A.P. Møller - Mærsk

Annual Report (ESEF) • Feb 8, 2024

Untitled Annual Report 2023 ALL THE WAY A.P. Møller - Mærsk A/S Esplanaden 50, DK-1263 Copenhagen K / Registration no. 22756214 Ambitions As an integrated container logistics company, A.P. Moller - Maersk strives to go all the way, every day, to deliver a more connected, flexible and sustainable future for global logistics. Purpose Improving life for all by integrating the world. Sustainability An integral part of, and prerequisite for, the success of A.P. Moller - Maersk’s global integrator strategy. Our core ESG commitments are: Environment: We will take leadership in the decarbonisation of logistics. Social: We will ensure that our people thrive at work by providing a safe and inspiring workplace. Governance: We operate based on responsible business practices. Strategy Transforming A.P. Moller - Maersk from a diversified conglomerate to be the global integrator of container logistics, connecting and simplifying customers’ supply chains. South China Sea, China Contents Management Review 05 Highlights 2023 06 Letter from the Chair and the CEO 08 Financials in brief 09 ESG in brief 10 Five-year summary 051 Shareholder information 054 Corporate governance 056 Remuneration 057 Board of Directors 059 Executive Board and the Executive Leadership Team 12 Our Purpose 13 Business model 14 Market environment 17 Strategy 20 Sustainability highlights 26 Risk management Financials 061 Consolidated financial statements 107 Parent company financial statements 121 Management’s statement 122 Independent Auditor’s Reports — 125 Definition of terms 32 Financial review 34 Financial guidance and ESG targets 36 Segment overview 37 Ocean 41 Logistics & Services 44 Terminals 48 Towage & Maritime Services 49 Quarterly summary Reporting universe To provide a comprehensive and transparent information to all stakeholders, A.P. Moller - Maersk publishes a suite of additional reports and supplementary information. See page 126 Executive summary Read more Governance Read more The global integrator Read more Financials Read more Performance Read more Annual Remuneration Report 2023 A.P. Møller - Mærsk A/S Esplanaden 50, DK-1263 Copenhagen K Registration no. 22756214 2023 Sustainability Report ALL THE WAY Executive summary The global integrator Performance Governance Financials 3 A.P. Moller - Maersk Annual Report 2023 Executive Summary Highlights 2023 Letter from the Chair and the CEO Financials in brief ESG in brief Five-year summary Santa Fe Springs, California, United States 4 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials 20 March Europe-China air freight A.P. Moller - Maersk launches Europe- China air freight service to add further agility to customer supply chains. 22 June First container vessel conversion to methanol dual-fuel engine A.P. Moller - Maersk to pioneer first container vessel conversion to methanol dual-fuel engine. As the first in the ship ping industry, A.P. Moller - Maersk will retro fit an existing vessel to a dual-fuel methanol powered vessel and thereby able to sail on green methanol. The first engine retrofit in the industry is scheduled to be conducted mid-2024. 22 November A.P. Moller - Maersk signs landmark green methanol offtake agreement Green fuel scarcity remains one of the key issues to solve to complete the green tran- sition in shipping. The offtake agreement between A.P. Moller - Maersk and Chinese developer Goldwind, a global leader in clean energy, reaches into the next decade and marks the first large scale green methanol offtake agreement for the global shipping industry. 4 December A.P. Moller - Maersk to invest more than USD 500m in integrated supply chain capabilities in Southeast Asia A.P. Moller - Maersk announced the plan to invest USD 500m in expanding its supply chain infrastructure to support Southeast Asia’s emergence as a global production hub and a consumption powerhouse. Invest- ments, which will spread over the coming three years, will mainly target Logistics & Services arm and reflects the commitment to being the global logistics integrator. 14 September Laura Mærsk Following a name-giving event in Copenhagen, Denmark, the world’s first methanol-enabled container vessel, Laura Mærsk, enters service. Highlights 2023 22 October A.P. Moller - Maersk signs deal with Starlink for its Ocean fleet A.P. Moller - Maersk’s more than 330 own operated container vessels will have Starlink installed, enabling high-speed internet with speeds over 200 Mbps. The service is a leap forward in terms of internet speed and latency which will bring significant benefits in terms of both crew welfare and business impact. 13 September Ground-breaking of Rijeka Gateway The USD 380m Rijeka Gateway will be a state-of- the-art remote-controlled container ter minal, and once it starts operations in 2025 it will significantly reduce transit time to the Adriatic and Central European markets. The terminal will mainly utilise electrical equipment and help minimise the carbon emissions footprint. MarchJanuary February April May June July SeptemberAugust October November December 5 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials In 2023, our purpose of ‘Improving life for all by integrating the world’ was prominently reflected in our role as leaders in the decarbonisation of the maritime industry and our consistent investments into advanced and robust logistic solutions, aimed at equipping our customers for various type of disruption and ensuring the resilience of global supply chains. Together with our customers, we navigated a year of profound change in the global logistics industry, marked by a rapidly evolving market environment. We are pleased to report that A.P. Moller - Maersk delivered financial performance in line with our guidance for the year, demonstrating resilience and adaptability throughout these highly trans- formative times. Markets normalised after the years of lock-down and subsequent boom in con- sumer demand. The market correction began in the fourth quarter of 2022 as supply chain bottlenecks gradually eased. In the first six months of the year, we saw a trend of reducing stock, leading to a decrease in demand. The second half revealed a new industry standard, marked by robust volumes but constrained by pricing pressures due to over- supply in shipping, with no immediate signs of more ships being idled or recycled. Measures for a changed reality During the year, we actively responded to the shifting environment. Early cost contain- ment measures were initiated, deployed capacity was adjusted, and efficient manage- ment of Ocean unit costs, cost per move in terminals, and SG&A cost level in Logistics & Services helped safeguard our financial performance. Our workforce was realigned with our evolving book of business, reducing our global staff from 110,000 to around 100,000. Moreover, we prudently reduced our capital expenditure plans for 2023 and 2024. LETTER FROM THE CHAIR AND THE CEO Dedicated to fulfilling our customers’ supply chain needs Copenhagen, Denmark 6 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Post-pandemic resilient supply chains Despite the absence of significant congestions, the vulnerabilities that triggered disruptions during the pandemic years still linger in global supply chains, and new challenges keep emerging. Supply chains have become increasingly complex and fragmented, and customers are dealing with uncer- tainty from geopolitical tensions and changing consumer behaviour causing fluctuating demand. Consequently, steps are taken to diversify sourcing and nearshore production to enhance resil- ience and flexibility in logistics. Throughout the year, we have further deepened our understanding of our customers’ diverse supply chain needs to help them develop resilient solutions. We remain committed to manage any complexities our customers may experience by continuously improving and innovating our services and offerings. Additionally, Terminals is further enhancing supply chain efficiency by expanding current terminals and establishing new ones. Key projects include the USD 1 billion expansion in Rotter- dam, the Netherlands, advancements in automation at Pier400 in Los Angeles, USA and plans for new terminal developments, like the announced strategic partnership in Hai Phong, Vietnam. Terminals consistently demonstrates robust business performance, maintaining a strong focus on cost management, safety and operational excellence. Digitising to deliver on customer needs We have advanced further on enhancing the operational reliability of our digital infrastructure, enabling very stable execution of business and significantly improved system availability. Further- more, we have hit some fundamental milestones in our efforts to develop modern platforms across the supply chain. Aiming to unlock truly integrated logistics for our customers, we have moved from basic visibility to multi-carrier, multi-modal visibility. Beyond this, we have made progress on standardising and rolling out our inland platform and our warehousing solution across regions. Focus is now on unlocking productivity gains through further platform integration and work-flow automation. Decarbonising logistics In 2023, we marked a noteworthy achievement in our efforts to decarbonise the logistics industry by introducing the world’s first green fuel-enabled vessel – Laura Mærsk. As a pioneering force in decarbonising the industry, we are acutely aware that we heavily rely on the partnership and support from the industry, from regulations and, fundamentally, from our customers. To transition away from fossil fuels, collaboration across sectors is crucial. By 2030, A.P. Moller - Maersk alone will need up to 5 million tonnes of green fuels to deliver on our green pledges, while current global production of green methanol is under 100,000 tonnes. The need for green fuels in shipping is immense and the challenge to provide it is too big a task for any one company or investor to manage alone. Our industry’s progress depends on robust regulatory frameworks. At UN’s annual COP meeting in November 2023, we stood united with leading players in our industry calling for lawmakers to introduce measures that – if implemented – will accelerate the decarbonisation of global maritime transport. Together with CEOs from four of the largest container carriers, we proposed in a joint declaration a carbon tax scheme to help close the price gap between fossil and green fuels recognising that not all customers are ready to pay the higher prices currently associated with sustainable transport. Reconfirming our transformational journey While we continue to streamline our organisation and operations, we remain dedicated to our strategy of fulfilling our customers’ diversified supply chain needs while pursuing growth oppor- tunities across our Terminals and Logistics & Services businesses. We are pleased to note great commercial wins, which reflect the value our customers place on our integrated logistics solutions and close partnerships. In our Ocean business, focus is steadfast on maintaining best-in-class margins and building an even more efficient and reliable future Ocean network. In Logistics & Services, we are looking to expand our offering while optimising performance and driving growth. Meanwhile, in Terminals focus is on continued optimisation and ongoing growth initiatives. The market dynamics of 2023 underscored the critical importance of diversifying our revenue streams beyond the Ocean business and forging stronger, more collaborative relationships with our customers. These efforts are key to our ongoing success and adaptation in a rapidly evolving market and to our strategy of being the global integrator of logistics. Thank you for your support 2023 ended with multiple distressing attacks on cargo ships in the Red Sea and the Gulf of Aden, including two A.P. Moller - Maersk vessels. We are horrified by the escalation of this unfortunate conflict. Ensuring the safety of our people and customers’ supply chains is our priority. We are encouraged by the strong international support to restore this essential shipping lane. Our sincere wish is for rapid control of the situation, to allow for the resumption of safe transportation in 2024. In closing, we would like to express our sincere gratitude to all A.P. Moller - Maersk colleagues around the world for their relentless efforts and unwavering dedication. We would also like to express our appreciation to the Executive Leadership Team and the Board of Directors. In particular, we welcome Kasper Rørsted, who joined the Board in 2023. Last but not least, we are extending a profound thanks to our customers. The support and partnership from our customers are the driving force behind our commitment to delivering excellence in global logistics. Vincent Clerc CEO of A.P. Møller - Mærsk A/S Robert Mærsk Uggla Chair of A.P. Møller - Mærsk A/S 7 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials In 2023, the logistics markets experienced a normalisation from the disruptions of the logistics industry in 2020-2022, due to COVID-19, accelerating already existing issues in the global supply chains and with a significant impact on world trade. In previous years, the demand for logistics services significantly increased, and, in turn, freight rates saw all-time highs due to capacity shortages, where container availability and air capacity remained tight, and wait times for vessels outside of ports remained lengthy given the bottlenecks in landside transportation and warehousing. In this exceptional market, freight rates peaked in Q3 2022, which for A.P. Moller - Maersk was the 16th quarter in a row with year-on-year earnings growth. After that, the high demand eventually started to normalise as congestions eased, and consumer demand declined leading to an inventory overhang, the correction of which resulted in rapid and steep declines in shipped volumes and rates starting in late Q3 2022. EBITRevenue Free cash flow Q1 Q2 Q3 Q4 Solid results in line with expectations, while continued destocking in Europe and especially North America together with easing of congestions implied lower volumes across all segments, while a maintained focus on proactively managing costs was key in adjusting to a radically changed business environment. A strong first half of the year, with A.P. Moller - Maersk responding to ongoing market normalisation prompted by destocking and a subdued growth environment, following the pandemic-fuelled years, leading to lower volumes and lower rates. Decisive actions on cost containment together with the contract port- folio cushioned some of the effects of this market normalisation. Deterioration of rates regained momentum now as a result of increased supply in Ocean with rates well off their 2022 peak and continued lower volumes. The business was facing a new normal with subdued demand, prices back in line with historical levels and inflationary pressure on the cost base. Over- capacity across most regions had since sum- mer triggered price drops and no noticeable uptick in vessel recycling or idling. Several cost and cash containment measures had been accelerated to safe- guard the financial performance. Volumes were up but rates continued to erode. Market condi- tions remained volatile, and the impact of high levels of additional supply increased with subdued idling and ship recycling initiatives across the business. Despite a temporary change in market conditions towards the end of the quarter amid the concerning disruptions in the Red Sea/Gulf of Aden, the underlying structural supply challenges remained unchanged. Revenue illustrated in quarters For specifics on the financial performance See page 32 Guidance for 2024 with the roadmap to 2025 and the ESG targets all the way to 2040 See pages 34-35 USDbnUSDbn USDbn Logistics & Services Terminals Ocean 10,000 5,000 0 3.9bn51.1bn 4.0bn (USD 30.9bn)(USD 81.5bn) (USD 27.1bn) EBIT decreased by USD 26.9bn, negatively impacted by the declining freight rates and with an impact from Ocean of USD 26.9bn. The decrease in free cash flow was negatively impacted by lower cash flow from operating activities, partly offset by lower CAPEX and higher financial income and sales proceeds. FINANCIALS IN BRIEF A year of normalisation 2019 2020 2021 2022 2023 1.7 4.2 19.7 30.9 3.9 2019 2020 2021 2022 2023 2.3 4.6 16.5 27.1 4.0 Q1 2019 Q1 2020 Q1 2021 Q1 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 8 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials 60% 40% 20% 100% 80% ESG IN BRIEF In 2023, A.P. Moller - Maersk continued maturing the roadmaps and processes identified in previous years to fully integrate ESG into the company’s business, delivering many examples of its environmental and social commitments. This included a milestone for A.P. Moller - Maersk and the entire industry – the arrival of the world’s first vessel capable of running on green methanol. A.P. Moller - Maersk increased the energy efficiency of its fleet through more energy- efficient operations and new technologies. This lowered Ocean’s emissions intensity, EEOI, from 13.0 in 2022 to a record low of 11.7 in 2023. The graph shows progress relative to the 2020 baseline. Validated science-based targets Investing in green solutions 1.5°C aligned 96% Progress on ESG commitments (107%) Engagement Safety Diversity 60th 1.11 27% (67th percentile) (0.93 LTIF) (26%) The challenging business climate of 2023, combined with uncertainty from A.P. Moller - Maersk’s large structural reorganisation in the beginning of the year and a work- force reduction had a dampening effect on employee engagement, which fell from the 67th percentile in 2022 to 60th percentile in 2023, measured in the biannual engagement survey relative to the global benchmark. In 2023, the lost-time injury frequency rate increased from 0.93 to 1.11, partly driven by a focus on improving the reporting culture, which has led to more reported cases. The share of women in leadership roles, including leaders, senior leaders and executives, increased to 27% (26%), requiring continued attention. Percentile Lost-time injury frequency (LTIf) % in headcount Decarbonising Ocean EEOI 2019 2020 2021 2022 2023 1.16 1.22 0.93 0.93 1.11 A.P. Moller - Maersk is the shipping industry’s first to secure validation from the Science Based Targets Initiative for 1.5°C- aligned 2030 targets and Net Zero 2040 targets, to be reported on from 2024 replacing previous targets. Laura Mærsk, the world’s first green methanol capable container vessel, com- pleted her first voyage from South Korea to Copenhagen, Denmark, entirely on green methanol. 