Ocean cargo and air freight ramps up for Damco
March 01, 2012
Damco, the logistics arm of the A.P. Moller – Maersk Group, reported “substantial” volume growth in both ocean and air freight markets.
Damco’s Earnings Before Interest and Tax (EBIT) improved by 29 percent in 2011, rising from $75 million in 2010 to $97 million.
Productivity improvements lowered the overhead expense ratio and drove the EBIT return on sales from 2.8 percent to 3.5 percent. Return on invested capital (ROIC) rose from 22 percent to 26 percent for the year. Total revenue grew to 2.8 billion from billion in 2010, with reduced freight rates masking the strong increase in underlying business.
“We are pleased to have delivered such strong results, despite the softening market in the second half of the year. Taking our market leading expertise in Retail and Lifestyle to other industry sectors is clearly resonating with customers,” said Rolf Habben-Jansen, CEO of Damco.
The traditional annual Q3 peaks in Europe and North America did not materialize due to weakened consumer confidence resulting from U.S. budgetary concerns and the Eurozone crisis. Europe and North America posted lower results in 2011 compared to the prior year.
The ongoing focus on accelerating Damco’s expansion in growth markets led to improved results across key parts of South and Southeast Asia, Africa and Latin America.
“More than 60 percent of our employees are in growth markets and the strength of our business in places like China, India, Vietnam, Indonesia and Africa allows us to challenge and win against even our largest competitors, which puts us in a good position when growth in Europe and the U.S. slows,” Habben-Jansen said. “Our acquisition of NTS, the Chinese air freight forwarder, further demonstrates our commitment to growth markets and building a strong air freight platform to complement our supply chain management and ocean forwarding services”, he added.
Airfreight tonnage rose 47 percednt in 2011 compared to the prior year, mainly driven by the acquisition of NTS in August. Like-for-like airfreight volume growth was about 5 percent above market. Damco’s ocean volume also grew strongly at 15 percent, some 9-10 percent ahead of the general market.
Supply chain management (SCM) volumes however declined 3 percent from last year mainly due to reduced imports handled for Damco’s large U.S. retail customers.
Global commercial initiatives implemented during the year resulted in Damco winning more large customers within targeted industry segments. New sales secured during 2011 had a total annualized gross profit of approx. $250 million. Customer satisfaction ratings improved for the fourth year in a row to the highest level yet.
Damco plans to again grow volumes significantly faster than market in 2012, while also further improve profitability.
“We will continue to focus on providing our customers with exceptional service, taking our supply chain management expertise to targeted industry verticals and further strengthening our products. We will also launch some new and differentiated services,” said Rolf Habben-Jansen, Damco CEO.
Pyers Tucker, Damco’s Global Head of Strategy, noted that 66 percent of its employees are located in emerging markets.
“We will continue to look for opportunities to further strengthen our business there,” he told Supply Chain Management Review – a sister publication.
In the interview with SCMR, he also noted that Damco is drawing on its market leading capabilities developed serving the retail, apparel and fashion sectors to provide customers in the hi-tech, chemical, industrial and reefer segments with “high quality supply chain solutions.”
“We already have offices in 90 countries and a presence in a further 30 countries. We are looking into Myanmar and will further expand our presence in Africa.”
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