A.P. Moller-Maersk Reports Q4 and 2016 Performance- More Signs of Ongoing Global Transportation Industry Turbulence
A.P. Moller-Maersk, the parent of global container shipping lines leader Maersk Line reported both fourth-quarter and total FY16 financial performance this week and the company’s shareholders were not pleased. The shipping industry further gained another reality check as to the ongoing implications of container shipping overcapacity.
For the recently concluded quarter, financial headlines included a $2.68 billion-dollar quarterly loss along with $2.6 billion in asset impairment charges. Revenues fell 2.6 percent to $8.9 billion.
Maersk Line reported an underlying loss of $155 million in Q4 due to continued lower freight rates and higher costs of fuel. Total revenues were up 2.4 percent from the year-earlier quarter, the first improvement since Q4 of 2014.
Average rates were reported as flat on a quarter-to-quarter basis in Q4, but with a reported positive upward trend recognized towards the end of the quarter from higher spot rates on East-West trades. Global container demand was estimated to have grown around 4 percent in the quarter, while the global container fleet grew around 2 percent, but impacted by high scrapping rate.
Average freight rates declined 7.1 percent in Q4. Volumes for the container shipping group increased 12 percent during Q4. Maersk Line’s capacity at the end of Q4 2016 grew by 9.4 percent to 3,239 million TEU’s.
For the entire year, A.P. Moller reported profitability of $3.1 billion but further indicated that the operating losses of Maersk Line negatively impacted earnings. Included was the statement: “Lower container rates and weaker market growth severely impacted earnings of Maersk Line during the year but with a positive underlying trend recognised through the fourth quarter.” In FY16, Maersk Line losses amounted to $376 million vs. $1.3 billion reported in FY15. Maersk Line had around 50 percent of total volume scheduled on North-South trades and around a third of total volume on East-West trades in 2016. Approximately 40-60 percent of Maersk Line’s volume reportedly was on long term contracts in 2016.
In an interview with analysts, A.P. Moller CEO Soren Skou reportedly indicated that the shipping industry has hit bottom and a recovery will become apparent next year. That is not the first time that Mr. Skou has called an industry bottom in prior year briefings, yet the picture of financial stress continues.
Because of recent performance, the parent company indicated it would cut its annual dividend by one-half in the coming year. A.P. Moller Maersk shares reportedly closed down 5 percent after the announcement of performance.
Today, The Wall Street Journal features a report indicating that the German banking sector is reeling from recent losses associated with shipping loans. Some of these loans are impaired while indications are that future loans directed at shipping may be significantly curtailed.
Moving forward in 2017, Maersk will begin to consolidate five existing businesses including Maersk Line to form a Transport and Logistics unit. Management expects to gain $150 million in cost savings during 2017 from this move.
Company officials re-iterated the intent to take on services previously performed by third-party logistics (3PL) firms such as loading containers on ships, clearing customs or moving containers inland to end users. The strategy includes routing more ships into and out of its owned port operator APM Terminals, and more inland cargo routed through owned logistics supply management firm DAMCO. We cited such strategies under 2017 Prediction Five- Continued Global Transportation Turbulence.
Maersk is in-essence now attempting to emulate a business model like FedEx or UPS, that coordinates global transportation movements with those of logistics and delivery to consignees.
Company management further indicated more stringent capital expenditure plans in 2017 including the postponement of any new shipping capacity for 12 months. The company further expects to begin integrating its recent acquisition of Hamburg Sud lines later in 2017.
This week’s announcements further included the appointment of former SAP co-CEO Jim Hagemann Snabe as the new chairman of Maersk’s board of directors. In its reporting, The Wall Street Journal cited informed sources as indicating that Mr. Snabe’s initial priorities will likely be in assisting with the corporate realignments for both Energy and Transportation being planned this year.
This Editor has already declared a positive viewpoint toward Snabe’s management abilities and we view his appointment as a rather positive move for Maersk. Snabe further brings a seasoned information technology investment perspective, one that could greatly benefit ongoing efforts especially related to becoming a more integrated global transportation services provider.
