Interview with Søren Skou, CEO of Maersk Group, from the World Economic Forum 2017



Following are excerpts from a CNBC interview with Søren Skou, CEO of Maersk Group, from the World Economic Forum 2017 with Steve Sedgwick and Geoff Cutmore.

CNBC: Søren Skou is with us, the CEO of Maersk Group, good morning to you, Søren, and nice to see you.

SS: Good morning, and thanks for having me.

CNBC: Thanks very much for joining us.  Look, let’s just deal with the current operational changes taking place in the business, this division of the oil operation and the shipping unit. How is that going? Can you just give us an update and tell us what you expect for this year?

SS: Well, it was about three and a half months ago that we announced that we were going to find solutions for how we could separate out our oil and energy related businesses, it’s about a third of the total group today.  We also, in December, announced that we were going to acquire Hamburg Süd, the German container shipping line.  So there is a lot going on.  I don’t have anything new to tell you, on energy we are still working hard on finding those solutions, and as soon as we have the first one, I’m sure we will come to the market.

CNBC: I mean, operationally, it is going to make a big difference in the way the market thinks about the two business units.  There was a lot of speculation about a Dong Energy deal, with the energy business.  Can you update us as to any current thinking at board level on that deal?

SS: Not really.  We have a longstanding policy of not commenting on market rumors and I’m going to stick to that today.

CNBC: So just if we were saying, theoretically, there were two energy businesses that were thinking about coming together, do you think this is the right business environment, with the oil price back above $50 a barrel, for significant mergers in the space?

SS: Well, we have said that we still see opportunities for growth in our oil business, the one of the four energy related businesses, there’s still, you know, lots of value to be had in the oil sector.  We plan to focus our oil company more on the North Sea, with less diversity or graphic footprint than we have today.  We see opportunities in the North Sea sector.

CNBC: Søren, I can’t see why the Baltic Dry Index is up 150% in the past year.  Perhaps you could help me on this one.  I’ve got a feeling it’s speculators leading the way on this one, as well.  We spoke to the Panamanian Minister, yesterday, we were speaking to the Finance Minister, and quite frankly, they’re not seeing more traffic.  In fact, they’re still very worried about the traffic situation, as well.  Why do you think that these indexes have shown such a growth level, and such a high spurt, when actually the underlying trade is still so tough for you guys?

SS: So, in the container sector, which we know best, we’ve seen exactly the same, that the freight index is up a lot, it more than doubled in the last-, pretty much the last nine months.

CNBC: More than doubled.

SS: It’s simply driven by the fact that the carriers have taken a lot of capacity out of the market, they are losing significant sums of money every day, and continuing to do that is just simply not sustainable.  So today, about 5% of the global container ship fleet is actually idle and laid up, but that has helped support prices.

CNBC: Did your company, and other companies, just get this very badly wrong in investing in the most extraordinarily large, ultra-large container ships, the very large container ships, and just got it wrong, at the wrong time in the cycle, invested in too big a ships, when actually the previous fleets would have been just about fine.

SS: So clearly, we, and others, were surprised by the fact that global trade has not grown nearly as much as one would have expected five years ago.  Before the financial crisis, global trade, in volume terms, was growing 8%, 9%, 10% per year.  Now we’re down to something very close to global GDP around 2% probably in 2016.  We expect 2.5, maybe 3% this year. So of course it’s a lot lower level of growth, that means that we have overcapacity, have invested in too much capacity as an industry, we are working our way through that as we speak, and we have seen virtually no new capacity being ordered in the last year.

CNBC: Interesting.  Yes, I mean, one of the problems, I think, has just been the way that the Chinese, the Koreans, and others, ramped up production very aggressively, thinking that pre-2007 trade growth would continue post the financial crisis, but clearly there has been a setback, and now we have Donald Trump talking about rolling back globalization.  Does that chill your heart a little, as you think about your containers running the route from Asia to North America and Europe? Are you worried?

SS: Well, first of all, I think we have a number of different messages coming out of the US. There’s a lot of talk about lower taxes and more investments in infrastructure, clearly that would be good for trade and for imports to the US.  We clearly, of course, also have to say that we believe in global trade as a wealth driving mechanism.  Global GDP, 60% today is made up by global trade, that’s up from 35% 25 years ago.  It’s been a massive driver of prosperity, so of course we believe that we, as nations, should continue to trade.

CNBC: Søren, it’s been a pleasure, thanks so much for coming and joining us here.

SS: Alright, thank you.

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Source: CNBC



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