A.P Moller - Maersk A/S

Welcome everyone and thank you for joining us on this earning call today as we present our second quarter results for 2026. My name is Vincent Clerc, I'm the CEO of AP Moller Maersk and with me in the room today is our CFO, Robert Erni. Let me start with the overall highlights for the second quarter. At the macro level, market demand continued unabated despite the disruptions from the war in the Gulf, driven by Far East exports on almost all trade lanes. Exports from the Far East grew for the third consecutive years while the backhaul volumes were stagnant or negative. This has led to significantly more imbalanced trade flows and increased congestions in various regions including Europe, the East Coast of South America, West Africa and the Middle East as volume levels are challenging the limits of ports and landside infrastructures in these regions. These bottlenecks quickly translated into significant and sustained increases in the spot rate for mid-May, which not only had a significant effect on this quarter, but we expect will affect the outlook for the rest of the year, which I will get to shortly. If we look at the financials, on the back of higher spot rates in Ocean, we delivered an EBITDA of $3 billion and an EBIT of $1.6 billion. Free cash flow turned positive again at $549 million, supported by higher earnings, albeit partially offset by a build-up in working capital driven by higher receivables as a consequence of higher rates and by bunker inventory because of higher energy prices. As you may have seen, we have upgraded our guidance for the full year. Based on market volumes growth of about 4%, we now guide for an underlying EBIT of 4.5 to 6.5 billion dollars and a positive free cash flow. We'll return to the guidance later in the presentation. But looking at the operational highlights by segments, in Ocean, we leveraged the agility of our network and made the necessary operational adjustments to adjust to the new situation in the Middle East and successfully increased volumes in other corridors. Weekly volumes are now consistently above pre-war levels. As we indicated last quarter, we successfully implemented commercial measures during March to recover elevated costs linked to the Middle East situation on contracts as well as on our spot business. Separately, the continued strong market demand and more imbalanced trade flows have led to increased congestions in multiple geographies and a second round of increase in a spot rate from mid-May. On the Red Sea, we have gradually been reintroducing services through the Bab-el-Mandeb Strait, with four services to date, the first one being announced on July 6. These make up about a third of the volumes that would ordinarily be transiting through the Strait and the Suez Canal. We continue to monitor the security situation in the region and are prioritizing the safety of crews, cargo and vessels in every transit that we make, and in the decisions on the return of other services. In logistics and services, the broad commercial momentum that the team has built over the past quarter supported growth across the portfolio. We saw continued margin improvement in both of our new segments of forwarding and landside, which contributed to further EBIT margin improvements to 5.1% for this quarter. The Gulf region has been impacted by the effective closure of the Strait of Hormuz, but we have managed to protect our customers' supply chains through the use of land bridge solutions. In terminals, we continued to grow the portfolio through a new greenfield investment that we announced in Da Nang in Central Vietnam. And as far as the existing portfolio goes, we delivered strong top-line growth while demonstrating disciplined cost control to drive improvement in both profit and margins. Now looking at the strategic priorities we had set for ourselves at the start of the year starting with Ocean. On Grow we have delivered good volumes growth at around 4% on the back of strong market demand and operational delivery as we quickly adjusted for the disruption in the Middle East. On protect our high asset turns, the volume growth have outpassed the fleet growth by 2% points thanks to the efficiencies that Gemini has delivered. Utilization remains very high at 96% with strong discipline in our fleet management. Gemini is now fully in the base so future asset turn uplift will likely be less pronounced, meaning that volume growth will be more in line with fleet growth in the coming quarters. Moreover, this with utilization already at a high level, the task for us will be to ensure that we have the capacity to grow, and we will use various levers to ensure that we continue to do so. On focus on profitability, higher spot rates from the strong market demand and the ensuing congestion drove strong ocean earnings for the quarter. The cost increase from the Middle East conflict on contracts was recovered through surcharges and bunker formula. Finally, with Gemini now fully implemented for a 12-month period, we can confirm that the ocean cost benefit came in at about 950 million dollars, just above the upper range previously communicated of 7 to 900 million dollars. Turning to logistics and services, this quarter we have introduced the new reporting structure that we announced earlier in the year. Going forward, we will report logistics and services across three segments, namely forwarding, solutions and landside. At high level, forwarding comprises air and ocean forwarding products, while solution comprises contract and lead logistics products, and landside comprises inland and ground freight products. This change is designed to give greater value for customers through clearer and better product categorization, simplify our logistics and services portfolio and organizational structures internally, and improve comparability with our peers in the industry. Through this, we will also give you a better view and understanding of where growth and margin progressions are coming from across the portfolio. As you will recall, our priorities in logistics and services are to improve growth and accelerate margin improvement. On the first priority, the business delivered very strong revenue growth of 15% in the quarter, driven both by volume growth in most products as well as