As transportation and logistics teams readily know, Maersk is force to be reckoned with in global container shipping. While financially stung by the ongoing effects of too much global capacity to support ocean movements, other lines stand to feel a far larger financial impact. That may open the door for yet further alliance, merger or acquisition activities in the coming months that could well yet again involve Maersk. The planned movement into integrated transportation services, if successful, provides other industry threats as well, but this will be an area where Maersk management needs to be open about the need for advanced technology.
© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
A New Round of Reported Job Cuts at Wal-Mart- Part of a Singular Leadership Model Directed at Integrated Online and Store Customer Fulfillment
Last week, word began to leak out that global retailer Wal-Mart was planning to cut nearly 1,000 corporate jobs before the end of this month, the close of the retailer’s fiscal year. These cuts are in addition to previous job cuts announced in 2016. Part of this effort is to continue to streamline and centralize leadership and goal-setting across Wal-Mart’s online and physical store strategies. The latest move is being headlined as the largest round of corporate level headcount cutbacks in some time.
Several published reports by The Wall Street Journal citing Wal-Mart internal communications indicate many believed executive changes underway. They include existing CIO Karenann Terrell departing the retailer in mid-February. SAP technology focused readers might recall that SAP’s 2015 Sapphire customer conference featured Ms. Terrell in an on-stage keynote delivered by SAP’s CTO and senior board executive Bernd Leukert. Ms. Terrell provided a humorous moment as she quipped to Leukert that she hoped that Wal-Mart could complete its SAP S4 HANA implementation sometime in her lifetime at the retailer.
Other reported executive moves include existing Chief Marketing Officer Tony Rogers assuming leadership of both online and digital marketing initiatives to include Jet.com marketing. Existing head of Wal-Mart Labs engineering Jeremy King, will reportedly be promoted to U.S. Chief Technology Officer, directly reporting to both the chief of U.S. stores and the chief of U.S. online. Scott Hilton, existing Chief Revenue Officer for Jet.com will reportedly assume the role of Chief Revenue Officer for all E-commerce operations.
The WSJ further indicates that Michael Bender, existing COO for E-Commerce will likely leave the company. A separate Wal-Mart securities filing indicates that Rosalind Brewer, current Executive Vice President, and CEO of the Sam’s Club business segment plans to retire effective February 1st. John Furner, current Chief Merchandising Officer for Sam’s Club will assume Ms. Brewer’s leadership role. Other reported headcount reductions include human resource staff and other support staff.
These latest organizational and headcount reduction moves follow a pattern for providing singular leadership in Wal-Mart’s effort to take on Amazon by initiating an online capability supported and complimented by physical store presence. In September, 7000 store focused back office jobs were eliminated and in November, because of the prior announced acquisition of Jet.com, founder Marc Lore was appointed to lead all U.S. online operations, causing several existing online executives to depart the retailer. In January of 2016, existing corporate IT and @WalMart Labs Silicon Valley development groups were merged together into one singular group to focus on singular technology deployment strategies.
Wal-Mart has invested a reported $10.5 billion in new information technology to enhance its online web presence and fulfillment capabilities. The retailer is planning to invest an additional $2 billion over the next two years to further springboard its online fulfillment channel, not to mention the $3 billion acquisition of the Jet.com online platform. That implies a commitment and an accountability to get it right.
These latest moves come in the shadow of the latest restructuring and headcount reduction announcements from multiple other retailers, all a result of the more apparent implications of online Omni-channel forces continuing to impact the retail industry.
© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
Supply Chain Matters has continually provided our readers insights relative to the increased momentum and ongoing impact that Cloud based computing has had across multi-industry settings. Such impacts are not only quickly changing ongoing software and IT hardware deployment strategies for line-of-business and cross-functional supply chain management teams, but the financial fortunes of existing high-profile enterprise and IT technology vendors themselves. Cloud computing equates to lower margins but more recurring subscription-based revenues for technology firms and thus the transition has to managed skillfully.
Over the past week, three high profile tech vendors, IBM, Microsoft and SAP have announced their latest financial performance results with contrasting pictures related to transitions.
