Shipping titan A.P. Moeller-Maersk will break off its two main businesses—transportation and oil/energy—into two separate divisions.
The move, according to the company, will allow for the Transportation & Logistics business to focus on driving synergies and developing new products and services, while its oil businesses will be able to home in on developing separate structured solutions.
Which is really to say, Maersk expects its transportation business to generate more growth and as such will focus its investments there, while it will maintain its oil businesses as a source of value.
Many are calling Maersk’s decision a radical one as the company faces a major downtrend in container shipping and some of the lowest freight rates in history, plus an oil glut that’s leading the industry to scale back on drilling.
Transportation & Logistics will now comprise Maersk Line, APM Terminals, Damco, Svitzer and Maersk Container Industry, and the brands will work as one to “enable and facilitate global supply chains.”
Energy will now consist of Maersk Oil, Maersk Drilling, Maersk Supply Services and Maersk Tankers.
“The industries in which we are operating are very different, and both face very different underlying fundamentals and competitive environments. Separating our transport and logistics businesses and our oil and oil related businesses into two independent divisions will enable both to focus on their respective markets,” Maersk board chairman Michael Pram Rasmussen said in a statement Thursday. “This will increase the strategic flexibility by enhancing synergies between businesses in Transport & Logistics, while ensuring the agility to pursue individual strategic solutions for the oil and oil related businesses.”
Maersk expects to generate up to a 2 percent return on investment improvement over a three-year period as a result of better utilization of its existing assets on the Transportation & Logistics side of the business. Financial reporting for the new structure will begin in fiscal 2017.
“Building on the group’s unique position within container transport and port operations, and significant position in supply chain management and freight forwarding, Transportation & Logistics will leverage its leading position through new product offerings, digitalized services and individualized customer solutions,” Maersk said.
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For the second quarter, Maersk Group reported profits down 32 percent to $1.78 billion. Maersk Line saw profits fall 129 percent to a loss of 151 million, largely owed to a 24 percent decline in average freight rates, and the company said it expects a $1.3 billion loss for 2016.