higher rates. The high growth this quarter is a testament to the growth platform that we have been building over the years. And whilst we are pleased with the growth over the past couple of quarters, we are certainly not complacent and continue to work hard to grow this business sustainably. As I mentioned, land-bridge solutions helped mitigate disruptions from the Middle East situation, illustrating the value of the integrated model for our ocean customers. On the margin improvement, we continue to deliver progress, with this quarter being the ninth consecutive quarter with year-on-year EBIT margin improvement. Our margins in forwarding and landside are strong, but we have to acknowledge that solutions still need improvement. The focus here is on converting the warehousing pipeline, reducing white space, and improving operational efficiencies as the new business is worn and ramps up. Overall, the business has shown that it can grow and improve margins at the same time, and these remain key priorities for us for the remainder of the year. Turning to terminals, the priorities remain to grow through existing and new locations and to maintain long-term profitability. The segment continues to perform well in that regard. It delivered strong revenue growth of 11%, driven mainly by revenue per move, illustrating the strong pricing power on the terminal side now as most terminals are full. New locations, including Rijeka in Croatia, are ramping up and helping compensate for volume impacts from disruptions in the Middle East, most notably our lower volumes in our Gateway terminal in Bahrain. We also continue to expand our portfolio with our greenfield investment in Da Nang, Vietnam. I'll add a few more words on this one very shortly. On profitability, terminals continue to deliver a strong return on invested capital of 14.8% while at the same time investing for growth. As we have signals, with the series of new investments we undertake, we expect some pressure on the ROIC during the build-up phase, but return on the existing portfolio will remain strong. Let me briefly highlight the Da Nang facility, which is an excellent example of the type of long-term infrastructure investments we want to achieve in APM terminals. APM terminals, together with our local partner Hateco Group, won a competitive tender process to develop a new multi-user terminal in Da Nang in central Vietnam. The port is strategically located in a region of Vietnam that is growing fast and is poised for long-term economic growth. The concession agreement with the Da Nang government gives our consortium exclusive rights to operate and expand Da Nang container ports for 50 years. This builds on the partnership with Ateco following the opening of the Hai Phong terminal in North Vietnam last year. The terminal will include 8 deep water berths with a total throughput capacity of more than 5.7 million TEU per year once fully built out. Our terminal will serve the growing Central Vietnam Gateway market as well as the neighbouring countries of Laos and Cambodia, Thailand and Myanmar as indicated on the map. The phase 1, comprising birth 1 and 2, will already go live in 2029. This is exactly the type of locations where we see long-term value creation, a strategic gateway for a growing market and an opportunity to build a state-of-the-art green and smart container terminal with a partner we know well. Before I hand over to Robert for the financial review, let me take a step back and talk more broadly about the developments in the ocean markets that have led to the change in outlook and financial guidance for the year. Container market demand has been extremely resilient, this growth being driven by exports from Asia. This has continued relentlessly despite various events such as the war in the Middle East or a new round of tariffs. Demand out of Asia grew 6.2% in Q2 alone and our weekly volumes today are above what they were prior to these events. This is not a pull forward, but real underlying demand and has led us to increase our expectation of growth in the container market from 2-4% earlier in the year to around 4% at the end of June. Additionally, that growth continues to be imbalanced with head-hold growth far outpacing back-hold. This means that terminal volumes are growing far faster than container market volume growth given the need to return an ever increasing number of empty containers on the back hole. This growth and increasing trade imbalances comes on the heels of about 15 years since the financial crisis where investment into terminal capacity has lagged. With market demand growing faster than terminal capacity, we were bound to hit a bottleneck at some point. To illustrate this, cumulative head hole growth from the Far East over the past three years, so since 2024, has now been around 25%, with the cumulative global terminal capacity growth only at 10% over the same period. This clearly shows the extreme challenges that some terminals are facing today. Many of them are completely full, resulting in growing congestions in some of the key nodes of our network, which is impacting the global network and not just the local situation because of their criticality. The effect of these disruptions will not be linear, and when a key node like Shanghai, which today has a 12 days waiting time, is affected, this will result in sharp rises in rates. Given the resilience of demand, the degree of underinvestment into terminal and the time that it will take to bring terminal capacity online to match these demands, it means that rate events such as what has happened since May will become more frequent in the years to come. As we look at this year, this is what we've been seeing. The combination of strong head-hold demand led to increasing congestions in many key ports, which in turn led to sharp increases in freight rate and finally led to our upgraded guidance. In effect, the bottleneck in the supply chain is now moving from ships to the land side. And this cannot be de-bottlenecked quickly. And so we believe that we are seeing right now a structural change with the rate environment becoming more benign, albeit still with a lot of volatility remaining. With that broader market perspective, I will now hand over to Robert who will take you through the financial review.