24 more methanol-capable vessels are on order, as well as a pilot for the world’s first methanol vessel retrofit. In 2023, A.P. Moller - Maersk further continued investing in end-to-end logistics decarbonisation solutions, including electric trucks in Germany, Norway, Sweden, the UK and China. Low emissions dry storage ware- houses were opened in the UK, Malaysia and Colombia, as well as a state-of-the-art cold storage space in New Zealand. In Terminals, the equipment electrifi- cation continued, and 10 terminals are now running on 100% renewable energy. 20222021 2023 2024 2025 2026 2027 2028 2029 2030 Target towards 2030 9 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Five-year summary Income statement 2023 2022 2021 2020 2019 Revenue 51,065 81,529 61,787 39,740 38,890 Profit before depreciation, amortisation and impairment losses, etc. (EBITDA) 9,591 36,813 24,036 8,226 5,712 Depreciation, amortisation and impairment losses, net 6,615 6,186 4,944 4,541 4,287 Gain on sale of non-current assets, etc., net 523 101 96 202 71 Share of profit/loss in joint ventures and associated companies 435 132 486 299 229 Profit before financial items (EBIT) 3,934 30,860 19,674 4,186 1,725 Financial items, net 428 -629 -944 -879 -758 Profit before tax 4,362 30,231 18,730 3,307 967 Tax 454 910 697 407 458 Profit for the year – continuing operations 3,908 29,321 18,033 2,900 509 Profit/loss for the year – discontinued operations 1 - - - - -553 Profit/loss for the year 3,908 29,321 18,033 2,900 -44 A.P. Møller - Mærsk A/S’ share 3,822 29,198 17,942 2,850 -84 Underlying profit – continuing operations 3,954 29,703 18,170 2,960 546 Balance sheet Total assets 82,100 93,680 72,271 56,117 55,399 Total equity 55,090 65,032 45,588 30,854 28,837 Invested capital 50,430 52,410 44,043 40,121 40,555 Net interest-bearing debt -4,658 -12,632 -1,530 9,232 11,662 Cash flow statement Cash flow from operating activities 9,643 34,476 22,022 7,828 5,919 Repayments of lease liabilities 3,226 3,080 2,279 1,710 1,291 Gross capital expenditure, excl. acquisitions and divestments (CAPEX) 3,646 4,163 2,976 1,322 2,035 Cash flow from financing activities 16,805 14,135 7,900 5,618 4,800 Free cash flow 3,967 27,107 16,537 4,648 2,340 Financial ratios 2023 2022 2021 2020 2019 Revenue growth -37.4% 32.0% 55.5% 2.2% -0.9% EBITDA margin 18.8% 45.2% 38.9% 20.7% 14.7% EBIT margin 7.7% 37.9% 31.8% 10.5% 4.4% Cash conversion 101% 94% 92% 95% 104% Return on invested capital after tax – continuing operations (ROIC) 7.4% 60.4% 45.3% 9.4% 3.1% Equity ratio 67.1% 69.4% 63.1% 55.0% 52.1% Underlying ROIC 7.5% 61.2% 45.7% 9.6% 3.2% Underlying EBITDA 9,771 36,843 24,036 8,324 5,790 Underlying EBITDA margin 19.1% 45.2% 38.9% 20.9% 14.9% Underlying EBIT 3,962 31,244 19,808 4,231 1,761 Underlying EBIT margin 7.8% 38.3% 32.1% 10.6% 4.5% Stock market ratios Earnings per share – continuing operations, USD 227 1,600 941 145 23 Diluted earnings per share – continuing operations, USD 227 1,595 938 145 23 Cash flow, operating activities per share, USD 572 1,889 1,155 399 288 Dividend per share, DKK 515 4,300 2,500 330 150 Dividend per share, USD 74 623 381 55 22 Share price (B share), end of year, DKK 12,140 15,620 23,450 13,595 9,608 Share price (B share), end of year, USD 1,800 2,242 3,576 2,246 1,439 Total market capitalisation, end of year, USDm 28,541 39,135 64,259 41,957 28,000 Environmental and social data Ocean: Reduction in carbon intensity (EEOI) by 2030 (2020 baseline) 4% -7% -6% 0% - Fatalities 4 9 4 1 5 Lost-time injury frequency (LTIf) 1.11 0.93 2 0.93 1.22 1.16 Women in leadership (% based on headcount) 27% 26% 22% 21% 20% 1 Maersk Drilling was demerged in April 2019 and following the classification of the businesses as discontinued operations, it was presented separately on an aggregated level in the income statement, balance sheet and cash flow statement. 2 The 2022 lost-time injury frequency (LTIf) was restated from 0.90 to 0.93. Definition of terms See page 125. Amounts in USD million 10 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials The global integrator Our Purpose Business model Market environment Strategy Sustainability highlights Risk management Santa Fe Springs, California, United States 11 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Improving life for all by integrating the world The integration illustrated by five years of Automatic Identification System (AIS) transponder data from A.P. Moller - Maersk vessels registered in the company’s scheduling system GSIS Gateway terminals and hubs A.P. Moller - Maersk is an integrated logistics company working to connect and simplify its customers’ supply chains. As a global leader in logistics services, the company has 100,000+ customers, operates in more than 130 countries and employs around 100,000 people. A.P. Moller - Maersk is aiming to reach net zero emissions by 2040 across the entire supply chain with new technologies, new vessels and green energy solutions. Ocean Green methanol-enabled vessels on order 24 Containers per annum (m FFE), serving over 475 ports worldwide 11.9 Container vessels deployed 670+ Logistics & Services 7,800k+ sqm warehousing capacity worldwide across 460+ sites Electric vehicles in operation; 200+ more on order 100+ Intermodal volumes managed (m FFE) 4.0 M A E RS K Terminals Moves in 2023 21.7m Vessel calls 27,000+ Operating facilities across 35 countries; 3 new port projects 62 * Gateway terminals and hubs OUR PURPOSE 12 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Through the enablers of ESG, Technology and People, customer, financial and operational synergies are unleashed from the integrated businesses of Ocean, Logistics & Services and Terminals. See page 18 Our business and how we create value A.P. Moller - Maersk is a purpose-driven company and always has been. Increasing complexity in global supply chains drives the need for integrated logistics. We aim to fulfil that need by sustainably and responsibly delivering better, simpler and more reliable outcomes for our customers. Improving life for all by integrating the world. What we depend on Value created for Purpose-driven people and our culture Our talented, diverse team of around 100,000 employees with 181 nationalities. Our brand For over a century, we have built partnerships with customers, enabling them to prosper by facilitating global trade. Natural resources Our business relies on natural resources such as steel for vessels and oil, biomass and water for conventional and green fuels. Stakeholder relationships and partnerships We rely on constructive relationships with customers, suppliers, peers and authorities. Assets and end-to-end delivery network Our assets, supplier relationships and logistics expertise ensure resilient supply chains. Financial capital We have a strong balance sheet and are committed to remaining investment grade-rated. Technology and data Technology and data are key to connecting and simplifying supply chains. Our customers We aspire to provide truly integrated logistics for 100,000+ customers’ supply chains, while helping them meet their decarbonisation commitments. Our people We keep our people safe and engaged while offering equitable and interesting career paths. Society By integrating global logistics, we improve the flow of goods and materials that sustain people, businesses and economies the world over and contribute to improved quality of life and prosperity. The planet Our industry is a significant contributor to global greenhouse gas (GHG) emissions, and we are committed to realising net zero emissions by 2040. Shareholders In our transformation to become the global integrator of container logistics, we continue to innovate and grow shareholder value. M A E RS K ESG Technology People Logistics & Services Ocean Terminals Customer synergies Financial & operational synergies BUSINESS MODEL 13 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials A resilient global economy In the first half of 2023, container trade demand growth was in negative territory. In the same period, the contract logistics business continued to remain resilient. The inventories that retailers were trying to reduce had to be stored and processed, making the weakness of one segment the strength of the other. The tide turned in the second half of the year, bringing demand growth back on Ocean, while contract logistics entered a period of realignment. A more resilient global economy than expected in 2023 The global economy has demonstrated resilience in the face of rapid increases in interest rates. Consequently, the growth rate for 2023 stands at 2.7% according to Oxford Economics, surpass- ing the initially projected 2% at the year’s outset. Strength was concentrated in the service sec- tor that completed its recovery from the pandemic shock. Conversely, global manufacturing remained in contraction. Throughout 2023, the Manufacturing Purchasing Managers Index (PMI) consistently registered values below 50 – the threshold indicating contraction – and concluded the year at 49. The stalwart of this unexpected resilience has been the US consumer, bolstered by accu- mulated savings and a robust labour market. Consumer goods spending experienced a notable uptick of 2.1% in 2023. Despite a robust demand for goods, inflation followed a downward trajectory, decreasing from an initial 6.4% at the start of the year to 3.4% by December. The impact of high interest rates on economic activity has proven more lagged than market expectations. Unlike in the US, the European economy has evolved broadly as expected, and it is in fact following the central bank playbook: the impact of increased interest rates has slowed economic activity, evidenced by a negative sequential growth in Q3 and flat growth in Q4. Overall, economic activity has remained stagnant throughout the year. Retail sales in the Euro area experienced a decline of 1.7% in 2023. However, it is important to highlight that this decline is partly driven by the fuel and food sectors. Excluding these groups, retail sales only saw a 0.5% decrease. With inflation gradually receding to 2.9% in December and nominal wage growth picking up, growth in real compensation of employees turned positive in the second half of the year. The drag on consumption from declining real earnings started to ease. Working in the opposite direction is slower employment growth, which is unlikely to bring the unemployment rate down from the 6.4% in December. Meanwhile, the Chinese economy grappled with persistent structural imbalances, character- ised by high household savings, low consumption, unproductive investment and ongoing delev- eraging in the housing market. After the initial disappointments stemming from the end of the zero-COVID-19 policy, the short-term outlook failed to improve in the second half of the year. The inventory correction continued its course The inventory correction has been a significant issue affecting trade in 2023. The combination of weak imports and strong consumer demand brought US inventories into a better balance. Bureau of Economic Analysis statistics show that, in November, retailers’ (excl. auto) inventories-to-sales ratio was 1.14, comparable to pre-pandemic levels in the US. However, despite progress, there are still pockets of inventory risk within specific retail segments, particularly in categories such as food and beverages, building materials, garden equipment and furniture. In contrast, the inven- tores-to-sales-ratio for cars and parts is very low. Wholesalers’ inventories-to-sales ratio also continued to trend down. Unlike in the US, the inventory picture remains mixed in Europe. At the aggregate level, inventories have continued to accumulate at a relatively fast pace in Europe during 2023, also because of the slowdown in consumer goods spending growth. Underneath the Europe headline, there are large cross-country differences. The inventory situation looks more challenging in countries like Germany and France and a bit less so in Italy, Spain and the Nether- lands. In the UK, there has been outright destocking for several quarters, such that the invento- ry-to-demand ratio has declined slightly despite weak final demand growth, and it is currently fairly close to historical averages. Demand for logistics services pivoted from contract logistics to container trade In the first half of 2023, global container trade demand growth was in negative territory by 6.4% y/y. In the same quarters, contract logistics demand continued to remain resilient with 3% growth y/y. The inventories that retailers were trying to bring down had to be stored and processed, making the weakness of one segment the strength of the other. As the year progressed, the tide turned on Ocean. Demand growth was 2% in Q3 and 6% to 8% in Q4, driven by technology and automotive. On the other hand, as inventories were brought in line with expected sales, demand for contract logistics started to contract in Q3. Regionally, the full-year container trade import growth in 2023 was notably negative in North America by -10% and in Oceania by -5%, remained flat in Far-East Asia, and was strong in Africa by 12% and in West Central Asia by 7%. Imports into Europe and Latin America were robust, each recording a year-over-year growth of 5%, see figure 1. Demand for air freight forwarding has been exceptionally weak in 2023. Demand declined, bringing volumes below pre-pandemic levels. The combination of slow demand and low rates on Ocean points to a possible modal shift. Weakness is broad-based with all verticals showing negative growth, except reefer. MARKET ENVIRONMENT 14 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Road freight contracted in 2023 both in the US and in Europe, however, with different magnitude. In the US, it declined by 6% y/y, following the exceptional growth of 2021 and the first half of 2022. Despite negative growth, demand held up in the second half of the year for Less-Than- Load (LTL) services compared to full truckload freight (FTL), as shippers traded down to smaller consignment formats. Demand for road freight has been negative in Europe as well, but the contraction has been more modest. This is consistent with growth during the pandemic recovery, which has been positive but more modest. Among the large Europe markets, Germany has been the weakest due to the importance of manufacturing, while in the UK a reset is in place follow- ing Brexit and pandemic shock. Supply has been a problem for container trade and US road freight The improvement in container trade demand throughout the year failed to support rates due to the increase in capacity available in the market. Nominal capacity expanded by 8% in 2023. The supply-demand balance deteriorated in the first half of the year, and marginally improved in the second half thanks to stronger demand. The accumulation of overcapacity brought utilisation down throughout the year. This is in stark contrast with contract logistics. Vacancy rates for warehouses remained on the low end of historical data due to the slow intake of newbuilds. In Europe, the vacancy rate ended in Q3 2023 at 5.2% according to Savills, while the Q4 2023 rate was 5.2% in the US (Cushman & Wakefield). North America -10 Global -1 Intra America -6 Latin America 5 Africa 12 Intra Europe -8 Europe 5 Intra-Asia -5 Oceania -5 West Central Asia 7 Far East 0 Africa 8 Source: Maersk Strategic Insights 1) Data displayed on geographical regions excl. Intra Regional 2) Actuals available up to November 2023; December is based on estimates 3) Mexico is part of the Latin America region in order to be consistent with the North America trade cluster 4) Colours embed information on the current dynamics relative to the 2011-19 average. Figure 1 Container volume growth in 2023 (%) Very strong Strong Neutral Weak Very weak Inbound Outbound Far East 2 North America 0 Latin America -2 West Central Asia 3 Oceania -1 Europe -6 15 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials The US road freight demand has seen elevated capacity since carrier numbers expanded rapidly during 2021. Record high rates saw large numbers of small, independent carriers enter the market, significantly increasing total supply. Throughout much of 2023, despite falling rates, carriers proved resilient and remained in the market despite higher costs. There were a couple of exits, particularly in the LTL and brokerage segments, but for much of 2023 carriers were able to weather higher costs and lower rates better than expected. Geopolitics is reshaping trade flows The concerted efforts in both Europe and the US to reduce dependency on imports from China have altered trade dynamics in container trade and air freight. Historically, North America relied on China for approximately half of its total container imports until 2019. However, by 2023, the share of China in total North America decreased to 42%. Concurrently, there has been a notable surge in imports from Southeast Asia, compensating for most, though not entirely, of the decline in imports from China. Additionally, there is a growing trend in North American imports originating from the Indian sub-continent. Despite this trade diversion, China’s share of global exports has remained steadfast at around one- third, showing minimal change over the past decade, see figure 2. What stands out is China’s success in expanding its exports into regions like Latin America, the Middle East, Africa and the Eastern Mediterranean, despite a challenging macroeconomic and market outlook in these areas. Change is visible also on air freight forwarding, where exports from China has softened to the US and strengthened to Mexico, and more so differently than from other countries. Mexican import volumes from China are small compared to the US, but their share increased recently. Notably, tech products have been the driver of the decline in US imports from China and the rise of Mexican imports. The risks map thickened Towards the end of 2023, the resilience of the economy faded away. Slower economic growth is likely to characterise 2024. The consensus forecast for global GDP growth is in the range of 2%. Despite a weak economy, air freight forwarding demand is expected to grow positively again in 2024, between 2% and 5% y/y. Container trade as well, between 2.5% and 4.5%. Contract logis- tics in the US is expected to be flat. In Europe, road freight and contract logistics are expected to grow modestly around 1%, while the US road freight demand will continue to adjust, with growth expected to remain negative. Considerable uncertainty looms over the macroeconomic and market outlook, owing to several key risks: • Geopolitical tensions persist as the most visible risks, with the situation around the Houthi attacks in the Red Sea being a very current example. To date, a