In in case of IBM, financial headlines from the results from the most recent quarter now reflect 17 continuous quarters of revenue declines. Revenue for Q2 dropped 2.8 percent while earnings fell nearly $1 billion. As readers may be aware, IBM continues to manage an ongoing shift to build new strategic businesses, termed strategic imperatives to drive growth while the tech vendor’s traditional business segment continue to decline.. Strategic imperatives include Cloud computing, analytics, artificial intelligence, security and mobile.
There was some good news however for IBM in that Cloud services revenues reportedly increased by 30 percent in the latest quarter, amounting to $3.4 billion. An additional 11 acquisitions were closed in the quarter, many focused on analytics and AI based capabilities. Within the supply chain applications segment, previous acquisitions have faltered and some have now been sold-off.
IBM’s former notion of building and deploying Smarter Commerce capabilities appears to be languishing. With the latest financial results, equity analysts and investors seem to be growing weary as to whether or when IBM can fully transition to the new wave of computing and information technology needs and deliver total revenue increases. In essence, IBM may be in a process of re-sizing itself.
On the other hand, Microsoft’s latest quarterly performance provides a different picture regarding managing the transition from on-premise to Cloud based computing. While total revenues declined a reported 7.1 percent In the vendor’s most recent fiscal fourth quarter, the company posted $3.1 billion in net income. The largest gains originated from Azure Cloud computing services with quarterly revenue amounting to $6.7 billion, growing a significant 102 percent on a year-over-year basis. In essence, as The Wall Street Journal concluded, Microsoft’s Cloud segment is growing while the Windows desktop and phone unit ae declining.
Microsoft is further moving aggressively in strategic partnerships with other technology and industry firms. At its recent Sapphire customer conference, SAP announced a strategic partnership with joint plans to deliver broad support for the SAP HANA® platform deployed on Azure and General Electric recently announced that it will partner with Microsoft in uniting their Cloud computing and analytics technologies in a partnership that will bring GE’s Predix IoT platform for the Industrial Internet to businesses running on Azure.
Speaking of SAP, earlier this week the German based enterprise software provider reported what the company termed as record revenues and profits yet the quarterly numbers seem otherwise. Second quarter total revenues increased 5.3 percent on a year-to-year basis while operating profit increased 81 percent to €1269 million. The company’s earnings news release was quick to highlight strong growth in the Cloud segment, as subscription and support revenue grew a reported 30 percent to €720 million. Further noted was: “The total of cloud subscriptions & support revenue and software support revenue reached 63% of total revenue in the second quarter of 2016, up one percentage point.” We portend to by no means be perceived as a financial specialist blog, but it would seem by reading the financial detail that SAP has lumped traditional software licenses and support revenue into a sub-category of Cloud and software that is termed “Predictable Revenue.” Albeit we will leave further interpretation up to the financial experts.
In its earnings press release, SAP indicates that it is significantly outpacing its main competitor in cloud and software revenue. We interpret the unnamed to be that of Oracle, which in June reported both fiscal 4th quarter and full year financial results. In our commentary related to Oracle we noted that Cloud based revenue in the quarter was $859 million, up 51 percent on a year-over-year basis. Additionally, Oracle’s strategies addressing Cloud are from our lens, far broader and currently incorporate not only database, applications and SaaS offerings but platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS) services as well. They include additional IT infrastructure hosting choices, either private (behind the firewall) or public for businesses in addition to applications. We further reiterate our assessment that Oracle is currently the only enterprise technology provider offering a full suite of supply chain and manufacturing applications available on a public or private cloud platform.
Thus we have different impacts and transitions occurring among enterprise software and technology providers and organizations and businesses need to read between the lines to discern which of these players has the most solid longer-term strategies. That would include support needs of businesses and organizations to seamlessly transform their computing and applications to more affordable and less disruptive Cloud platform choices. In some cases, that has led to aggressive and sometimes expensive acquisition strategies to springboard innovation and availability timetables. The other force is obviously the needs of stockholders and stakeholders to preserve both short and longer-term margins and profits.
In the middle of all of these efforts often resides boasting and marketing hype as to which Cloud platforms and strategies are the best for customers.
The transition and the effects will continue and businesses need to continue to do their homework in market education and vendor intelligence.
