Turnaround strategy works for CSAV

After a whirlwind year of change for Chilean sea carrier CSAV, the company staged a turnaround last year, with a strong focus on emerging markets. According to Lance Pullan, GM of CSAV Group Agencies in Durban, last year saw significant change in the form of a new controlling shareholder, major adjustments to its services and fleet, and a trimming of its management structure. The controlling buy-out was by Quiñenco – one of Chile’s largest business conglomerates with consolidated assets of approximately US$54 billion – which subscribed US$547 million, and became the holder of 37.44% of the company and its legal controller. In addition, US$100m was subscribed by the maritime transport company, Marinsa, and US$553m by other shareholders and third parties. This deal was finalised last February. Quinenco pushed CSAV away from vessel leasing toward purchases, and positioned the company to post further gains as global trade rebounded. The company lost a record US$1.25bn in 2011 when its overlarge chartered fleet was caught up in the global ship glut in the worldwide economic slump. The restructuring process that was put together included a substantial reduction in containership carrying capacity. In addition, thanks to agreements with major shipping companies, the volume of joint operations rose from around 30% in early 2011 to 95% in October, 2012. The company was also intent on enlarging the size of its own fleet, and vessel purchases allowed the company to own 37% of its fleet in the second half of 2012, up from 8% at the beginning of 2011. As part of this, the funding from the share acquisition allowed CSAV to finance a nine-ship buying deal which it had signed up in 2010. In this, two 6 500-TEU and seven 8 000-TEU ships were to be delivered between 2010 and 2012. At the same time, according to Pullan, CSAV trimmed its management structure, cutting various management layers. “From an SA perspective,” he told FTW, “there was also lots of restructuring. We had to trim staff numbers, and also put a focus on getting the basics right.” But good news came in the third quarter of last year, he added, when the global organisation recorded a US$55.78m profit. “That was quite a turnaround from the previous year’s third quarter loss of US$342.8m.” This US$55.78m net income was the first positive number since the third quarter of 2010, according to data compiled by Bloomberg. CSAV has also returned 60% for investors over the past 12 months, the best among global peers tracked by Bloomberg – which noted that the next-best performer, China Shipping Container Lines, returned 43%, while the average gain was 15%. “The recovery was due to strong performance in the company’s operating result in the quarter,” Pullan said. “Operating income was US$37.3m, which contrasted with the loss ofUS$354.9m in the same period of 2011.” The company’s services restructuring will also strengthen its ties with SA, he added, with CSAV now focusing on serving Latin America and emerging markets – which include this country. The line now has three services with an SA connection – linking South America (ECSA), southern Africa and the Far East. INSERT ‘Good news came in the third quarter of last year when the global organisation recorded a US$55.78m profit.’ CAPTION Lance Pullan ... getting the basics right.