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Calm After The Storm?

13 March 2017 by lberuti

2016 proved to be an annus horribilis for the shipping industry. CMACG (CMA CGM), the French company which ranks number 3 in the world in the sector, did not go unscathed. After making $567mln in profit in 2015, they announced on Friday a net loss of $452mln for the full year 2016. But more importantly for investors, they reported a strong 4th quarter, on the back of improving freight rates and cost cuts. Volumes increased thanks to the acquisition of Neptune Orient Lines (NOL), but CMACG has striven to preserve their operational margin rather than conquer market share at all cost. Operational margin remained in positive territory at 0.2% for 2016 as a whole, and it even reached 4.2% in Q4, which should bode well for the year to come. The management delivered an upbeat message during their conference call with analysts, guiding towards improving EBITDA in Q1 2017, continuing freight rates improvements on the key Asia-Europe route, as well as ongoing progress in extracting synergies from the NOL acquisition. Investors rewarded them by sending CMACG’s 5-year risk premium to its tightest level at 588bps.