resolution to conflicts in Gaza and Ukraine remains elusive. Geopolitical tensions can impact energy prices and disrupt supply chains, subsequently affecting global growth and business costs, in addition to the significant human toll. • As climate patterns shift, the frequency of extreme events is increasing. Prolonged disruptions caused by low rainfall in Panama are expected to persist into the first half of 2024, affecting schedule reliability for container trade and logistics. • Inflation might prove challenging to curb further, potentially prompting central banks to delay interest rate cuts. Prolonged high interest rates could trigger a financial event in the coming months. • The convergence of slowing economic growth and elevated interest rates raises concerns about the sustainability of debt, posing risks for both corporate entities and sovereigns. A potential debt crisis could escalate a soft economic landing into a severe downturn, impacting global markets across the board. • Conversely, Europe might surprise with positive momentum stemming from an improving consumer outlook. Restored purchasing power, fuelled by decreasing inflation and consistent wage growth, could enhance sentiment and positively impact demand for logistics. Source: FBR (M202312) CHN Global Export Share (rhs) Figure 2 China has maintained export market share despite US trade diversion Share % China Exports Share % 100 90 80 70 60 50 40 30 20 10 0 REG 2016 2017 2018 2019 2020 2021 2022 2023 35.0 34.5 34.0 33.5 33.0 32.5 32.0 31.5 31.0 30.5 30.0 29.5 10 10 10 10 9 9 10 11 3 3 3 3 3 3 3 3 24 25 26 23 24 24 23 20 7 7 7 8 7 8 9 10 28 27 27 29 29 30 30 28 23 23 22 23 22 22 21 22 4 4 4 5 4 4 4 5 WCA OCE NAM LAM FEA EUR AFR 16 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials The global integrator 2023 was another year where A.P. Moller - Maersk’s transformation from diversified conglomerate to be the integrator of container logistics made progress, with the objective to connect and simplify customer’s supply chains while providing increased transparency, tighter control and drive higher efficiencies. The vision includes the combination of a broad product and service offering of Logistics & Services with a highly dependable and more differentiated Ocean transportation offering. Significant financial and operational synergies are realised between Terminals and Ocean, including leveraging the company’s own Ocean volumes to optimise and de-risk terminal operations. Despite the highly dynamic market situation observed in 2023, rich in disruptions on the back of the COVID-19-fuelled boom and the supply chain disruptions, A.P. Moller - Maersk’s strategy remains ‘in season’. Although the business in Logistics & Services did not grow in 2023, significant new wins were registered during the year. This is a strong testament that despite, and partly also because of the changing reality and radically different environment, the company’s customers’ buy-in to the integrator strategy, across verticals, size and geographies is unwavering. A.P. Moller - Maersk’s strategy continues to generate tremendous interest among customers and across the industry, including competitors. They see tangible value and the value proposition is as relevant as ever for them, addressing their main pain points. Performing while transforming The strategy is underpinned by innovative technology, the Group’s industry leading commitment to ESG, not least the Group’s commitment to reach net zero carbon emissions by 2040 across A.P. Moller - Maersk’s businesses, and the Group’s highly capable people. The ability to put the customer first, help them navigate disruptions and absorb the inherent complexity of global logistics is a true differentiator which A.P. Moller - Maersk aspires will spear- head the Group’s strategy and efforts in making A.P. Moller - Maersk a global integrator. The key business segments continue to perform while transforming amidst some unprecedented market circumstances experienced in 2023 on the back of the COVID-19 period. As much as the company continues to optimise each business segment’s operational and financial performance, the customers value the unmatched full A.P. Moller - Maersk network with its scale, connectivity and accessibility. The road from a conglomerate to the global integrator The vision A.P. Moller - Maersk’s vision to become the global integrator of container logistics was introduced and the Hamburg Süd acquisition was closed 2017 2018 2019 2020 2021 2022 20242023 Simplified customer experience The commercial frontlines of Ocean and Logistics & Services were merged to improve customer interaction and accelerate organic growth Acquisitions to bridge identified capability gaps Vandergrift, Performance Team and KGH Customs Services Demerger of entities Maersk Tankers, Maersk Oil and Maersk Drilling to focus the company towards container logistics Reorganisation The reorganisation of Ocean and Logistics & Services completed and the integration of the Safmarine brand, Damco air freight and LCL to improve customer experience and end-to-end service delivery e-commerce and Air capabilities acquired Acquisitions to bridge capability gaps within the e-commerce and Air space with Pilot, Visible, B2C Europe, HUUB and Senator International First methanol vessels ordered First vessels capable of operating on green methanol ordered to enable the company’s decarbonisation journey Project logistics solutions and contract logistics Acquisitions of Martin Bencher to complement A.P. Moller - Maersk’s project logistics solutions portfolio and LF Logistics to complement for contract logistics 2M break-up The 2M alliance termination in 2025 announced with the goal to enable the Integrator strategy and unlock higher value for A.P. Moller - Maersk’s customers Reorganisation New organisation introduced to pivot on the transformation strategy First methanol-fuelled vessel in the world Delivery of Laura Mærsk Ocean network A.P. Moller - Maersk has entered a long-term operational collaboration with Hapag-Lloyd from February 2025 named Gemini Corporation Bringing the global integrator to life STRATEGY 17 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials M A E RS K OceanLogistics & Services Terminals Customers’ business needs are evolving, and the need for supply chain resilience and stability has never been greater. The Red Sea crisis is another proof point, following the supply chain disruptions experienced during COVID-19. In 2023, as the Ocean industry entered into a new chapter charac- terised by a deteriorating supply-demand balance, managing operations and improving EBIT margins became a sharp focus for the company. This required frequent and active adjustments of deployed capacity, while ensuring adequate and flexible access for customers to high-quality and reliable Ocean products. That is why the company is designing a best-in-class ocean network that will offer an industry-leading combination of reliability, speed to market and geographical reach, all while continuing to support decar- bonisation and the company’s goal of being net-zero in the future. To deliver this network, A.P. Moller - Maersk has entered a long- term operational collaboration with Hapag-Lloyd, the ‘Gemini Cooper- ation’, to be implemented from February 2025, immediately after the conclusion of the current 2M Alliance. The new network design in combination with the launch of Gemini Coorporation represents an innovation that allow A.P. Moller - Maersk to continuously evolve to meet customer needs, while maintaining a disciplined approach to CAPEX and keeping the company’s fleet around 4.3 million TEU. Over the course of 2023, consumers reverted back to normal spending patterns, increasing spending on experience economy and reducing on goods. Volumes going through the supply chain slowed down drastically as excess inventory had to be worked down and as a consequence, prices rapidly adjusted back to pre-pandemic levels, and in some cases below. This is expected to continue for most of 2024, where the market will gradually start recovering as inventory levels normalise and volumes start to pick up again. Similarly to the market, 2023 was a year of adjustment also for the Group, where focus has shifted to operational excellence in order to deliver to the customers, which remain at the centre of the activities, with the product depth, breadth and service quality required. Reliability, cost and speed remain the hygiene factors customers expect, while resilience is also a critical customer requirement. In the face of economic headwinds, geopolitical instability and accelerating paradigm shifts in the logistics industry, these requirements will become ever more important, and A.P. Moller - Maersk is continuing its focus on providing better solutions to meet those needs. Acquisitions have played a critical role in filling gaps in the company’s ability to provide end-to-end solutions, securing critical knowledge, assets and geographic coverage. While the past years have been dominated by acquisitions, the focus in 2023 has been on integrating those acquisitions with the goal to deliver on the financial and operational synergies. 2023 was another year of profitable earnings in Terminals, despite the onset of normalisation in ocean shipping enabled by cost management actions, strong focus on operational excellence and cooperation with local authorities to adjust tariffs in line with inflation. Terminals continues to be a global leader among terminal opera- tors, aiming to delivering operational quality and efficiency, pursuing an ambitious ESG agenda and driving local economic engagement, growth and development. Through these differentiated and continuously evolv- ing capabilities, Terminals is creating value for host governments and customers across the value chain. Terminals plays a key role to the integrator strategy, through the hub terminals which have been preparing for the launch of the new Ocean network in February 2025. Substantial investments in physical and digital infrastructure at the hubs, in addition to close operational collaboration with Ocean, are essential to unlocking target standard for Ocean reliability. In Ocean, normalisation on the back of COVID-19 was felt in the industry and in A.P. Moller - Maersk already in the second half of 2022, which continued throughout 2023 until the emergence of another supply chain crisis centred around the Red Sea. For A.P. Moller - Maersk, following the years of strong business growth, 2023 marked a year of transition in Logistics & Services on the back of COVID-19. Terminals is an integral part of the end-to-end container shipping supply chain and remain critical for A.P. Moller - Maersk’s inte grator strategy, enabling network stability while lowering costs to serve its customers and deliver stable and resilient earnings. Reference to the business model See page 13 18 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials People working at A.P. Moller - Maersk are essential drivers in delivering customer value by addressing customer needs, developing deep content expertise and spearheading the transformation journey into an integrated logistics company. A.P. Moller - Maersk’s ambitious commitments on ESG are core to the purpose of the group, an integral part of its business strategy and a prerequisite for success as the global integrator. Delivering on the strategy requires building and rebalancing of skills and capabilities across the organisation, especially within logistics and technology, and of the company’s DNA, while embedding a culture of customer centricity among thousands of colleagues, current and new. Maintaining strong capabilities in the focus areas, attracting and retaining talent as well as talent development are top priorities for A.P. Moller - Maersk. In 2023, the company continued investing in the People Strategy, making progress on initiatives for performance management, leadership capabilities, career building and upskilling its teams while ensuring the talent pipeline needed to bring the business strategy to life. Progress continued despite 2023’s sharp market downturn, which necessitated a reduction of the workforce in 2023. In line with its values, A.P. Moller - Maersk worked to reduce the impact to its people as much as possible through natural attrition, local savings and organisational adjustments. To secure and retain the needed talent, A.P. Moller - Maersk strives to remain an employer of choice, offering employees exciting develop- ment opportunities and a company environment that values diversity of thought. The company continued to build on the performance manage- ment approach and culture launched in 2022, moving away from tradi- tional ratings to continuous performance conversations, with the goal of improving performance, alignment, and career growth. A.P. Moller - Maersk’s strong commitment to create an engaging environment for all colleagues remains at the centre of the efforts, also covering Diversity, Equity and Inclusion (DE&I) principles as the company aspire to create a safe and inclusive workplace for all where colleagues can develop and have thriving careers. For further details, see the 2023 Sustainability Report. In 2023, A.P. Moller - Maersk became the first in the shipping industry to have its 2030 and 2040 targets validated by the Science Based Targets initiative (SBTi) in alignment with a 1.5°C and net zero pathway, and the company made progress on its roadmap to decarbonise logistics across all business areas. A hallmark moment was the arrival of Laura Mærsk in 2023, the world’s first container vessel capable of sailing on green methanol. In 2024, A.P. Moller - Maersk will see the arrival of more new methanol- capable vessels out of the 24 vessels currently on order. Securing access to green energy solutions at scale remains a key strategic priority. In 2023, A.P. Moller - Maersk signed the first large-scale green methanol offtake agreement with Chinese developer Goldwind. 2023 saw continued demand growth for the company’s low emis- sions ECO Delivery Ocean product. Around 3% of Ocean volumes are now transported with ECO Delivery versus 2% in 2022. Reflecting the Group’s dedication and progress on decarbonisation and the broader ESG agenda, A.P. Moller - Maersk was for the first time awarded the highest scores in its top two prioritised ESG ratings in 2023, receiving a Platinum rating from EcoVadis and an A score in CDP Climate Change. These two ratings are significant because they are val- ued by the company’s customers and the financial sector. The EcoVadis Platinum rating is reserved for top 1% of companies within the industry based on their ESG score, and in 2023, only 346 companies out of over 21,000 across all sectors made the CDP A list. For further details on the A.P. Moller - Maersk ESG priorities and progress, see the Sustainability highlights page 20. Technology PeopleESG A.P. Moller - Maersk embarked on a process and tech trans - formation journey in 2020 to enable growth through scalable platforms, deliver better quality and customer outcomes, and unlock user productivity. The technology landscape in the broader logistics industry remains heavily fragmented, plagued by a lack of standards and data com- patibility. This drives costs, operational friction, poor reliability, and limited visibility and control for A.P. Moller - Maersk’s customers. As part of A.P. Moller - Maersk’s strategy, the company is on a journey to transform its process and technology landscape by: • Stabilising and modernising core applications and infrastructure • Accelerating the move to standardised processes and automated workflows by leveraging digital platforms • Integrating modern platforms to automate end-to-end workflows and enable seamless data flow. Considerable progress has been made over the past year, including: • System availability and decreasing lost business hours • Simplifying the technology stack by decommissioning about half of the legacy applications that have been earmarked as redundant • Progressing the roll-out of modern platforms, including A.P. Moller - Maersk’s landside platform (TMS), Warehouse Management System (WMS), and new Supply Chain Platform • Kick-starting the automation of processes through integrations, with Ocean Delivery now being one of the most integrated processes. The company continues its efforts to digitise customer and operator workflows, including providing comprehensive visibility across supply chains along with greater control. AI represents a significant opportunity to unlock productivity, enhance employee experience, increase profitability and accelerate the transformation of A.P. Moller - Maersk. To capitalise on this opportunity and turn it into a competitive advantage, A.P. Moller - Maersk continues to invest both in established AI initiatives such as Digital Twin simula- tions and demand forecasts as well as early-stage pilots with generative AI based tools to automate otherwise manual, repetitive tasks and boost employee productivity. 