved our EBIT margin by 0.5 percentage points to 4.6%. There is, of course, more to do, and our focus for the rest of the year remains on revenue management and productivity improvements to drive performance. On the second priority of improving growth, we have delivered a revenue growth of 9% overall across the portfolio. While further proof points need to be delivered in the coming quarters to confirm this good performance, we are satisfied with the current momentum. Our job is to grow, but to do so profitably, continuing to make investments where it makes good sense, like we did in Singapore, if we turn to the next slide. Back in mid-March, I had the pleasure of attending the opening of our new modern warehouse in Singapore. World Gateway 2 is a fully automated multi-client distribution center spanning about 100,000 square meters and strategically located close to major transport infrastructure. The facility marks a major expansion of our contract logistics and e-commerce capabilities in Asia Pacific and represents a doubling of our footprint in Singapore. It is equipped with state-of-the-art robotics and automation technologies. For customers, this will mean faster order fulfillment to end-to-end customers and shorter lead times as well as improved accuracy generally. The modern technology and scalability will unlock opportunities in new verticals, including luxury, to complement the others where we already cover, such as lifestyle, FMCG, retail, wellness, and technology. We are excited about World Gateway 2 and look forward to delivering value to our contract logistics customers. In terminals, looking at our strategic priorities for the year, in relation to the first one, growth through existing and new location, we demonstrated solid growth of 4% year-on-year. What is equally exciting is that the growth plan that we have either announced or executed during this quarter. These investments will allow the business to diversify and increase its portfolio of gateway terminals across the globe while ensuring continued strong value generation. First, we announced the strategic expansion plan to upgrade North Sea Terminal in Bremerhaven together with our partners at Eurogate. I'll elaborate on this one shortly on the next slide. We also announced the acquisition of a 13.7% minority stake in Southern Container Terminal in Jeddah, Islaming Port alongside DP World. And further, we executed the incoming transfer of our 49% minority share in the Hateko Haiphong International Container Terminal, which is located in an area of crucial importance for Vietnam's growth and for the Asia and Trans-Pacific trade. Finally, we completed phase 2 of the expansion of Lázaro Cardenas in Mexico with high level of automation, electrification and the use of clean energy sources. We are now proceeding with phase 3 of the expansion of that terminal. On our other priority, maintain long-term profitability, the quarter generated a very strong return on invested capital of 16%. We do expect the effect of growth investment in greenfield projects to affect the ROIC figure in the coming quarters as invested capital increases ahead of activities during the build-up phase. These are great investments, though, that will secure future growth and deliver strong returns over many decades for our shareholders. The expansion plan to upgrade Bremerhaven is an example of what we do best and comes straight out of our playbook of operational excellence. The €1 billion planned investment, together with our partners Eurogate, will significantly upgrade North Sea Terminal in Bremerhaven and promise a significant return. As we have recently done in Pier 400 in Los Angeles, we will implement automation to bring down our break-even level. The learning from Los Angeles means that we expect the implementation and outcome to be even better this time at NTB. In parallel, we will expand NTB's capacity by around a third to 4 million TEUs per annum, which in turn will strengthen the location as a key terminal in the Maersk Ocean Network. And I will now hand over to Robert, who will walk you through the detailed financial and segment level performance. Thank you.

Thank you, Vincent. I'd like to take a brief moment to introduce myself, as this is my first earnings call with Maersk. My name is Robert Ernie, and I started as the Group CFO of Maersk in February of this year. I have 30 years of experience in finance across the global logistics sector, of which about plus 10 years as Group CFO in previous companies. Maersk is a company I've long admired and come to know well from the customer side. I'm very pleased to be part of the team. I look forward to meeting many of you in the days and weeks ahead. Now let me turn to the results for the quarter. The first quarter was characterized by solid operational execution across the business with strong volume growth. However, this was against a more volatile environment and materially lower earnings in ocean, driven by deteriorating rates as a result of industry's oversupply. We delivered revenue of $13 billion, which was a 2.6% decrease year on year. Lower rates were only partly offset by the strong volume growth. The impact from lower freight rates can be seen in our profitability, which declined despite earning growth in terminals and logistics and services. We delivered EBITDA of $1.8 billion and EBIT of $340 million. This led to a decline in return on invested capital to 3.8%. Free cash flow was negative, $874 million in the quarter, reflecting the lower earning base. Our balance sheet remained strong and we retained significant financial flexibility. Following the distribution of dividends for the financial year 25 and continuation of the share buyback program, we ended the quarter with $18.4 billion of cash and deposits and a net cash position of $1.3 billion. Let us look at our cash flow generation in Q1. Let me comment on a few of the key developments in the bridge, starting from the left. Our networking capital increased by $913 million in the first quarter, as the higher price of bunker drove an increase in the value of bunker inventory, while customer receivables also increased. As a result, operating cash flow was $1 billion. Relative to EBITDA, this implies a cash conversion of 59% down from 102% in the first quarter of last year. This is mainly due to the increase in net working capital as already explained. Our capital lease installments increased by roughly $400 million over last year to $1.2 billion. The increase is mainly related to installments towards the renewal of the Port Elizabeth Terminal in the USA concession, which was signed in Q2 2025, as well as the exercise of purchase option on some formerly chartered vessels. Gross capex remained sequentially stable at $1 billion but decreased around $400 million year-on-year, reflecting a lower investment level in ocean. As usual, the majority of gross capex related to ocean investments. After these items and the $231 million proceeds from sale of aircraft, which is included in the other bucket, free cash flow was negative $874 million for the quarter. In addition, we returned $1.3 billion to shareholders through the distribution of dividends for the financial year 2025 and the ongoing share buyback. Taking this together with