© Copyright 2016 The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All Rights Reserved.
In providing our Supply Chain Matters readership with market landscape education regarding technology supporting B2B business networks process needs, we have provided prior visibility to Canadian based technology services provider OpenText.
Last week, this analyst and executive editor had the opportunity to attend OpenText Enterprise World 2016, this vendor’s annual customer conference and we walked away with rather positive impressions regarding direction and services.
OpenText has now assimilated technology centered on three focused strategic areas which CEO and CTO Mark Barrenechea addressed in the conference opening keynote:
OpenText Enterprise Information Management (EIM) which is just about everything related to document and content management. Many SAP ERP users may or may not be familiar with the brand, but much of the document content exchanged within SAP applications is powered by OpenText including new iterations of SAP HANA and SAP S4HANA applications. Likewise, the vendor supports EIM needs for other ERP systems as well.
OpenText Business Network which is a B2B business network platform that supports EDI messaging, supplier and customer onboarding, purchase-to-pay transactional support and other growing managed services. The gem of this network is the 2013 acquisition of the GXS Trading Grid network with its genesis as the prior General Electric Information Services. In June of 2012 this author declared that GXS was the hidden gem in B2B information transfer and software services and that prediction continues to manifest itself.
OpenText Analytics which is the new evolving area for this provider, one that promises to harness insights and business decision support related to both EIM and Business Network operational and business information flows. This capability has become a new strategic thrust for the company, one that by our view can present a more visible player to the analytics and enterprise technology market.
Regarding the latter, Barrenechea provided two major product announcements in conjunction with the conference. The first was Project Bandaroo, a technology to be focused on the changing nature of work. It was described as bringing together OpenText Core, the vendor’s core Cloud platform for everything related to EIM, with other elements of social communities, channels, bots and project management. An on-stage demo outlined a scenario of working group interactions and discussion forums centered on specific information needs. From our lens, the concept seems interesting but needs more specifics related to actual business challenges. Timetable communicated was the second-half of 2017.
The second announcement related to Project Magellan which is described as a next generation cognitive platform being designed to integrate voice, video, natural language processing and other content. It was outlined as an open systems based platform that would leverage both the Spark Apache platform along with the analytics capabilities of Actuate, OpenText’s most recent acquisition focused on advanced analytics. Barrenechea was not shy in making a direct head-to-head technology comparison with the IBM Watson Cognitive platform and that his company will compete directly as an alternative platform in the market. From this author’s lens, this was a far more newsworthy announcement and one to keep an eye on in the coming months, especially since such technology can be applied to the OpenText Business Network. This capability is also planned for introduction in the second-half of 2017.
Regarding the Business Network, much more strategy and information was shared with conference attendees, information that we garnered from an April industry analyst event. Product managers declared that upwards of $7.4 trillion in commerce, the equivalent of 10 percent of world GDP, along with connections to 65,000 partners are currently supported by this network. Support encompasses 37 data centers across 18 countries and 25 satellites.
In addition to electronic transactional messaging (EDI), support is provided in the process areas of purchase-to-pay (P2P), order and shipment visibility and other business process areas. Evolved capabilities in a series of managed services for specific industries and customers continues to expand with an increase of over 200 customers in this segment alone since the acquisition of GXS. The audience was reminded that OpenText Business Network is currently positioned by Gartner in the Leaders Quadrant for B2B Business Networks.
Our on-site executive briefings not only provided more background to new functionality and services that are enabled by the latest OpenText Suite 16 product release but future capabilities being planned in the all-important area of supply chain wide analytics. Of further interest is the introduction of what is termed as Supply Chain Activity Index, an analytical based aggregate view of the B2B network, with forms of Business Process Management (BPM) support for processes that span the supply and value chain network. These two areas should really peak interest, depending on eventual design and functionality.
There was additional validation that support for SAP Ariba’s efforts to move beyond indirect procurement and support more direct materials procurement processes such as electronic invoicing and messaging will stem from OpenText Managed Network Services.
Our other impressions from this event include:
OpenText is indeed well on the road towards addressing the complex and fast-changing requirements for supporting globally-extended B2B networks beyond electronic messaging and EDI. Unfolding support in specific managed services and analytics areas are very promising as is the unfolding strategy of leveraging analytical capabilities to support network-wide decision-making.