19 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Progress on ESG strategy 2023 was the hottest year in recorded history, highlighting the urgency of addressing climate change and the imperative for a green transition in global supply chains. A.P. Moller - Maersk took delivery of the world’s first container vessel capable of running on green methanol. This is only the beginning of the journey, however, and transitioning the industry is not something one company can do alone – it is dependent on the right regulatory framework, among others, and the willingness of customers to support decarbonisation. Sustainable and responsible supply chains are a baseline requirement from customers, investors, employees, regulators and broader society today. In 2023, A.P. Moller - Maersk worked actively and strategically with all aspects of sustainability risks and impacts, as part of its comprehensive ESG strategy. A.P. Moller - Maersk’s focus since the launch of this strategy in early 2022 has been on defining the roadmaps and ensuring strong governance to drive meaningful progress on the ESG commitments and to aim for fully integrating those activities across the business and into decision-making. The ESG strategy is linked to the company’s Purpose and Core Values. It is also an integral part of, and prerequisite for, the success of A.P. Moller - Maersk’s global integrator strategy, including ambitious and science-based targets to reach net zero emissions by 2040. This is essential to sup- porting many of A.P. Moller - Maersk‘s customers’ own ambitious decarbonisation targets. In 2023, the company achieved validation of an updated set of climate targets aligned with the Science Based Targets initiative’s 1.5-degree pathway and net-zero standard. These will lead to a review and alignment of some of A.P. Moller - Maersk’s current targets on decarbonisation. In other ESG areas, targets set for 2023 including for safety and security, business ethics and data ethics, will carry over into 2024 as annual training targets. A.P. Moller - Maersk ESG strategy Strategic targets Performance 2023 Updates to targets Environment We will take leadership in the decarbonisation of logistics We will deliver on our customer commitment to decarbonise their supply chains in time and our societal commit- ment to act and have impact in this decade 2030: Aligned with the Science Based Targets initiative’s 1.5-degree pathway Industry-leading green customer offerings across the supply chain Carbon intensity (Ocean) decreased by 4% compared to 2020 baseline Reduction of emissions (scope 1 and 2) of 13% in Terminals since 2020 Share of Ocean freight transported with green fuels increased to 3% 2030: 35% absolute reduction in total scope 1 emissions 100% renewable electricity sourcing 22% absolute reduction in total scope 3 emissions 2040: Net zero across the business 100% green solutions to customers 2040: 96% absolute reduction in total scope 1 and 2 emissions 90% absolute reduction in total scope 3 emissions Social We will ensure that our people thrive at work by providing a safe and inspiring workplace We ensure everyone gets home safe by preventing fatal and life-altering incidents 2023: 100% of Learning Teams completed following High Potential Incidents Global Leadership (Top 1,200) upskilled in A.P. Moller - Maersk safety and security principles 99% Learning Teams completed following High Potential Incidents 98% leadership trained in A.P. Moller - Maersk safety and security principles Only the target on Learning Teams will continue in 2024 We create an engag - ing environment for all colleagues 2025: Employee Engagement Survey score in the 75th percentile of global norm 60th percentile No change to target We facilitate diversity of thought 2025: >40% women in management and leadership >30% diverse nationality (non-OECD) of executives 35 % women in manage - ment and leadership 20% diverse nationality (non-OECD) of executives No change to targets Governance We operate based on responsible business practices We live our Code of Conduct 2023: 100% of employees (in scope) trained in Maersk Code of Conduct 92% of employees (in scope) trained Target continues for 2024 We protect and treat data with respect 2023: 100% of employees (in scope) trained on data ethics 91% of employees (in scope) trained Target continues for 2024 We procure sustainably 2024: 100% of suppliers (in scope) committed to the Supplier Code of Conduct 95% of suppliers (in scope) committed No change to target Looking ahead, external expectations, regulation and reporting requirements continue evolving, and new ESG regulatory landscapes are taking shape regionally and globally – these will spark increased transpar- ency and enhanced reporting practices which will unfold over the coming years. From 2024 and onwards, the Corporate Sustainability Reporting Directive (CSRD) will require A.P. Moller - Maersk to fully integrate reporting according to European Sustainability Reporting Standards (ESRS) directly in the Annual Report. In 2023, in preparation for these requirements, A.P. Moller - Maersk conducted a double materiality assess- ment which will guide the 2024 integration of the company’s annual and sustainability reports. SUSTAINABILITY HIGHLIGHTS 20 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials MARKET As part of A.P. Moller - Maersk’s double materiality assessment, the company has assessed material impacts and risks across its operations and value chain as shown below. These are not exhaustive but highlight the variety of the material impacts and risks from the activities that the company manags as an integrator of global supply chains. For information on how these are managed to minimise harm and mitigate risk, see the relevant ESG category chapters. For more information on the double materiality assessment see the 2023 Sustainability Report. Material ESG impacts and risks As an end-to-end logistics provider, we store and manage data on customers, suppliers and workers. Our assets are exposed to climate-related hazards. Climate change adaptation is material to the resilience of our business and to our customers, supply chains. Long stretches on the road and inadequate access to housing and sanitation can impact truck drivers’ well-being and conditions of work. In logistics, the workforce is typically more fragmented and less unionised, increasing the risk of violating workers’ rights. Corruption & bribery is an industry-wide risk for the transport and logistics industry. A large part of our water consumption in landside operations occurs in areas of high water stress. Underrepresented and vulnerable groups at risk of violence and harassment and discrimination – especially in areas where gender norms and power imbalances influence perceptions, and local laws are inadequate. Pollution to air and water from oil and chemical spills is an industry-wide risk along with release of air pollutants such and SO x , NO x and particulate matters to air and to oceans. Climate change mitigation is critical across all of our oper- ations, but our Ocean segment is the major contributor of our GHG emissions. We work with more than 41,000 suppliers, including 5,100+ high-risk suppliers in our global supply chain. The nature of the work embodies safety risk of injuries and fatalities across our value chain. Customers Warehousing CARBON-NEUTRAL Ocean transport Air transport Rail freight Import terminal Distribution Customer’ s warehouse or shop Negative impact $ Financially material impact Positive impact ESG strategy category Material issues Environment Climate change $ Climate change mitigation $ Climate change adaptation Environment and Ecosystems $ Resource inflows $ Pollution to air, water and soil Water use Biodiversity and state of species Degradation of ecosystems Waste and ship recycling Social Safety and security $ Safety and security DE&I $ Violence and harassment Diversity and diverse abilities Work-life balance Human capital Talent development Employee relations and labour rights $ Working conditions Work related rights Human rights Salient human right issues Governance Business ethics $ Corruption and bribery Protection of whistleblowers Corporate culture and transparency Data ethics Data privacy and ethics Sustainable procurement $ Supplier relations Responsible tax Responsible tax Citizenship Citizenship Across categories Climate advocacy Political engagement $ 21 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials A.P. Moller - Maersk has defined 14 ESG categories covering all material impacts and risks. Each category is owned by an executive sponsor and anchored in relevant functions that drive imple- mentation and performance. The company reports on the strategy, governance and performance across all the 14 categories in the Annual Sustainability Report, supplemented by further details, TCFD and SASB indexes in an online ESG Factbook. From 2023, executive remuneration (Long- Term Incentive) has been linked to selected ESG KPI targets. Environment Global logistics is responsible for 11% of all greenhouse gas emissions. As a key industry player, A.P. Moller - Maersk is obligated to be part of the solution and play a leading role in the decarbon- isation of logistics, with a commitment to support a green and just transition, based on respect for human rights, social dialogue and stakeholder engagement. The results of the double materiality assessment confirm that climate change is a highly mate- rial topic to A.P. Moller - Maersk, both from an impact and financial risk perspective, see page 21. Wider environmental risks, addressed in the Environment & Ecosystems section of the 2023 Sustainability Report, are an area of growing focus from regulation and key stakeholders, in particular impacts on nature and biodiversity. Climate change: delivering concrete progress towards net zero by 2040 In 2023, A.P. Moller - Maersk took delivery of Laura Mærsk, the world’s first container vessel with an engine capable of running on green methanol. This important step sent a clear demand sig- nal to the industry, and today there are some 180 methanol-capable vessels on order across the industry. Ocean activities are A.P. Moller - Maersk’s primary source of GHG emissions, but not the only source, and 2023 also saw progress in decarbonising Terminals and Logistics & Services businesses, as detailed in this report’s specific sections. In early 2022, A.P. Moller - Maersk introduced an accelerated net zero 2040 target, including key milestones needed by 2030 from a 2020 baseline, and committed to aligning targets with the SBTi 1.5-degree pathway to 2030 and the 2040 net-zero standard. Following the publication of the long-awaited SBTi sectoral framework for maritime shipping in late 2022, A.P. Moller - Maersk has during 2023 worked to prepare and submit 2030 and 2040 targets. With a successful validation of the targets by the SBTi, A.P. Moller - Maersk is the first in the industry to have its 2030 and 2040 targets validated by the Science Based Targets initiative, in alignment with a 1.5°C pathway and the Net Zero standard. One of the key drivers behind A.P. Moller - Maersk’s approach to decarbonising supply chains is providing customers with green solutions to help them reach their own targets. Today almost 60% of the company’s top 200 customers have committed to, or set science-based targets to decarbonise their supply chains. Many of these are on equally ambitious timelines as A.P. Moller - Maersk to reach their targets by 2040 or even sooner. In 2023, A.P. Moller - Maersk had a total GHG footprint of 79.5 million tonnes, a decrease of 4.1% compared to 2022. The decrease was mainly driven by reduced purchases of capital goods (scope 3) and reduced fuel consumption (scope 1 and 3). Moreover, to align with the SBTi-validated targets, the 2022 baseline has been recalculated, which led to a 6% increase of previously stated emissions. In 2023, A.P. Moller - Maersk continued increasing the energy efficiency of its fleet through a focus on more energy-efficient operations and the ongoing roll-out of efficiency technologies on owned and time-chartered vessels such as new and improved propellers, bulbous bows, and shore power enablement. Combined with the continued use of second-generation biodiesel in the fleet, the company was able to lower relative emissions intensity, measured by the Energy Efficiency Oper- ating Indicator (EEOI), from 13.0 in 2022 to a record low of 11.68. In 2023, A.P. Moller - Maersk imple- mented better governance and forecasting processes for EEOI and leading indicators to be able to better track and act on progress during 2024. Regulatory impact changing the playing field A strong supportive regulatory framework will be critical to deliver the green transition of the shipping and logistics industries. 2023 saw promising developments: Regionally, the US Inflation Reduction Act and the European Union’s Green Deal are driving significant investments and action Commitments to science-based targets validated by the Science Based Targets initiative 1 Scope 1 Own operation 35% Absolute reduction in total scope 1 emissions 96% Absolute reduction in total Scope 1 and scope 2 emissions Scope 2 Purchased electricity 100% Renewable electricity sourcing Scope 3 Value chain 22% Absolute reduction in total scope 3 emissions 90% Absolute reduction in total scope 3 emissions Aligned with 1.5-degree pathway by 2030 Net zero by 2040 1 Main KPI’s and targets: baseline year 2022. See A.P. Moller - Maersk’s Sustainability website for specific details on the science-based targets shown in this overview. Residual emissions will be neutralised in accordance with the SBTi’s Net Zero criteria. 22 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials across industries. Globally, the International Maritime Organization (IMO) agreed on a framework at the 80th session of the IMO’s Marine Environmental Protection Committee (MEPC 80) for member states that sets enhanced ambition levels for reducing GHG emissions over the mid and long-term, and for the uptake of zero or near-zero GHG emission technologies, fuels and/or energy sources. For A.P. Moller - Maersk, the most important elements in the revised strategy are the IMO’s mandate to develop two pivotal and complementary measures by 2025 – a global fuel standard and a maritime GHG emissions pricing mechanism. While the GHG price will address energy effi- ciency, a global fuel standard of 5-10% green fuels by 2030 will ramp up the use of green fuels in shipping. A variety of GHG pricing mechanisms are currently on the table. A.P. Moller - Maersk, along with other World Shipping Council members, have put forward a proposal for a Green Balance Mechanism that places a relatively modest fee on fossil fuel emissions, which would be used to subsidise the use of green fuels without leading to global inflation. Ensuring the right fuels for a sustainable green transition Although there is promising momentum, securing sustainable, green fuels at scale remains a significant challenge for the years ahead. It requires a massive ramp-up of renewable energy to produce low emissions fuels which follow A.P. Moller - Maersk’s life cycle assessment approach. This in turn requires supportive policy, for example new permitting processes and safety stand- ards for methanol bunkering in more ports. To help catalyse this ramp-up, A.P. Møller Holding, together with A.P. Moller - Maersk as a minority owner, created a seed investment in C2X – an independent company aiming to build, own and operate assets to produce green methanol at scale. C2X plans to bring 3 million tonnes of green fuels to market annually starting in 2030, and large projects are underway in Egypt and Spain. Social Under the social dimension, the results of the 2023 double materiality assessment confirm that the social topics included in A.P. Moller - Maersk’s ESG strategy are also those that come out as most material, including the health and safety of all people within A.P. Moller - Maersk’s duty of care, and – from a Diversity, Equity & Inclusion point of view – the risk of violence and harassment. Wider aspects of DE&I, as well as human capital (talent development) and labour practices and human rights, are equally assessed as material topics. The right safety culture for safe workplaces In the area of safety and security, A.P. Moller - Maersk’s commitment is to ensure that everyone gets home safe by preventing fatal and life-altering incidents. In 2023, the company failed to live up to that commitment and, with deepest regret, four people lost their lives while on active duty for A.P. Moller - Maersk, including two employees and two contractors. A.P. Moller - Maersk’s duty of care extends to its entire value chain, and the company is actively working on better under- standing the risks associated with partners and how to best ensure they understand and comply with company safety standards. This also extends to the company’s Logistics & Services business, where rapid growth of 460+ warehouses since 2018 has increased the risk profile in new locations with diverse practices and safety cultures. A.P. Moller - Maersk is proactively addressing this challenge with a comprehensive Safety & Security Transformation Programme across its global transportation and fulfilment portfolios. See the 2023 Sustainability Report for more details. A critical focus in A.P. Moller - Maersk’s core safety approach is building a culture of trust, enabling all to contribute to safety reporting, raising concerns, and challenging how things are done to find safer ways of working. The goal is to create a physically and psychologically safe workplace with a strong reporting culture where all colleagues feel safe to speak up. In support, a training and upskilling programme was launched in 2023 to sharpen company risk and incident reporting processes and systems across the regions. Diversity, Equity & Inclusion In 2023, A.P. Moller - Maersk updated its Diversity, Equity & Inclusion strategy to put DE&I at the core of its People strategy and drive real, long-term results with enhanced metrics and leader accountability. A fundamental part of this commitment is the protection of underrepresented and vulnerable groups at greater risk of harassment and discrimination. Moreover, diversity of thought is part of improving and developing the business providing access to a larger, more diverse talent pool. In 2023, A.P. Moller - Maersk strengthened its DE&I performance management and datadriven decision-making with the launch of a new DE&I dashboard to support leaders. The DE&I strategy also changed from emphasising diversity targets to a greater focus on inclusion as a driver of behaviour change. This includes developing leadership inclusion capabilities to create advocates and drive accountability. 2023’s roll-out focused on A.P. Moller - Maersk‘s top 160+ leaders. In 2024, inclusion training will be required for all people leaders. 2023 saw progress on many fronts, including improvement in both representation for gender diversity (women in management and leadership) and diverse nationality even as market condi- tions significantly toughened. A.P. Moller - Maersk expects 2024 will continue to present market challenges that could impact the company’s growth journey and hence the opportunity to attract new and diverse talent. Current metrics indicate that progress towards 2025 targets is impacted. This was in part due to 2023’s sharp market slowdown, which necessitated a freeze on external hires and advancement across many parts of the organisation. 