Maersk Line expects moderate 2007 profit as turnaround strategy kicks off

LAST WEEK’S announcement by Maersk Line of a turnaround strategy that will see the reduction of 2000 to 3000 jobs worldwide in a costcutting exercise designed to return the line to sustainable profitability will take its toll on all stations, South Africa included. CEO Eivind Kolding revealed the core elements of the plan in a web conference broadcast worldwide last Tuesday. While on the surface the strategy is hardly rocket science - filling ships with profitable cargo, providing the most reliable product to customers, providing a faster, more responsive service and reducing complexity and cost – implementation is less straightforward. “In the past Maersk Line has focused on growing its business and growing its market share,” said Kolding. “We are today about 10 times the size we were ten years ago but the way we operate does not conform to our operational size. "We are in a cyclical business meaning that some years will be better than others, but the overriding factor will be to deliver satisfactory results to our shareholders.” Until now the company has operated in an integrated mode with all the activities under the container umbrella. “Our new strategy will change that and we will focus on each activity separately – Maersk Line, Maersk Logistics and Damco and our container inland services. “By doing this we will reduce complexity and enhance focus on each activity.” And Kolding believes the company is already on the right track. “In 2006 the container business combined recorded a loss of US$568m. We have already promised that 2007 will have a moderately positive result. Obviously this is far from satisfactory but it is a significant improvement over 2006 showing we are on the right track.” And this is evident from customer feedback, he said. “We have systematically measured customer satisfaction since 2004 and today have the highest rating throughout this period. “But we are not internally content.” Cutbacks will reduce the staff complement by 7%. “We will move out the middle layer to reduce complexity and to ensure we can make decisions close to our customers. It’s always a bad thing to make a decision that means saying goodbye to a number of employees but it’s simply necessary. “The reality is that a leaner and simpler business requires fewer people and this means there will be fewer positions in Maersk Line, mainly in the middle management layer,” he said. A key element will involve reducing the company’s regional organisations into smaller teams and pushing decision-making closer to the customers. “The new strategy is based on comprehensive analyses over the past six months of Maersk Line’s organisation as well as feedback from customers. A new management team has been established to take responsibility for the delivery of the strategy,” he said, with reorganisation expected to be completed by April 2008.