Thank you, Vincent. We had a good second quarter, with results stronger in comparison to both the prior year and the first quarter. This performance was driven by all three segments, but in particular ocean, as higher spot rates and volumes translated into better earnings and stronger cash generation. We delivered revenue of $15.8 billion, up 20% year-on-year, supported by strong demand in the container market, higher spot rates in ocean, and continued growth across all our segments. The strong revenue growth translated into higher profitability. We delivered EBITDA of $3 billion and EBIT of $1.6 billion, driven mainly by ocean, while logistics and services and terminals also continued to perform well. Free cash flow was positive at $549 million compared with negative $373 million last year, reflecting the stronger earnings. Our balance sheet remains strong with $18.5 billion of cash and deposits and a net cash position of $1.5 billion. Turning to cash flow, the stronger results also translated into improved cash generation in the quarter. Operating cash flow was $2.3 billion supported by EBITDA of $3 billion. Relative to EBITDA, this implies a cash conversion of 75%. The lower cash conversion compared to the last quarter was mainly due to the increased working capital reflecting higher receivables following the increase in ocean rates and higher bunker inventory because of higher bunker prices. Gross capex was $931 million, in line with our annual guidance, while repayments of lease liabilities amounted to $863 million. After all of this, free cash flow was positive and better than both last quarter and the same period last year. In addition, we returned $367 million to shareholders during the quarter, of which the majority was through the ongoing share buyback program. As I mentioned, the increased earnings was mainly driven by Ocean, so let me spend a few minutes on what happened during the quarter. Revenue increased to $10.5 billion, up 23% year-on-year, mainly driven by rates and further supported by good volumes. Average loaded freight rates increased by 22% year-on-year and 32% sequentially, driven by strong spot rates across most of our trade clusters, particularly Latin America and inter-Asia. Loaded volumes increased by 4.1% year-on-year to 3.4 million FFE, supported by strong market demand driven mainly by Far East exports. Despite various cost headwinds, unit costs at fixed energy decreased by 1% year-on-year. Note that if you exclude the positive impact from the extended useful life of our vessels and a number of others. was mainly driven by the strong development in spot rates, while the commercial measures with contractual customers compensated for the higher operating costs resulting from the Middle East disruption. Finally, gross capex was $663 million, and why it's lower than last year remains within the scope of our annual guidance. The year-on-year improvement in ocean earnings becomes clearer when we break down the main moving parts of the bridge. The largest positive contributor was freight rates, which alone had a positive impact of around $1.6 billion on EBITDA. This included compensation for higher bunker costs, elevated insurance premiums, longer dwell times, as well as other transshipment and network costs associated with contingency routing. Strong volume growth also contributed positively, adding $185 million. These benefits were partly offset by significantly higher bunker prices following the oil price surge back in May. Bunker prices were up 44% year-on-year, resulting in a negative impact of around $612 million. Container handling costs also increased, mainly reflecting congestion in terminals and higher storage costs across the network. Network costs were broadly stable as higher port, charter and transshipment costs were offset by 4% lower year-on-year bunker consumption owing to Gemini network efficiencies. Taking everything together, the strong spot rate environment and continued volume growth more than compensated for the elevated cost base during the quarter. Turning to logistics and services, logistics and services continued to make steady progress during the quarter. The business is growing and importantly continuing to improve profitability at the same time. Revenue increased by 15% year-on-year to $4.2 billion driven by volume growth across most of the portfolio. EBIT was up 24% to $217 million, up both sequentially and compared to the previous year. Likewise, the EBIT margin increased to 5.1%. The improvement was driven by top-line growth, productivity