23 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Statutory report on gender diversity, cf. section 99b of the Danish Financial Statements Act This statement reports on gender diversity with respect to the Board of Directors of A.P. Møller - Mærsk A/S, the parent company of A.P. Moller - Maersk, and other management levels, as required by Section 99b of the Danish Financial Statements Act. In accordance with the guidelines from the Danish Business Authority, equal representation has been achieved in the Board of Directors of A.P. Møller - Mærsk A/S. During 2023, A.P. Møller - Mærsk A/S has employed fewer than 50 employees in ’Other management’, and hence in accordance with the guidelines from the Danish Business Authority, no policy for increasing the gender diversity in other management levels has been implemented. Management level Number of members Share of females Board of Directors 9 (of which 6 males and 3 females) 33% Other management levels 2 (of which 2 males) 0% For more information on A.P. Moller - Maersk’s commitment to Diversity, Equity & Inclusion, see the 2023 Sustain ability Report and the company’s DE&I policy. For information about gender distribution in other companies within the Group required to report upon the underrepresented gender, cf. section 99b of the Danish Financial Statements Act, refer to the Management Review of the subsidiary in question. Human capital People are the foundation of A.P. Moller - Maersk’s success. Whether they work on a vessel, in a terminal or warehouse or sit in an office, the company’s ability to attract, retain and develop talented colleagues at all levels is critical to delivering on the company’s Purpose and Global Integrator vision. In 2023, the company continued to make progress on initiatives for performance management, leadership capabilities, high performance teams, career building and upskilling while ensuring the talent pipeline needed to bring its business strategy to life. Activities in these areas continued despite the market downturn, which necessitated a reduc- tion of the workforce at the end of 2023. In line with its core values, the company worked to reduce the impact to employees as much as possible through natural attrition, local savings and organisational adjustments, and ensured that all people changes were done in a responsible manner and in full compliance with local laws and all applicable labour agreements. The challenging business climate of 2023, combined with uncertainty from A.P. Moller - Maersk’s large structural reorganisation, had a dampening effect on the key human capital performance indicator, the biannual global Employee Engagement Survey (EES). 90,568 colleagues shared their views in the second half-year EES, a participation rate of 85% – significantly above the global benchmark average. The EES results indicate a reversal of the positive trend seen in previous years, with the grand mean declining to the 60th percentile. The company is taking several follow-up actions to return to a positive trend, including listening sessions, refining processes and policies as necessary, and continuous investment in leadership capabilities and team management. Governance A.P. Moller - Maersk’s commitment to responsible business practices is strongly linked to its Purpose and how the company promotes sustainable, responsible trade and a more equal society. 2023 was a year of heightened risks with ongoing geopolitical tensions and inflationary economies. Geopolitical instability has made trade more complex, as sanctions and export controls restrict or ban the movement of goods and services or business with certain countries, individuals or companies. As a Danish-headquartered company and global leader in ocean transport and logistics services, A.P. Moller - Maersk complies with all applicable sanctions and export controls laws. In the 2023 double materiality assessment, topics part of A.P. Moller - Maersk’s ESG strategy were confirmed to be the most material topics under governance, including business ethics, data ethics and supplier relations. Positive impacts were identified within the topics of responsible tax and citizenship. Political engagement/lobbying, a topic cuts across categories of the ESG strategy, was also identified as a material issue comprising of both potential positive and negative impacts. Business ethics A.P. Moller - Maersk is committed to operating responsibly and have in place a robust compliance framework. By 2025, the aim is to have a best-in-class compliance programme that helps the com- pany promote sustainable trade and a more equal society by preventing, detecting and correcting behaviour that is not aligned with A.P. Moller - Maersk’s core values and Commit Rules on business ethics. See the 2023 Sustainability Report for details. In 2023, a third Global Risk Assessment of all active entities was rolled out to monitor com- pliance risks, as well as a company-wide functional risk assessment. A new A.P. Moller - Maersk Code of Conduct introduction course was also rolled out along with an updated annual e-learning refresher course, with 92% of the employees completing the mandatory training against a target of 100%. Challenges in reaching all employee groups remain, particularly in years with large orga- nisational changes, but the company is working to close this gap with a goal of 100% completion in 2024. 24 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Data ethics The rapid pace of global supply chain digitalisation is raising the importance of data ethics as a strategic imperative for A.P. Moller - Maersk and its customers who entrust the company with their data. A.P. Moller - Maersk’s global integrator strategy revolves around the ability to offer customers digitally enabled products and services. A.P. Moller - Maersk is therefore committed to demon- strating leadership in technical innovation with the highest data ethics standards. By end of 2023, over 91% of A.P. Moller - Maersk employees have completed the mandatory data ethics e-learning against a target of 100%. While challenges in reaching all employee groups are likely to persist, the company keeps the rigour of a 100% target for 2024, with a particular focus on ensuring all new employees are trained. The rapid development of Artificial Intelligence (AI) applications is a significant change and requires A.P. Moller - Maersk to balance opportunities and risks as the company creates a new gen- eration of AI-powered solutions. Implementation of AI data management procedures continues to be based on the four cornerstones of the company’s data ethics policy; transparency, respect, security and innovation, to ensure the early identification and mitigation of risks in the technology pipeline. This governance is already applied in Generative AI tools supporting sales, software engineering and the people function. Sustainable procurement A.P. Moller - Maersk relies on more than 41,000 suppliers, including 5,100+ in high-risk categories in the company’s global supply chain. Addressing sustainability risks in the supply chain is critical in strengthening stakeholder trust in the A.P. Moller - Maersk brand and to live up to coming regu- lations on due diligence in supply chains. A.P. Moller - Maersk is committed to procuring sustainably, with an ambition to integrate ESG as a strategic topic across supplier life cycle stages and establish end-to-end visibility on supplier performance through collaboration and engagement. In 2023, the company continued building on the sustainable procurement foundation built in 2022, with a focus on driving execution and integrating ESG deeper into A.P. Moller - Maersk’s procurement activities. This included scaling up supplier engagement, embedding ESG requirements into source-to-pay processes and preparing for increased regulatory due diligence requirements. In 2023, 95% of suppliers in scope committed to the Supplier Code of Conduct against a 2024 target of 100%. For full reporting on ESG strategy and performance, see the 2023 Sustainability Report and 2023 ESG Factbook. Read more EU Taxonomy reporting 2023 In 2023, A.P. Moller - Maersk continued its reporting of the share of its activities that are EU Taxonomy-aligned as well as eligible. Aligned activities are the share of the company’s eligible activities that meet both the ‘substantial contribution’ and ‘do no significant harm’ criteria outlined in the EU Taxonomy Regulation – a classification system identifying environmentally sustainable economic activities. The results of the 2023 screening confirm that A.P. Moller - Maersk has a significant opportunity to make a substantial contribution towards climate change mitigation, and that it is in its early stages of the journey to decarbonise its end-to-end value chain. In 2023, 4% of revenue, 17% of CAPEX and 7% of OPEX are reported as taxonomy-aligned, and 76% of revenue, 57% of CAPEX and 61% of OPEX are taxonomy-eligible but not aligned. For complete details, see the 2023 Sustainability Report. 2023 Sustainability Report ALL THE WAY Revenue OPEXCAPEX 2023 4% 17% 7% 3% 7% 10% 76% 57% 61% 82% 56% 90% 20% 26% 32% 15% 37% 2022 Taxonomy-aligned Taxonomy-eligible but not aligned Non-eligible 25 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials RISK MANAGEMENT Navigating risks Risk management at A.P. Moller - Maersk is focused to support the strategic and operational objectives in the medium term and ensure the longevity of the company in the longer term. A.P. Moller - Maersk’s Enterprise Risk Management framework enables a consistent approach to identification, assessment, mitigation and monitoring of key risks. Identifying A.P. Moller - Maersk’s key risks The enterprise risk management (ERM) framework ensures that all A.P. Moller - Maersk businesses and functions identify risks that could affect their business objectives and operations. Risk identi- fication is based on a combination of facilitated risk reporting from business areas and functions along with interviews with individual executives to gather their holistic view of the risks to the company’s business objectives. The risks identified are then consolidated into an enterprise-wide risk landscape and validated for relevance and significance by the Risk & Compliance Committee. After final consolidation, the risk landscape is reviewed by the Executive Leadership Team, which determines the key risks for the company. These risks are then discussed and validated by the Audit Committee and the Board of Directors. Managing A.P. Moller - Maersk’s key risks The key risks are assigned to an executive owner who is accountable for the management of the risk, including confirmation that adequate controls are in place and that the necessary action plans are implemented to bring or keep the key risk within risk appetite. To provide adequate over- sight, key risk developments and mitigation progress are monitored and reported on throughout the year based on agreed metrics. Quarterly in-depth reviews of the status of the key risks and their mitigation are conducted in various oversight fora such as the Risk & Compliance Committee. In addition, the Audit Committee conducts deep dive sessions with executive risk owners through- out the year on selected key risks. Figure 1 presents an overview of A.P. Moller - Maersk’s ERM governance structure. Changes to the key risks Figure 2 shows the 2024 key risks to A.P. Moller - Maersk’s business objectives. In 2024, some of the 2023 risks have changed slightly in terms of emphasis. This applies to the Ocean price level where last year’s risk of a drop in freight rates has largely materialised, and the risk is now that current (or lower) rate levels extend for a period longer than expected. The 2023 risk called Technology roadmap and Process standardisation has been split into two separate risks in 2024, Technology roadmap and Process excellence, to create stronger focus on and ownership of the mitigating action. Given the easing of the supply chain constraints and the lowering of inflation related to COVID-19 a few 2023 key risks, including Customer service level and Rising costs have moved out of the key risks list in 2024. One new risk has entered the key risks list, Lack of growth pace in logistics, emphasising further the risks associated with the ongoing trans formation. ERM roadmap A.P. Moller - Maersk continues to develop and improve the ERM process. The areas in focus include further operationalisation of the ERM framework to ensure consistent and uniform performance of the ERM process across the company, implementation of a shared risk appetite framework, launch of a framework for management of project risks and implementation of a digital ERM system to support collation of comprehensive risk data and real-time monitoring of key risk metrics. Figure 1 Overview of governance structure Executive Leadership Team/ Risk & Compliance Committee Review key risks Review effectiveness of ERM across A.P. Moller - Maersk ERM Team Responsible for the imple men- tation and maintenance of the ERM framework Facilitate identification, assess ment, mitigation, and monitoring of key risks Cultivate risk culture and ERM capabilities across A.P. Moller - Maersk Enterprise Risk Owners Responsible for the management of risks assigned to them Responsible for developing and implementing action plans to mitigate risks Internal Audit Internal Audit A.P. Moller - Maersk A.P. Moller - Maersk business areas and functions Board of Directors / Audit Committee Provides oversight over ERM effectiveness 26 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials K e y r i s k s S t r a t e g i c O p e r a t i o n a l F i n a n c i a l C o m p l i a n c e Low Low LowLow Risk severity 7 8 2 3 6 9 10 4 5 1 High Financial Risks associated with potential financial losses and/or insolvency Operational Risks associated with business activities and operations, procedures, people and systems Lack of growth pace Failure or serious delay in achieving the targeted growth in Logistics Cyberattack External or internal attack resulting in service unavailability or data breach Mergers and acquisitions integration Failure to integrate a major acquisition Organisational capabilities Inability to retain and attract the right workforce for key critical capabilities 5 8 3 Strategic Risks associated with current and future business plans and strategies Ocean price level Financial loss from lower freight rates Geopolitical tension Escalation of geopolitical tensions and political uncertainty impacting future supply chain. Technology roadmap Failure or serious delay in execution of technology roadmap Process excellence Failure or serious delay in the standardisation of core end-to-end processes Decarbonisation Failure to generate business value from decarbonisation 1 2 6 7 4 Risk continuing from 2023 New risk Figure 2 Key risks to the 2024-2028 business plan A.P. Moller - Maersk categorises risks into four different areas to provide the appropriate level of governance and oversight to effectively manage these risks. Compliance Risks associated with non-compliance with rules and/or policies Legal and regulatory compliance Being hit by a large compliance case 9 10 27 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials 1 2 3 NEW RISK 4 5 Ocean price level Geopolitical tension Lack of growth pace Technology roadmap Cyberattack Risk owner....Chief Product Officer – Ocean Year-on-year risk movement . . . . . .Increasing Risk category .....................Strategic Risk owner.... Chief Corporate Affairs Officer Year-on-year risk movement . . . . . .Increasing Risk category .....................Strategic Risk owner......Chief Product Officer – L&S Year-on-year risk movement . . . . . . . New risk Risk category ..................Operational Risk owner...Chief Technology and IS Officer Year-on-year risk movement . . . . . . . . . Stable Risk category .....................Strategic Risk owner...Chief Technology and IS Officer Year-on-year risk movement . . . . . . . . . Stable Risk category ..................Operational What is this risk Due to a major increase in effective capacity, rates and profitability are expected to drop further in the coming years until they eventually rebound. From the market side, the risk is that industry EBIT margins remain negative for longer than expected. Escalation of geopolitical tension may have a strong and immediate impact on the future supply chain, through disrup- tions in supply, demand and logistics infra- structure and, eventually, fragmentation of supply chains. This is particularly the case where tension mounts to military conflict and/or trade sanctions being applied. To fully deliver the objectives of the inte- grator strategy in a timely manner, including achievement of financial targets and sta- ble results, A.P. Moller - Maersk must secure profitable growth in the logistics business according to plan. A serious delay or failure to execute the technology roadmap will have a material negative impact on A.P. Moller - Maersk’s growth vision as an end-to-end integrator of global container logistics. As A.P. Moller - Maersk becomes increas- ingly digitalised, more devices and control systems are connected online resulting in a wider technology surface. This, compounded with ever-increasing external threat capabil- ities, puts more pressure on systems to be cyber threat resilient. A cyberattack could lead to severe operational disruption and/or data breaches. How we manage it A.P. Moller - Maersk has limited levers to impact the overall demand for container shipping and the level of rates. With the continuing development of differentiated value propositions, agile adaption of net- work, rigorous focus on volume perfor- mance management and cost discipline and a long-term contracts portfolio, the com- pany will all else equal continue to reduce the exposure. A.P. Moller - Maersk monitors geopolitical developments and takes adaptive steps as required, including reducing exposure to critical suppliers, evaluating alternative procurement options, implementing tail heavy payment profiles, creating external communication plans and advancing business continuity planning. A.P. Moller - Maersk focuses mitigation efforts on the growth side on strengthen- ing the customer value proposition of the integrator strategy and lowering the cus- tomer churn-rate. On the profitability side, the focus is on review and optimisation of the asset utilisation within the Air and Ware- housing segments together with timely implementation of planned process stand- ardisation and automation. A.P. Moller - Maersk focuses on maturing and strengthening a multi-location talent sourcing and retention strategy within the technology organisation to ensure having the right skilled people to modernise and integrate the platforms. The company moni- tors progress and ensures adequate govern- ance and prioritisation and cross-functional collaboration. A.P. Moller - Maersk continues to execute its cyber security programme, strengthen business continuity plans and enhance its cyber threat resilience. Over the recent years, the company has enhanced capabili- ties to control impact through appropriate preparedness and response procedures. Target tolerance A.P. Moller - Maersk assumes margins will continue to be under pressure in the short to medium term. In addition, the geopolit- ical environment and the development in the economic situation in Europe and the US makes the industry very volatile, emphasis- ing the necessity for a strong balance sheet. A.P. Moller - Maersk aims to have alternative procurement supply-options in place and to be able to adjust network and capacity in the ocean, terminals and logistics space to accommodate potential disruptions and changes in customer needs. A.P. Moller - Maersk targets large and profitable growth in volumes across its warehousing, inland and air segments through acquisitions as well as through organic growth and stable financial per- formance across the business portfolio. In 2024, A.P. Moller - Maersk targets sig- nificant progress in the implementation of best-in-class technology platforms to sup- port end-to-end supply chain solutions and underpin customer convenience and satisfaction. A.P. Moller - Maersk aims to avoid a material cyberattack through increased threat intel- ligence and response capabilities, and builds digital resilience with business segments, third parties and wider supply chains. Potential scenario The current situation of low freight rates due to increased capacity combined with low demand continues for a longer period than expected. Military conflicts or comprehensive and long-lasting naval blockades leading to obstruction of major network routes and potential wide sanctions inhibiting trade in major markets affected. The implementation of the integrator strategy lags due to delays in achieving profitable growth in logistics as planned, and the company remains exposed to the financial volatility of the Ocean segment. Unsuccessful implementation of digitised supply chain solutions causes loss of digital competitive advantage and customer dis- satisfaction and impacts the company’s reputation and financial performance. Direct or indirect attack(s) on A.P. Moller - Maersk’s or its business partners’ network due to digitisation, threat sophistication or inherent vulnerabilities from, e.g. new M&A environments cause severe business disruption and/or data breaches leading to financial losses and loss of customer trust. 