net borrowings and other items, net cash flow for a quarter was negative $2.4 billion. So let us have a closer look at the financial performance of our segments, starting with Ocean. I will start by reiterating a point made by Vincent earlier. The financial impact of the Middle East conflict was immaterial in the first quarter, even as supply chain disruptions led to an increase in both rates and costs towards quarter end. The impact will be more visible in our P&L in the second quarter as we consume our bunker inventory and recognize revenue from containers shipped at high freight rates from March onwards. Ocean reported revenue of $8.2 billion, down 8.2% from last year. This is driven by the impact from much lower freight rates, partly offset by the substantial volume growth driven by strong Asian exports. The commercial mix was more or less in line with our target, with 44% of volumes on longer-term rate products. Operating costs remained broadly stable despite various disruptions in the external environment. With the increase in volumes, this means that unit cost at fixed energy was down by 7.1% compared to last year. Profits were slightly lower sequentially with EBITDA of $903 million and EBIT of negative $192 million. Ocean continues to reap the benefits of the Gemini network. We maintained industry-leading reliability for our customers and we're seeing sustainable financial benefits from better asset turns and bunker savings. These are helping to cushion the full impact of declining rates. Finally, gross capex was $716 million, which is in line with our capex guidance. In the EBITDA bridge, you can see how all of these different factors have contributed to the year-on-year development in quarter profitability. The significant rate decline was the dominant factor, driven by lower rates from the supply overhang with a large negative impact of around $1.2 billion. This was only partially offset by stronger volumes. There was a positive impact from the lower price of bunker, which decreased 16% year-on-year to $486 per fuel, oil equivalent ton. Note that this does not reflect the increase in oil price that happened throughout March. Bunker consumption was also down by 5.3%, driven by network efficiencies. Net-of-the-volume effect, we managed to keep both container handling and network cost, excluding bunker price, largely flat year-on-year. There's also a significant revenue recognition element, as rates declined sharply between Q4-24 and Q1-25, but were stable between Q4-25 and this past quarter. A pure timing effect. Continuing to our logistics and service business, the segment continued to track positively in the first quarter. We are growing, and we are growing profitably. Revenue increased by 8.7% year-on-year to $3.8 billion. Growth came from all three service models. Revenue was down sequentially following peak season in the later half of 2025. This quarter also marks the eighth consecutive quarter of year-on-year EBIT margin improvement, with the business delivering EBIT of $173 million, implying a margin of 4.6%. This represented a 0.5 percentage point increase in EBIT margin compared to the previous year. Let me remind you that from the next quarter, we will be reporting logistics and services under a new structure as already advised. And therefore, only briefly on the current service models, which you will be seeing for the last time. You can see the volume growth helped to drive increased revenue from all service models. Profitability-wise, most of the increase came from fulfilled by Maersk through middle-mile and transported by Maersk through air. Specifically, air saw volume increase by 20% compared to last year. We continue to prioritize investments in profitable growth, and whilst CapEx was 30% lower year-on-year, this was only as a result of the phasing of investments. Stepping back, the picture shows that broad-based top-line growth is translating into better profitability, particularly in the parts of the portfolio where we have been focusing on operational improvements. Revenue was up around 9%, while EBIT was up 22%, demonstrating good operating leverage and continued improvement. As Vincent says, we are focused on margin expansion and productivity to drive performance. That is our job for the coming quarters. So I round off my financial review of the segment with our terminal business. Through a quarter of geopolitical conflict and supply chain disruptions, our terminal business again demonstrated its resilience and delivered a solid performance. Revenue increased 6.7% year-on-year to $1.3 billion, driven by higher revenue per move and volumes across most regions. The volume growth of 4.3% was largely coming from North America, which experienced growth of 11%. This was due to Gemini, which consolidated its volumes at two North American terminals, representing a net gain relative to the former 2M alliance. Revenue per move increased around 3%, driven by improved rates, favorable mix, and forex, but partly offset by lower storage revenue. Cost per move similarly increased about 4%, mainly reflecting higher depreciation from recent investments, adverse forex and investments to extend the life of our cranes and other equipment. This was partly offset by lower SG&A and the benefit from higher volumes. EBITDA reached $488 million with a margin of 37.1%, while EBIT increased by 11% to $436 million, corresponding to a margin of 33.2%. Gross capex increased to $171 million, driven by gross investments, including SWAPE in Brazil and BIPAVAF in India. It should be noted that while return on invested capital on a 12-month basis for the segment increased to 15.7%, capital employed will increase following the recent investments while incremental earnings ramp up. Moving on to the financial guidance. Following the first quarter performance and given what we can see now, our 2026 financial guidance remains unchanged. Assuming global demand remains robust, we continue to expect global container volume growth of 2% to 4% in 2026, with Maersk to grow in line with the market. On this basis, we continue to guide for an underlying EBITDA of $4.5 to $7 billion, underlying EBIT of negative $1.5 to positive $1 billion, and free cash flow of negative $3 billion or better. Whilst we maintain our cash flow guidance, we are experiencing higher working capital because of higher bunker costs, which is absorbing additional cash. Our cumulative capex guidance also remains unchanged at 10 to 11 billion for 2025 to 2026 and likewise for 2026 to 2027. The guidance range continues to reflect industry overcapacity from new vessel deliveries as well as different scenarios on the timing of the reopening of the Red Sea and Strait of Hormuz and their consequent impacts. With that, we remain focused on operational execution, cost discipline, capital allocation as we navigate what is still expected to be a volatile year. On that note, we finished the first quarter financial review and we'll now proceed to the Q&A. Operator, please go ahead.

Ladies and gentlemen, we'll now begin the question and answer session. Anyone who has a question may press star and one at this time. Once again, star followed by one. The first question from the phone comes from Cristiane Delco with UPS. Please go ahead.