gains, cost discipline, and continued efficiency improvements across the business. This was also the ninth consecutive quarter of year-on-year improvement in EBIT margin. Reflecting continued operational progress across the portfolio. As we said before, our focus remains on profitable growth and continued margin expansion, particularly in the parts of the portfolio where we still see significant improvement opportunities. On a segment basis, Landsight was the strongest contributor to margin improvement, benefiting from land bridge solutions, Overall, this was a good quarter with revenue growth of 15% and debit growth of 24%. But we are not complacent and continue to target further growth and improved profitability. So looking at our new segments performance across logistics and services, the performance differs across logistics and services. We continue to see strong performance in both forwarding and landside, where revenue growth has translated into solid profitability and margin progression. Forwarding delivered revenue growth of 32% and a debit margin of 6.4%, supported by good development in both air and ocean forwarding activities. Landsight also delivered a strong quarter with revenue growth of 14% and an EBIT margin of 6.3%, reflecting solid execution across the portfolio. The picture is different in solutions, where revenue increased by 11% but profitability remains too low. The EBIT margin decreased to 1.7%, which primarily reflects white space associated with new warehouse capacity, together with the slow conversion of the commercial pipeline. As a result, our focus remains on improving pipeline conversion, increasing utilization across the network and reducing white space costs. While there is still work to do in solutions, the performance in forwarding and landsat demonstrates the earning potential of the portfolio when scale, productivity and disciplined execution come together. Overall, the message from this slide is that logistics and services continue to move in the right direction, with the next stage of marginal improvement coming from improving the profitability of solutions. The final segment I'd like to cover is terminals, which once again delivered a solid performance during the quarter. Revenue increased by 11% year-on-year to $1.4 billion, supported by both volume growth and higher revenue per move. Revenue per move increased by 7.1%, reflecting higher rates and increased storage revenue. At the same time, volumes increased by 2.2%, driven mainly by North America and the continued consolidation of Gemini volumes into Lazaro Cardenas. On the cost side, cost per move increased by 5.3%, mainly driven by labour inflation across the portfolio. Taking these together, EBIT reached $458 million, equivalent to an EBIT margin of 31.6%. Compared with last year, absolute EBIT is broadly stable, while the margin decreased. It is important to remember that the second quarter of 2025 benefited from a positive joint venture one-off of $45 million. Excluding that item, the EBIT margin was roughly stable year-on-year despite the inflationary cost environment. Return on invested capital was 14.8% compared with 15.4% a year ago. The slight decline reflects the ramp-up of new investments where capital is employed ahead of the full earnings contribution. Gross CapEx was $122 million compared with $141 million in the same quarter last year. Overall, the business continues to combine resilient earnings, attractive returns and disciplined investment in future growth. Having reviewed the performance across the business, let me finish with our updated outlook for the year. We continue to see a fundamentally stronger and tighter market backdrop than we expected at the beginning of the year. Since our June guidance upgrade, the market dynamics Vincent described have become more evident, reinforcing our confidence in the outlook for the remainder of the year. Based on the strong first half performance, better visibility for the remainder of 26 and our continued expectation of container market volume growth of around 4%, we are upgrading our financial guidance for the full year. We now guide for our underlying EBITDA of $10.5 to $12.5 billion, underlying EBIT of $4.5 to $6.5 billion and a positive free cash flow. Our cumulative capex guidance has remained the same. It stays at 10 to 11 billions for 2025 to 2026 and the same for 2026 to 2027. With that, we conclude the financial review and will proceed to the Q&A. Operator, please go ahead.

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