28 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials 6 7 8 9 10 Process excellence Decarbonisation Mergers and acquisitions integration Legal and regulatory compliance Organisational capabilities Risk owner............Chief Strategy Officer Year-on-year risk movement . . . . . . . . . Stable Risk category .....................Strategic Risk owner...........Chief Operating Officer Year-on-year risk movement . . . . . . . . . Stable Risk category .....................Strategic Risk owner............Chief Strategy Officer Year-on-year risk movement . . . . . .Decreased Risk category ..................Operational Risk owner... Chief Corporate Affairs Officer Year-on-year risk movement . . . . . . . . . Stable Risk category ..................Compliance Risk owner............. Chief People Officer Year-on-year risk movement . . . . . . . . . Stable Risk category ..................Operational What is this risk Serious delay or failure to standard ise core end-to-end business processes will severely impact the scalability of A.P. Moller - Maersk’s integrated solu tions and its growth vision as an end-to-end integrator of global logistics. Decarbonisation is a business necessity and a mission-critical factor. It is imperative for A.P. Moller - Maersk to decarbonise its end- to-end supply chain at a speed that meets the expectations of customers, investors and society, and in a way that generates business value for A.P. Moller - Maersk and its customers. A key driver to Logistics & Services growth is the expansion of product and people capabilities through M&As. Some of the acquisitions are substantial, and if A.P. Moller - Maersk fails to integrate those, it may derail the execution of the inte grator strategy. The legal and regulatory landscape in which A.P. Moller - Maersk operates is complex, and the company could be subject to com- pliance cases in connection with violations of anti-corruption laws, anti-trust regula- tions, international sanctions and/or data privacy. A.P. Moller - Maersk’s strategy to become a global integrator of container logistics requires the right capabilities. Inability to retain and attract for key critical capabilities could impact the ambition to deliver a logistics-based, digitally transformed business model to support the integrator strategy. How we manage it A.P. Moller - Maersk continues to drive standardisation of processes with focus on process design and quality, assessing pro- cess maturity levels across the organisation and establishing the visibility of end-to-end process design progress. Process perfor- mance metrics are also being rolled out to measure the efficiencies achieved. A.P. Moller - Maersk continues to progress its strategy by offering eco-delivery products to customers. The supply of green fuel is secured through partnerships with green methanol suppliers as well as the invest- ment in the new methanol company C2X. A.P. Moller - Maersk is also fully supporting the GHG IMO regulation. A.P. Moller - Maersk has a dedicated post-merger integration office equipped with experienced capabilities to assist the business in effectively managing M&A integrations. A project risk management framework is also being rolled out to ensure risks are identified and managed along the integration. A.P. Moller - Maersk has global and regional subject-matter experts in each compliance area and a robust compliance programme designed to fulfil the global requirements. The company has implemented many ini- tiatives to improve focus and emphasis on compliance training, awareness, processes and controls. A.P. Moller - Maersk continues to strengthen global processes and people solutions for talent development, retention and attraction aligned to business and workforce require- ments for key critical roles. Mitigation efforts will be focused on enhancing visibility of business and workforce requirements as well as on employee engagement through creation and implementation of specific actions based on biannual survey results. Target tolerance A.P. Moller - Maersk is constantly working to document, streamline and automate its core processes in terms of design and consistent implementation across the company. A.P. Moller - Maersk targets achievement of a value-generating decarbonisation vision by innovating supply chain solutions and accelerating its decarbonisation initiatives to drive credibility towards the customers, investors and society. A.P. Moller - Maersk aims to have adequate and experienced capabilities and effective processes to warrant that substantial M&As are integrated successfully both during and after the ‘hyper care’ period to realise the anticipated benefits as planned. A.P. Moller - Maersk is committed to ensuring compliance with all applicable laws and regulations in all the countries where it operates. A.P. Moller - Maersk targets to be an employer of choice, able to attract and retain qualified talent who are highly engaged and committed to the company’s values, goals and objectives. Potential scenario Unsuccessful standardisation of the pro- cesses will not bring the required level of qual ity and conformance, thereby making A.P. Moller - Maersk’s product delivery unre liable and difficult to scale and forfeiting associated productivity gains and cost sav ings. A.P. Moller - Maersk fails to generate busi- ness value from decarbonisation by being too aggressive or linear in its efforts, as customers are unwilling to pay a premium for green products until there is greater cost parity between ‘green’ and ‘black’ solutions which is expected over time. A failure to successfully integrate a major acquisition due to inadequate integration approach, lack of internal processes or capabilities, or cultural differences cause value destruction in the form of unrealised synergies. A violation of compliance regulation causes severe reputational damage and substantial legal fines, damages and costs. A.P. Moller - Maersk’s strategy execution is hampered by lack of adequate organi- sational capabilities essential to match business needs and rapid shifts in external business, technology and regulatory environments. 29 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials ESG risks In preparation for the EU Corporate Sustainability Reporting Directive (CSRD) reporting requirements, which will be mandatory from 2024, A.P. Moller - Maersk has in 2023 conducted a double materiality assessment. As part of this assessment, A.P. Moller - Maersk established the financial impact arising from the CSRD topics. The topics covered by the financial impact assessment for 2023 are climate change, pollution, working conditions, equal treatment, other work-related rights (forced labour, data pri vacy) and corruption and bribery. The quantified impact of each of the topics is established through scenario-based modelling. For the results of the double materiality assessment and specifically on climate related risks, Task Force on Climate-related Financial Disclosures (TCFD) See Sustainability Report 2023. Emerging risks Emerging risks to the company’s longer-term value drivers are identified through an externally facilitated workshop considering prevailing megatrends through the four lenses shown in Figure 3. In 2024, the focus for emerging risks continues to be on understanding the impact of climate change on the business model and assets and on how the rapid advancements made in technology could affect the integrator value proposi tion. 1 Change in consumer behaviour Growing environmental consciousness and regulatory intervention to achieve climate goals could lead to reduced consumption and lower economic activity in developed countries. Also, it could change consumer behaviour and impact the demand for goods in the lifestyle, retail and reefer segments. A.P. Moller - Maersk is exposed to changes in demand for long haul transportation of consumer goods, especially in the retail and lifestyle segments. 2 Rapid technology advancements Given the rapid rise in engineering interconnectedness of data and technology, and mass AI availability (e.g. ChatGPT), customers may see an opportunity to replace their need for integrated logistics solutions by using readily available technology solutions that replicate through technology the benefits of an integrated offering. Figure 3 Emerging risks in focus Technology Greater Inter connectedness AI and automation Engineering advances Biotech revolution Economics Network economy Service economy Economic growth Concentration of wealth People & Society Urbanisation Focus on health Individualisation and empowerment An ageing world population Geopolitics Market access Trade regulation Geopolitical conflicts Globalisation 5 5 10 Years 10 0 2 1 Change in consumer behaviour Rapid technology advancements 30 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Performance Financial review Financial guidance and ESG targets Segment overview Ocean Logistics & Services Terminals Towage & Maritime Services Quarterly summary South China Sea, China 31 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Financial review A.P. Moller - Maersk delivered solid financial results for 2023 in line with guidance in a difficult market environment, with a strong performance in Terminals while Ocean and Logistics & Services faced strong headwinds coming off the pandemic peak. While volumes were up across most products and cost reductions improved results, rates continued to erode, in particular in Ocean. The financials for 2023 declined significantly versus 2022, which was a year of all-time high results due to an exceptional market situation, which was not expected to continue. Revenue, EBITDA and EBIT saw substantial declines, predominantly due to the financial results in Ocean. Ocean results were solid on a cumulative basis but declined in the second half of the year reach- ing break-even levels in Q3, and entering negative territory by Q4 as the result of the continuous pressure on rates. The impact of lower rates was partially offset by a strong cost containment focus. Logistics & Services performance continued to be impacted by lower rates, particularly in the air and haulage business and by lower volumes for lead logistics and e-commerce. Profit- ability declined versus previous year with an increased emphasis on cost management to resize the organisation and tackle a lower-rate environment. Terminals revenue declined given the normalisation of storage revenue and lower volumes, mostly due to ongoing construction work and exits of terminals. However, tariff increases in line with local inflation as well as strong cost control secured a continued solid financial performance. Financial and operational performance Revenue decreased by USD 30.5bn to USD 51.1bn (USD 81.5bn), with decreases across segments, in Ocean by USD 30.6bn, in Logistics & Services by USD 507m and in Terminals by USD 527m. Revenue in Ocean reflects the inventory corrections seen in Western economies in 2023 with lower volumes and significantly lower freight rates. In Logistics & Services, total revenue decreased, due to destocking in the USA in lifestyle and retail volumes, lower growth in Europe and China, as well as lower air freight rates, only partially compensated by increased revenue from the integration of LF Logistics and Martin Bencher. Revenue decreased in Terminals due to lower volumes and significantly lower storage revenue, particularly in North America. EBITDA decreased to USD 9.6bn (USD 36.8bn) with a decrease in Ocean of USD 26.8bn due to lower rates, and smaller decreases in Logistics & Services of USD 127m and in Terminals of USD 257m. Ocean, USDbn (2022: 33.8) 6.9 Logistics & Services, USDbn (2022: 1.4) 1.3 Terminals, USDbn (2022: 1.5) 1.3 EBIT decreased by USD 26.9bn to USD 3.9bn (USD 30.9bn) impacted by the declining EBITDA. The EBIT margin decreased to 7.7% (37.9%). Ocean, USDbn (2022: 29.1) 2.2 Logistics & Services, USDm (2022: 814) 446 Terminals, USDm (2022: 832) 980 Return on invested capital (ROIC), last twelve months, decreased to 7.4% (60.4%), as earnings declined significantly. Financial items, net, amounted to a gain of USD 428m (loss of USD 629m), as the increase in inter- est income and impact of capitalised interest gains was only partly offset by interest expenses. Tax expense decreased to USD 454m (USD 910m), primarily due to a lower profit before tax and the impact from utilisation of tax losses carried forward within the joint taxation group. Net profit was USD 3.9bn (USD 29.3bn), with a significant decline in operating earnings. The underlying net profit after financial items and tax of USD 4.0bn (USD 29.7bn), was adjusted for net gains of USD 523m, primarily due to vessel and container sales in Ocean of USD 316m and net gains from the divestments of US Marine Management of USD 92m, Höegh Autoliners of USD 57m and Maersk Supply Service of USD 15m. This was offset by restructuring charges and the impairment of brands of USD 485m and other net impairment losses. Highlights for the year USD million Revenue EBITDA EBIT CAPEX 2023 2022 2023 2022 2023 2022 2023 2022 Ocean 33,653 64,299 6,940 33,770 2,227 29,149 1,987 2,620 Logistics & Services 13,916 14,423 1,251 1,378 446 814 771 657 Terminals 3,844 4,371 1,278 1,535 980 832 541 516 Towage & Maritime Services 2,160 2,293 320 369 457 307 318 350 Unallocated activities, eliminations, etc. -2,508 -3,857 -198 -239 -176 -242 29 20 A.P. Moller - Maersk consolidated 51,065 81,529 9,591 36,813 3,934 30,860 3,646 4,163 Unless otherwise stated, all figures in parenthesis refer to the corresponding figures for the same period prior year. 32 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials 20.1 A.P. Moller - Maersk remains investment grade-rated and holds a Baa2 (positive) from Moody’s and a BBB+ (stable) rating from Standard & Poor’s. Total equity decreased to USD 55.1bn (USD 65.0bn at year-end 2022), due to higher dividend payments and share buy-backs partly offset by net profit of USD 3.9bn, resulting in an equity ratio of 67.1% (69.4% at year-end 2022). The liquidity reserve decreased to USD 24.4bn (USD 33.3bn at year-end 2022) and was composed of cash and bank balances (excluding restricted cash), term deposits and securities of USD 18.4bn (USD 27.3bn at year-end 2022) and undrawn revolving credit facilities of USD 6.0bn (USD 6.0bn at year-end 2022). Dividend The dividend for 2022 of USD 10.9bn declared at the Annual General Meeting on 28 March 2023 was paid on 31 March 2023. Withholding tax of USD 1.5bn was paid in Q2 2023. The Board of Directors proposes a dividend to the shareholders for 2023 of DKK 515 per share of DKK 1,000 (DKK 4,300 per share of DKK 1,000) corresponding to 30% (37.5%) of underlying net result as per the company’s dividend policy of distributing between 30-50% of the underlying net result to shareholders in dividends. The proposed dividend payment represents a dividend yield of 4.2% (27.5%), based on the Maersk B share’s closing price of DKK 12,140 on 29 December 2023. Payment is expected to take place on 19 March 2024. Proposed dividend 2024, DKK Per share of DKK 1,000 515 Ordinary dividend 2023, DKK Per share of DKK 1,000 4,300 Share buy-back During 2023, A.P. Moller - Maersk bought back 332,309 A shares and 1,327,842 B shares, worth DKK 21.1bn (approximately USD 3.1bn), including shares bought back for the long-term incentive plan. At 31 December 2023, A.P. Moller - Maersk owns a total of 306,636 A shares and 1,279,120 B shares as treasury shares, corresponding to 9.03% of the share capital. Given the heightened uncertainty, the Board of Directors has decided to immediately suspend the share buy-back programme, with a re-initiation to be reviewed once market conditions in Ocean have settled. The Annual General Meeting has authorised the Board of Directors to allow the company to acquire treasury shares to the extent that the nominal value of the company’s total holding of treasury shares at no time exceeds 15% of the company’s share capital. Cash flow from operating activities of USD 9.6bn (USD 34.5bn) was driven by EBITDA of USD 9.6bn and lower net working capital of USD 417m due to improved trade receivables, translating into a strong cash conversion of 101% (94%). Gross capital expenditure (CAPEX) was USD 3.6bn (USD 4.2bn), driven by lower investments in Ocean. Ocean, USDm (2022: 2,620) 1,987 Logistics & Services, USDm (2022: 657) 771 Terminals, USDm (2022: 516) 541 Free cash flow decreased to USD 4.0bn (USD 27.1bn), negatively impacted by lower cash flow from operating activities, partly offset by lower CAPEX, higher financial income and sales proceeds and dividends received. Capital structure and credit rating Net interest-bearing debt decreased to a net cash position of USD 4.7bn (a net cash position of USD 12.6bn at year-end 