An open question acknowledged by senior management is whether OpenText remains an infrastructure and Cloud services provider or moves more boldly into applications. This will be an area we keep an eye to in the coming months since there are pros and cons to either.
We are of the impression that OpenText senior management now understands the stand-alone nature and business value of OpenText Business Network in terms of an independent marketing persona of that of EIM that includes need for brand recognition within broader supply chain management functional audiences. Anticipate more concentrated efforts and visibility in this area.
Having the opportunity to attend many vendor conferences in any given year, this author can quickly extract a sense of overall management culture. Having now had direct 1:1 interaction with a number of OpenText senior executives at multiple events, we are impressed with their openness, sensitivity to customer and market needs and desire to make good on commitments. That was supported by some select customer interviews conducted. Once more, the company continues to reach out and hire and retain additional experienced talent. As an example, we were impressed with the technical savvy and communication skills of Actuate executives brought forward from that most recent acquisition.
As always, this analyst will provide continued assessment commentaries related to both Open Text and the broader B2B supply chain business network technology landscape. In the meantime, if readers have specific questions, send us an email or call.
© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
There has been quite a significant announcement related to Internet of Things (IoT) and Industrial Internet technologies, one that line of business, product management and manufacturing focused teams should pay close attention to.
General Electric announced that it will partner with Microsoft in uniting their Cloud computing and analytics technologies in a partnership that will bring GE’s Predix platform for the Industrial Internet to businesses running on Microsoft Azure. The parties indicate in the joint announcement that the combination of Predix with Azure will bridge GE’s industrial equipment and digital expertise in industry and manufacturing, and Microsoft’s forte in information technology. From the lens of this analyst, there are far more implications related to the all-important selection of a technology platform to power IoT initiatives.
This latest announcement bears significance because of selection of Microsoft itself. It is no secret that Microsoft technology has over the years become a dominant integrating technology within and across factory floors. Therefore, from my lens, the potential is the ability to link not only physical objects to business and supply chain business processes but further to connect the shop floor and manufacturing applications with operating assets as well. GE engineers and executives do due diligence very well and they are increasingly acted like an information technology provider with deep domain expertise in industrial equipment and expensive physical assets.
SAP focused readers may recall that at the recent SAP Sapphire conference, Microsoft and SAP also announced a strategic alliance to leverage Azure in the future development of more desktop and mobile applications as well as to provide extensibility of SAP applications to desktop, mobile, Cloud and analytics needs.
We believe that readers should view both of these alliance announcements as a strategy by Microsoft via its Azure platform to become a far more pertinent player as an IoT information and analytics platform. It further opens IoT efforts for the scope of mid-market equipment manufacturers where Microsoft technology is dominant.
In prior Supply Chain Matters commentaries we have called attention to GE as a manufacturer that is both a dominant player and first mover in IoT, but also a significant influencer as to which technology players will ultimately be key IoT participants. By recently opening up its Predix platform in its Digital Alliance program, GE is striving for Predix to become the Industrial Internet platform of choice. In our most recent blog related to GE Predix, I have stated:
“Make no mistake, the expanded (GE) Digital Alliance program is a wide swath initiative to build extensive influence and critical technology and development mass in the IoT marketspace.”
This week’s GE-Microsoft announcement adds far more credence to this intent. It is sure to invoke other responses from competing enterprise information, business applications and infrastructure technology providers. The announcement is indeed a big deal and this partnership merits lots of visibility and scrutiny over the coming months.
We will do our part to keep readers informed and in helping to connect events and implications. While the IoT focused industry remains in the early stages of more widespread IoT deployments, current actions center on how major enterprise, supply chain, industrial equipment and platform vendors converge on approach, since the current strategy is one of fostering platform and technology dominance.
This is great theatre one that will keep technology analysts busy and engaged in advisory modes. Insure that you acquire multiple opinions and viewpoints to determine how to position your organization or line of business perspectives related to planned IoT initiatives. Give us a call or send us an email if you require further assistance.
© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.