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UPDATE 1-Pandemic propels makeover at shipping giant Maersk

05/11/2021 05:55
UPDATE 1-Pandemic propels makeover at shipping giant Maersk

Adds CEO, analyst quotes, detail on strategy

By Jacob Gronholt-Pedersen

- Shipping group Maersk MAERSKb.CO said on Tuesday it expects average returns on invested capital towards 2025 to be significantly above recent years, propelled by high demand for containers to meet a surge in consumer orders.

The Danish company said it aims to bolster supply chain logistics for clients such as Puma PUMG.DE and Walmart WMT.N as it spurs a transformation that began before the pandemic.

Maersk Chief Executive Soren Skou told investors at a Capital Markets Day he expects return on invested capital (ROIC) - a measure of how well a company uses its capital to generate profits - above 12% between 2021 and 2025, compared with average returns of 2.3% in the previous five years.

"This is an ambitious (target) and testifies to a belief that the good times will continue longer than most people expect," said Per Hansen, investment economist at Nordnet.

Maersk last week presented record quarterly profits and said it expects the "exceptionally strong" performance to continue for the rest of the year, driven by high demand for shipping containers from China to the United States. nL1N2MS0AO

Skou also said the ocean container business, which handles about one in five containers shipped worldwide, will continue to be at the centre of the company, while its land-based logistics business, which includes shipment from factory, customs services and warehousing, will be its "growth engine".

The 200 biggest customers in ocean container shipping currently only use Maersk for a "very, very small fraction" of what they spend on land-based logistics, Skou said.

"Being able to sell more logistics products and services to our ocean customers is a cornerstone of the strategy, and the opportunity is huge," he said, pointing to Maersk's 70,000 customers in the ocean container business.

Maersk targets organic growth in its logistics business above 10% in the next five years, complemented by acquisitions, Skou said.

(Reporting by Jacob Gronholt-Pedersen, editing by Louise Heavens and Emelia Sithole-Matarise)

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