2022), as cash used for share buy-backs of USD 3.1bn and dividends of USD 11.0bn was partly offset by free cash flow of USD 4.0bn. Further, new net lease liabilities amounted to USD 2.0bn, and excluding lease liabilities, the Group had a net cash position of USD 15.1bn (USD 24.2bn at year-end 2022). Development in net interest bearing debt (NIBD) USDbn USD 7.9bn -1.2 Acquisitions, net -0.9 Sale proceeds and dividends received -0.4 Change in working capital -0.1 Other -2.6 -9.6 EBITDA -12.6 NIBD -4.7 NIBD 2022 2023 14.1 Dividends and share buy-backs 3.6 Gross CAPEX 2.0 New capitalised leases 0.4 Financial payments, net 33 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Financial guidance and ESG targets Financial guidance for 2024 Guidance is based on the expectation that global container volume growth in 2024 will be in the range of 2.5% to 4.5% and that A.P. Moller - Maersk will grow in line with the market. It is further expected that the significant oversupply challenges in the Ocean industry will materialise fully over the course of 2024. High uncertainty remains around the duration and degree of the Red Sea disruption with the duration from one quarter to full year reflected in the guidance range. Front-loading is expected towards the start of 2024. USDbn EBITDA Underlying 1.0-6.0 EBIT Underlying -5.0-0.0 Free cash flow (FCF) or higher -5.0 CAPEX guidance, maintained 2023-2024 8.0-9.0 CAPEX guidance 2024-2025 9.0-10.0 ESG commitments A.P. Moller - Maersk’s ESG strategy highlights three core commitments: Each of the core ESG commitments is supported by a set of short, mid and long-term strategic targets and as of 2023, the executive remuneration is linked to A.P. Moller - Maersk’s ESG performance. Performance against the 2023 targets is reported in the 2023 Sustainability Report and ESG Factbook and the targets will continue for 2024. In 2023, A.P. Moller - Maersk became the first in the shipping industry to have its decarbonisation targets validated under the maritime guidance published by the Science Based Targets initia- tive (SBTi) in December 2022. The new validated targets include near-term 2030 targets aligned to a 1.5-degree pathway and a 2040 net zero target, from an updated baseline year of 2022. The number of companies with SBTi commitments has nearly doubled every year over the past eight years, showing the importance and wide adoption of the SBTi framework. The introduction of these new absolute emissions reduction targets covering all greenhouse gas emissions scopes makes this a transitional year, where A.P. Moller - Maersk continues reporting towards its existing targets, while reporting towards the new SBTi-aligned targets will commence from 2024. For more information on the new science-based targets, see the 2023 Sustainability Report. Sensitivity guidance Financial performance for A.P. Moller - Maersk for 2024 depends on several factors subject to uncertainties related to the given uncertain macroeconomic conditions, bunker fuel prices and freight rates. All else being equal, the sensitivities for 2024 for four key assumptions are listed below: Factors Change Effect on EBIT (full year 2024) Container freight rate +/- 100 USD/FFE +/- USD 1.2bn Container freight volume +/- 100,000 FFE +/- USD 0.1bn Bunker price (net of expected BAF coverage) +/- 100 USD/tonne +/- USD 0.3bn Foreign exchange rate (net of hedges) +/- 10% change in USD +/- USD 0.3bn Forward-looking statements The Annual Report contains forward-looking statements. Such statements are subject to risks and uncertainties as various factors, many of which are beyond A.P. Moller - Maersk’s control, may cause the actual development and results to differ materially from expectations contained in the Annual Report. ESG targets for 2024 (actual performance 2023) Safety & security 100% 100% 100% 100% Learning Teams completed following a high potential incident (99%) (92%) (91%) (95%) Business ethics Employees (in scope) trained in the Maersk Code of Conduct Data ethics Employees (in scope) trained on data ethics Sustainable procurement Suppliers (in scope) committed to the Supplier Code of Conduct Environment Take leadership in the decarbonisation of logistics Social Ensure that people thrive at work by providing a safe and inspiring workplace Governance Operate based on responsible business practices 34 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials (35%) (20%) (60th percentile) ESG targets towards 2030 ESG targets towards 2040ESG targets towards 2025 (actual performance 2023) Ocean Ocean delivered an EBIT margin of 6.6% over the last twelve months, above the target of 6% under normalised conditions. Total average operated fleet capacity is within the range of 4.1-4.3m TEU. EBIT margin Target: >6% 6.6% Execute with the existing fleet size Target: 4.1-4.3 TEUm 4.2 TEUm Logistics and Services For Logistics & Services, organic growth of negative 15% over the last twelve months was below the target of positive 10%. The EBIT margin for the last twelve months was 3.2% versus the target of above 6% due to a combination of lower rates, lower utilisation and costs relating to cost management initiatives, e.g. restructuring charges. Organic growth Target: >10% -15% EBIT Target: >6% 3.2% Terminals The return on invested capital (ROIC) (LTM) was 10.5% for Terminals, exceeding the expectation of above 9% towards 2025. ROIC Target: >9% 10.5% Roadmap towards 2025 The mid-term financial targets introduced at the Capital Markets Day in May 2021 relate to the transformation towards becoming the integrator of container logistics. Consolidated The return on invested capital (ROIC) (last twelve months) was 7.4%, slightly below the target of above 7.5% every year under normalised conditions due to the declining profits in 2023. The average return on invested capital for 2021-2023 was 37.7%, above the 12% target for the period 2021-2025. ROIC (LTM) Target: >7.5% 7.4% A.P. Moller - Maersk will prioritise the capital allocation to investments in the business, including acquisitions in Logistics & Services, repaying debt, paying dividends based on a pay-out ratio of 30-50% of underlying net profit and distributing excess cash to shareholders through share buy-backs and special dividends in that order. The proposed dividend payment for 2023 of DKK 515 per share represents a dividend yield of 4.2% and 30% of the net underlying profit. Of the total planned share buy-back programme of USD 12.0bn over 2022-2025 or USD 3.0bn annually, A.P. Moller - Maersk has bought back USD 6.3bn as of 31 December 2023. Given the heightened uncertainty, the Board of Directors has decided to immediately suspend the share buy-back programme, with a re-initiation to be reviewed once market conditions in Ocean have settled. > 40% Women in management and leadership Diversity, Equity & Inclusion > 30% Diverse nationality of executives Diversity, Equity & Inclusion > 75% Employee Engagement Survey (EES) percentile rank on global norms Human capital 35% 100% 22% 96% 90% Absolute reduction in total scope 1 emissions Renewable electricity sourcing Absolute reduction in total scope 3 emissions Absolute reduction in total scope 1 and 2 emissions Absolute reduction in total scope 3 emissions Climate change Climate change Climate change Climate change Climate change 35 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials SEGMENT OVERVIEW Ocean Profitability declined significantly for Ocean in 2023 from excep- tionally high levels in the prior year, with freight rates decreasing on average by 50% and with volumes on par following the market normalisation. The global congestion decreased considerably, leading to improved schedule reliability and operating conditions. Logistics & Services faced a transition year with rates progres- sively coming off their pandemic peak across all products, leading to reduced profitability. Active cost management and productivity measures have been put in place. Terminals delivered a solid ROIC of 10.5% during a year where con- gestion-related storage revenue declined significantly. A diversified portfolio and a margin protection plan helped shield returns from the sharp drop in US volumes and inflationary pressures, keeping margins significantly above the pre-pandemic levels of 2019. Logistics & Services Terminals Read more Read more Read more Revenue USDm 33,653 EBIT USDm 2,227 Revenue USDm 13,916 EBIT USDm 446 Revenue USDm 3,844 EBIT USDm 980 36 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Ocean Profitability declined significantly in 2023 from exceptionally high levels in the prior year, driven by a steep decline in freight rates following market normalisation. Additionally, the global con gestion decreased considerably, leading to improved schedule reliability and operating conditions, which resulted in a reduction of expenses. Revenue reflected weak volume demand in the first half of the year and although picking up in the second half, revenue was severely impacted by a continued decline in the freight rates driven by higher supply availability. The freight rates decreased by 50% on average from 2022 levels, with volumes on par with 2022. Unit cost at fixed bunker decreased due to lower container handling unit costs and lower bunker consumption after the congestion bottle- necks eased. Utilisation at 91.6% was 2.3 percentage points better than in 2022, due to several structural capacity initiatives. Line of business At the heart of the integrator strategy, Ocean ensures that goods keep moving across the world, providing customers with a unique offering, combining flexibility and stability to manage and simplify their end-to- end supply chains. While providing access to a competitive global network, Ocean offers resilient solutions and differentiated value propositions through its global network and digital products to fit the diverging customer needs and enhance long-term partnerships. Operating one of the largest container vessel fleets in the world, Ocean carries close to 12m FFE per annum serving over 475 ports worldwide. Ocean highlights USD million 2023 2022 Freight revenue 28,421 56,499 Other revenue, including hubs 5,232 7,800 Revenue 33,653 64,299 Container handling costs 9,233 10,214 Bunker costs 6,064 8,077 Network costs, excluding bunker costs 6,917 7,516 Selling, General & Administration (SG&A) costs 2,921 2,947 Cost of goods sold and other operational costs 1,646 1,835 Total operating costs 26,781 30,589 Other income/costs, net 68 60 Profit before depreciation, amortisation and impairment losses, etc. (EBITDA) 6,940 33,770 EBITDA margin 20.6% 52.5% Profit before financial items (EBIT) 2,227 29,149 EBIT margin 6.6% 45.3% Invested capital 29,851 32,368 Gross capital expenditure, excl. acquisitions and divestments (CAPEX) 1,987 2,620 Operational and financial metrics Loaded volumes (FFE in ’000) 11,904 11,924 Loaded freight rate (USD per FFE) 2,313 4,628 Unit cost, fixed bunker 1 (USD per FFE incl. VSA income) 2,371 2,533 Bunker price, average (USD per tonne) 616 763 Bunker consumption (tonne in ’000) 9,838 10,579 Average operated fleet capacity (TEU in ’000) 4,162 4,285 Fleet owned (end of year) 310 318 Fleet chartered (end of year) 362 389 1 Unit cost, fixed bunker has been restated as a result of the fixed bunker price being changed to 550 USD/tonne from 450 USD/tonne. Copenhagen, Denmark 37 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Ocean Revenue Operating costs Loaded volumes EBIT Average loaded freight rate EBITDA Unit cost at fixed bunker 33.7bn 26.8bn 11.9k 2.2bn 2,313 6.9bn 2,371 (USD 64.3bn) (USD 30.6bn) (11.9k FFE) (USD 29.1bn) (4,628 USD/FFE) (USD 33.8bn) (2,533 USD/FFE) The decrease in revenue was driven by the decline in freight rates of 50% to 2,313 USD/FFE (4,628 USD/FFE), whereas volumes were on par at 11,904k FFE (11,924k FFE). Lower bunker price and container handling costs due to the normalisation of operational congestion and bottlenecks had a positive impact on operating costs. Container handling costs decreased by 9.6%, because of lower terminal costs. Network costs excluding bunker costs decreased by 8.0%, due to lower slot charter costs and time charter equivalent costs, partially offset by higher port and canal costs. Adjusting for the positive impact from the development in foreign exchange rates, operating costs decreased by 14.1%. Volumes picked up in the second half of the year and remained on par with 2022. The lower volumes in North America and Intra Asia were offset by higher volumes in Asia-Europe and Latin America. EBIT decreased by USD 26.9bn in line with the lower revenue due to the decline in freight rates. EBIT margin was 6.6% (45.3%). Both contract and shipment rates decreased versus 2022. Freight rates decreased by 50% due to the release of operational bottlenecks across the supply chain and new capacity in the market, which resulted in additional availability of vessels and equipment. The largest decreases were observed on the Asia-Europe, North and Latin America and Africa trade clusters, mainly on headhaul trades. The average freight rate at fixed bunker decreased by 49%. Due to significantly lower revenue, partly offset by lower bunker costs from both lower bunker prices and consumption, and lower other operating costs, EBITDA decreased by USD 26.9bn. The EBITDA margin was 20.6% (52.5%). The decrease of 6.4% was driven by lower terminal costs, lower bunker consumption from slow steaming and lower slot charter costs. FFE (’000) 2023 2022 Change Change % East-West 5,510 5,483 27 0.5 North-South 3,900 3,763 137 3.6 Intra-regional 2,494 2,678 -184 -6.9 Total 11,904 11,924 -20 -0.2 USD/FFE 2023 2022 Change Change % East-West 2,221 5,081 -2,860 -56.3 North-South 3,064 5,424 -2,360 -43.5 Intra-regional 1,626 2,771 -1,145 -41.3 Total 2,313 4,628 -2,315 -50.0 2023 2022 2021 2020 2019 2,371 2,533 2,186 2,055 2,037 USDbn USDbn USDbn FFE USD/FFE USDbn USD/FFE 2019 2020 2021 2022 2023 28.8 29.2 48.2 64.3 33.7 2019 2020 2021 2022 2023 13.3 12.6 13.1 11.9 11.9 2020 2021 2022 20232019 0.0 10.0 30.0 40.0 20.0 2020 2021 2022 20232019 0 3,000 2,000 1,000 4,000 5,000 2020 2021 2022 20232019 0.0 20.0 10.0 30.0 40.0 38 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Ocean Ocean highlights The business environment was vastly different from 2022 as global congestion has nearly returned to normal levels and US inventories have rebalanced. Steps were taken to remain agile with deploying the capacity in the most meaningful way, increase the quality of Ocean’s products and preparing for a greener future of shipping. Bunker costs Average operated capacity Cost split 6.1bn 672 Vessels (year-end) 4,162kTEU (USD 8.1bn) Bunker costs decreased by 25% with a decrease in average bunker prices of 19% to 616 USD/tonne (763 USD/tonne) and a 7.0% decrease in bunker consumption. Bunker efficiency increased by 5.7% to 39.5 g/ TEUNM (41.9 g/ TEU*NM). The average operated capacity of 4,162k TEU decreased by 2.9%. The newbuilding programme had replacements of 24 vessels capable of running on green fuels at the end of 2023. At the end of the year, the fleet consisted of 310 owned and 362 chartered vessels, of which 149k TEU or 3.6% of the fleet were idle (20 vessels), mainly due to repairs. Operating costs are split across four reporting categories. Container handling and equipment costs Network cost excl. bunker Bunker Other costs USDbn Per cent Fleet capacity, year-end 2023 2022 2023 2022 TEU TEU Vessels Vessels Own container vessels 0-4,699 476 478 141 144 4,700-7,999 277 289 45 47 8,000-14,999 707 723 74 77 > 15,000 903 903 50 50 Total 2,363 2,393 310 318 Chartered container vessels 0-4,699 644 719 237 260 4,700-7,999 332 375 55 61 8,000-14,999 654 657 62 63 > 15,000 124 77 8 5 Total 1,754 1,828 362 389 Ongoing focus on cost discipline Many cost-saving initiatives have been implemented across the organisation to reduce costs, while maintaining focus on the quality and reliability of the Ocean products. In some instances, A.P. Moller - Maersk has been able to reduce its variable costs by partnering with the right suppliers and applying a more robust cost discipline within the company. Value-adding products to customers Based on strong collaboration with customers from differ - ent industries, the product team is exploring innovative and integrated transport solutions that can meet customers’ diverse and evolving needs and requirements, with a focus on reliability and flexibility. Focus on network optimisation Global congestions have reduced significantly in 2023, which has allowed for an extensive network review with the objec- tive to reduce emissions and improve reliability across ser- vices. The 2M alliance with MSC will terminate from January 2025 and a new operational cooperation with Hapag Lloyd will start from February 2025. Ocean will keep the focus on the Integrator strategy to meet the evolving needs of the cus- tomers, including reliability, flexibility and sustainability. The ambition is to provide customers with adequate volumes while limiting the deployed capacity and keeping a high utilisation. 34% 26% 23% 17% 39 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Ocean A landmark port call in Ocean decarbonisation The two key levers to decarbonising the Ocean business are transitioning to green fuels and improving fuel efficiency. The most notable milestone in 2023 was the September arrival of the Laura Mærsk – the world’s first container vessel capable of sailing on green methanol. The 2,100 TEU feeder vessel completed her entire 21,500 km first voyage from Hyundai Mipo Dockyard, South Korea to Copenhagen, Denmark, while sailing on green methanol. Laura Mærsk is now in service as a feeder vessel on the Baltic Sea and operating on green fuels. A.P. Moller - Maersk further expanded its green methanol shipping capacity in 2023, ordering six additional vessels of 9,000 TEU each to be delivered in 2026 and 2027 and bringing its total order book to 24 vessels. In 2024, the company will start taking delivery of the first eight of 12 larger container vessels of 16,000-17,000 TEU capacity. As an alternative path to newbuilds, A.P. Moller - Maersk also announced an industry-first pilot with MAN Energy Solutions to con- vert an existing 14,000 TEU vessel from a traditional fossil diesel engine to a dual-fuel methanol engine. The pilot vessel conversion will take place in 2024, with the intention of replicating the retrofit on additional vessels. One of the main challenges in accelerating the transition to net zero shipping is the limited supply of green fuels. A.P. Moller - Maersk continuously works on green sourcing solutions with a broad range of global partners, and in 2023 signed a landmark offtake agreement with China’s Goldwind, a leader in clean energy, to secure 500 kilotonnes of green methanol annually start- ing in 2026. This agreement will cover the fuel needs of half of the 24 methanol vessels cur- rently on order. To further support the ramp-up of green fuels, A.P. Møller Holding, together with A.P. Moller - Maersk as a minority owner, created a seed investment in C2X – an independent com- pany that will build, own and operate assets to produce green methanol at scale. C2X plans to bring three million tonnes of green fuels to market annually starting in 2030, and large projects are underway in Egypt and Spain. The second key lever for decarbonising shipping is improving fuel efficiency. Through more energy-efficient operations and the continuous roll-out of efficiency technologies on owned and time charter vessels, A.P. Moller - Maersk lowered its emissions intensity measure for Ocean, EEOI, to a record low of 11.68 (13.0) in 2023. DECARBONISATION Elsinore, Denmark 40 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Logistics & Services Singapore, Singapore Truly integrating logistics solutions Logistics & Services is a core growth element of A.P. Moller - Maersk’s integrator strategy. Logistics & Services seeks to fulfil more of the customers’ needs at every step of their supply chain through the integrated logistics offerings enabled by digital platforms. Managed by Maersk offers customs brokerage services, supply chain management and 4PL services, cold chain logistics and Maersk Project Logistics. Fulfilled by Maersk offers consolidation, deconsolidation and fulfilment warehousing, cold storage as well as distribution services, inland transportation, depot operations and e-commerce logistics. Transported by Maersk offers landside transportation, air freight, less than container loads and cargo risk management products. Despite consistent volume growth across most products year- over-year, revenue decreased in 2023. The challenges were intensified by the aftermath of an abnormal year in 2022, marked by the global impacts of COVID-19. The logistics industry witnessed exceptionally high freight rates in 2022 due to increased consumer demand caused by the pandemic. As 2023 unfolded, the industry entered a normalised phase causing lower freight rates compared to the abnormal levels of 2022. During 2023, Logistics & Services proactively implemented a series of strategic measures to address the challenging operational landscape. The company prioritised driving technological advancements, aiming to enhance efficiency and to stay at the forefront of industry innovations. Furthermore, efforts were directed towards securing new customers and acquiring new capabilities to broaden the company’s market reach. Operational improvements were a key focus, with initiatives aimed at improving processes and optimising resource allocation. Logistics & Services remains dedicated to strong cost management by enhancing operational efficiencies and optimising asset utilisation, with tangible impacts expected to manifest gradually in 2024. Logistics & Services highlights USD million 2023 2022 Revenue 13,916 14,423 Direct costs (third party cost) 9,694 10,717 Gross profit 4,222 3,706 Direct operating expenses 1,895 1,482 Selling, General & Administration (SG&A) costs 1,076 846 Profit before depreciation, amortisation and impairment losses, etc. (EBITDA) 1,251 1,378 EBITDA margin 9.0% 9.6% Profit after depreciation and impairment losses, before amortisations (EBITA) 619 944 EBITA margin 4.4% 6.5% Profit before financial items (EBIT) 446 814 EBIT margin 3.2% 5.6% Invested capital 10,779 9,858 Gross capital expenditure, excl. acquisitions and divestments (CAPEX) 771 657 Operational and financial metrics EBIT conversion (EBIT/gross profit - %) 10.6% 22.0% Managed by Maersk revenue 1 2,168 2,491 Fulfilled by Maersk revenue 1 5,452 4,916 Transported by Maersk revenue 1 6,296 7,016 Supply chain management volumes (cbm in ’000) 102,252 110,264 Intermodal volumes (FFE in ’000) 4,031 4,526 Air freight volumes (tonne in ’000) 295 211 1 The 2022 by Maersk revenue figures have been restated in order to reflect changes within the Logistics & Services model definition. 41 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Logistics & Services Gross profit EBIT 4.2bn (USD 3.7bn) Increased by USD 516m to a margin of 30.3% (25.7%). The increase was primarily driven by warehouse and distribution increasing its gross profit margin from 39% to 46%, affected posi- tively by improving its deconsolidation, fulfil- ment and consolidation profitability. Further- more, gross profit was positively affected by inorganic gross profit contribution from acquisitions. USDbn EBITDA 1.3bn (USD 1.4bn) EBITDA decreased by USD 127m due to lower freight rates with an EBITDA margin of 9.0% (9.6%). USDbn USDm Revenue USDbn Organic/inorganic USD million 2022 Organic Inorganic 2023 Revenue 14,423 -2,220 1,713 13,916 Growth -15% 12% EBITA 944 -380 55 619 2019 2020 2021 2022 2023 6.3 7.0 9.8 14.4 13.9 Revenue decreased by 3.5% to USD 13.9bn (USD 14.4bn) due to lower freight rates, however, volumes increased across all products except for inland services and supply chain management. Organic revenue decreased by 15%, driven by air due to lower rates and warehouse and distribution, mainly in North America, due to lower consoli- dation and deconsolidation volumes primarily in the retail and lifestyle segment. In 2023, more than 50% of the decline in organic revenue was driven by the top 200 customers. Inorganic revenue of USD 1.7bn increased by 12% with the biggest contribution from LF Logistics, Pilot and Senator. EBITA was USD 619m (USD 944m), of which USD 55m was in - organic. Pilot and Senator became organic during Q2 2023. LF Logistics has been organic since the start of September 2023, and Martin Bencher and Grindrod Logistics are considered inorganic all of 2023. Managed by Maersk’s revenue decreased by 13% to USD 2.2bn (USD 2.5bn), driven by 7.3% lower volumes in supply chain manage- ment volumes to 102,252k cbm (110,264k cbm). Customs services volumes increased by 2.2% to 5,684k declarations (5,559k declarations). Fulfilled by Maersk’s revenue was up by 11% to USD 5.5bn (USD 4.9bn) driven by the establishment of 17 new warehouses equivalent to 725k sqm, of which 259k sqm was from LF Logistics in 2023. Transported by Maersk’s revenue was down by 10% to USD 6.3bn (USD 7.0bn), driven by lower freight rates and partly offset by increasing vol- umes in air and LCL. Organic inter- modal volumes decreased by 11% to 4,031k FFE, (4,526k FFE) excl. Grindrod Logistic. Inorganic volumes from Grindrod Logistic increased by 5.5% or 249k FFE to 4,280k FFE. Lower organic volume from inter- modal was due to lower ocean vol- umes given market normalisation, partly offset by higher non-carrier haulage volumes. Air volumes in- creased by 40%, or 8.2% in organic growth. The inorganic contribution from Senator increased volumes by 32%. Revenue was offset by demand slowdown and a decrease in rates due to post-COVID-19 normalisation. 13.9bn (USD 14.4bn) 446m (USD 814m) EBIT decreased by USD 368m with the EBIT margin at 3.2% (5.6%) and an EBIT conversion of 10.6% (22.0%). Managed by Maersk Maersk Project Logistics (MPL) was launched as a global product family in January 2023. The product is an amalgamation of Maersk SPL and Martin Bencher, which was acquired to add additional project logistics competences and global coverage, with 350 dedicated project logistics professionals. The purpose of MPL is to meet customers’ needs for end-to-end transportation and mobilisation of special cargo (out of gauge cargo) and integrated project logistics solutions that remove complexity and provide outcome certainty in a safe manner. Fulfilled by Maersk With the acquisition of LF Logistics and with organic growth, the global warehousing footprint reached 7,829k sqm and 469 sites in 2023 from 7,104K sqm and 452 sites at the end of 2022. Ful- filled by Maersk is rolling out a modernised transport manage- ment system globally and are leveraging LF Logistics technology to develop and implement one global warehouse management system. These are key milestones in being able to provide cus- tomers with digitally enabled end-to-end logistics solutions. Transported by Maersk The Less than Container Load (LCL) value proposition was strength- ened by expanding the LCL network, with over 600 own direct con- solidation lanes now open versus 400 lanes in 2022 and enhanced digital capability on Maersk.com for public track and trace, instant price and booking journey. This own-controlled and operated con- solidation model with fixed sailing schedules and loading priority will help safeguard the highest-level reliability for customers. Logistics & Services highlights By expanding in capacity and capabilities while becoming more digitalised, Logistics & Services continues to improve its end-to-end logistics solutions providing greater flexibility for the customers at every stage of their supply chain. 42 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Logistics & Services Connecting end-to-end logistics decarbonisation solutions DECARBONISATION A.P. Moller - Maersk increased delivery of decarbonisation solutions based on its 2022 groundwork on understanding customers’ needs and the most promising and commercially viable technologies. For many customers, the GHG emissions from land-based logistics including contract logistics, cold chain and omnichannel fulfilment, are the most carbon-intense parts of their logistics supply chains, and there is significant appetite for end-to-end decarbonisation solutions. At the same time, scaling Logistics & Services decarbonisation offerings relies on regional solutions as well as local policy, capacity and infrastructure, such as sufficient electric vehicle charging. A.P. Moller - Maersk launched an ECO Delivery Inland product in select US locations using owned/ leased electric vehicles in 2023. The company also began deploying heavy duty electric trucks, together with partners, in Germany, Norway, Sweden, the UK and China, with pilots in Brazil. The first ECO Delivery Air pilots were also run for customers requiring air shipments in their supply chains. Sustainable warehouse and distribution centre facilities are another key lever in decarbonising logistics. In 2023, A.P. Moller - Maersk launched low and very low emissions dry storage warehouses in the United Kingdom, Malaysia and Columbia. ‘Low emission’ facilities are defined as being fully compliant with a target based on facility size, use of renewable energy and no equipment running on fossil fuels. Cold store warehouses are further required to use natural refrigerants in the main cooling system to be compliant. In 2023, A.P. Moller - Maersk inaugurated a state-of-the-art cold storage facility in Hamilton, New Zealand, built with a low-carbon construction policy and including advanced energy management, solar energy and rainwater harvesting. Delhi, India 43 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Terminals 55 gateway terminals across 30 countries The terminals are operated either exclusively by Terminals under the APM Terminals brand or together with a joint venture partner. The performance of seven hub terminals also operated by Terminals is reported under the Ocean segment. Terminals is uniquely positioned to help both shipping line and landside customers, with 75%/25% of revenue, respectively, to grow their business and achieve better supply chain efficiency, flexibility and dependability. Terminals delivered a strong 2023 with an EBIT of USD 980m and a ROIC of 10.5%. In the first half of the year, global demand dropped significantly, decongesting global supply chains and reducing terminal utilisation. Consequently, Terminals revenue decreased significantly with dwell time and hence storage revenue returning close to the pre-pandemic levels of 2019. Margins were actively protected through cost-saving initiatives and tariff increases resulting in an EBITDA margin of 33.2%, 5.4 percentage points above 2019 levels, with only a 1.9-percentage point drop from 2022. Volume adjusted for exits decreased by 0.8% in a contracting global market driven by a weak US market and construction closures in India (GTI), partially offset by growth in Poti, Georgia, and Callao, Peru. Reve- nue per move decreased by 8.2% due to lower storage revenue and exits, which outweighed the achieved tariff increases in many locations. Cost per move decreased by 4.5% on the back of exits and inflation offset- ting cost-saving initiatives. Expansion projects were initiated in Lazaro Cardenas, Mexico, and Pipavav, India, while the terminal modernisation project in Onne, Nigeria, was completed. The significant modernisation projects in Los Angeles, USA, and Mumbai, India, are nearing completion as well. Terminals highlights USD million 2023 2022 Revenue 3,844 4,371 Concession fees 308 362 Labour cost (blue collar) 1,121 1,270 Other operational costs 618 638 Selling, General & Administration (SG&A) and other costs, etc. 519 566 Total operating costs 2,566 2,836 Profit before depreciation, amortisation and impairment losses, etc. (EBITDA) 1,278 1,535 EBITDA margin 33.2% 35.1% Profit before financial items (EBIT) 980 832 EBIT margin 25.5% 19.0% Invested capital 7,813 7,593 Gross capital expenditure, excl. acquisitions and divestments (CAPEX) 541 516 Operational and financial metrics Terminal volumes – financially consolidated (moves in ‘000) 12,204 12,752 Ocean segment 4,245 4,558 External customers 7,959 8,194 Terminal revenue per move – financially consolidated (USD) 313 341 Terminal cost per move – financially consolidated (USD) 252 263 Result from joint ventures and associated companies (USDm) 282 -46 Moin, Costa Rica 44 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Terminals Revenue 3.8bn (USD 4.4bn) Revenue decreased by USD 527m, driven by a normali- sation of storage revenue due to easing global conges- tion and exits. Overall volumes were 4.3% below 2022 with a 3.5 percentage point impact from exits (Luanda, Itajai, Cartagena and Mauritania), and a 1.8-percentage point impact from construction closures in Mumbai, India. Volumes in the remaining portfolio grew 1.5% with strong volumes in Poti, Georgia, Callao, Peru, and Pipavav, India, offsetting weak volumes in the USA. Volumes from Ocean decreased by 6.9% (3.3% like-for-like) and volumes from external customers decreased by 2.9% (increased by 1.8% like-for-like). Despite the increase in volumes in the continuing portfolio, utilisation decreased to 73% (78%), mainly driven by a capacity increase from a termi- nal modernisation programme in North America. Lower congestion-related storage revenue and exits resulted in an 8.2% reduction in revenue per move, even as underlying tariffs were increased in line with local inflation. Cost per move improved by 4.5% to USD 252 (USD 263), driven by mix impact, exits and an ability to limit the impact of inflation on the cost base. Adjusted for foreign exchange rates, volume mix and portfolio changes, revenue per move decreased by 4.3% and cost per move increased by 3.2%. USDbn EBIT 980m (USD 832m) EBIT increased by USD 148m, driven by the impact of divesting GPI in 2022. Adjusted for the divestment EBIT decreased by USD 255m, driven by the normali- sation of storage revenue, partly offset by increasing tariffs and cost-saving initiatives keeping increases below inflation. Compared to the pre- congestion year in 2019, EBIT improved by USD 335m. USDm EBITDA 1.3bn (USD 1.5bn) EBITDA decreased by USD 257m driven by the normali- sation of storage revenue, partly offset by higher tariffs. The EBITDA margin decreased to 33.2% (35.1%), but compared to the pre- congestion year in 2019, the EBITDA margin improved by 5.4 percentage points. USDbn CAPEX 541m (USD 516m) CAPEX increased by USD 25m as investments into the existing portfolio was largely unchanged with key projects being the ongoing moder nisation of terminals in Los Angeles, USA, Port Elizabeth, USA, and Barcelona, Spain, and the completion of construction work in Mumbai, India, and Poti, Georgia. USDm Per cent Per cent Cost split Frontline and office-based people costs make up almost half of Terminals cost base. Labour costs (blue collar) Selling, general and administration (SG&A) and other costs, etc. Other operational costs Concession fees Depreciation and amortisation ROIC 10.5% (7.6%) ROIC (LTM) increased by 2.9 percentage points, driven by the impact of the Global Port Investments (GPI) divest- ment in 2022. Adjusted for the GPI divestment, ROIC decreased by 1.8 percentage points, down from 12.3% in 2022, due to the normalisation of storage revenue. 2023 2022 2021 2020 2019 980 832 1,173 687 645 Results from joint ventures and associated companies 282m (negative USD 46m) The share of profit in joint ventures and associated companies improved to positive USD 282m (nega- tive USD 46m), driven by the divestment of GPI and Wilhelmshaven, Germany, in 2022. Adjusted for the divestments results decreased by USD 22m driven by the go-live of a second terminal in Abidjan, Côte d’Ivoire. USDm 2020 2021 2022 20232019 0 0.5 5 1.0 10 1.5 15 2.0 2019 2020 2021 2022 2023 3.3 3.2 4.0 4.4 3.8 2020 2021 2022 20232019 36% 17% 20% 10% 17% 45 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Terminals In Europe, volumes increased by 3.6% due to strong demand in Poti, Georgia, and Vado, Italy, partly offset by a weaker performance in Aarhus, Denmark, while utili sation decreased to 72% (75%). In Latin America, volumes decreased by 1.7%, purely driven by the exit in Itajai, Brazil. Volumes in the rest of the portfolio increased by 6.9%, driven by strong volume in Callao, Peru, while utilisation reduced to 74% (75%) due to increased capacity. In Asia and Middle East, volumes decreased by 3.2%, purely driven by construction work in Mumbai, India, where one berth was unavailable. Excluding Mumbai, volume grew 7.1% with all terminals increasing volumes year on year. Utilisation remained unchanged at 79% (79%). In North America, volumes decreased by 8.4% due to a significantly weaker performance in Los Angeles, USA, and Port Elizabeth, USA. Additionally, capacity increased due to the ongoing modernisation programme, leading to a significant decrease in utilisation to 70% (86%). In Africa, volumes decreased by 21% purely due to the divestment of Luanda, Angola. Adjusted for the exit, volume increased by 5.0%, mainly driven by San Pedro, Côte d’Ivoire, and Onne, Nigeria. Utilisation remained on par at 61% despite increasing capacity from the completed expansion in Onne. Regional volumes Moves (‘000) 2023 2022 Growth (%) Europe 2,722 2,626 3.6 Latin America 2,346 2,386 -1.7 Asia and Middle East 3,321 3,431 -3.2 North America 3,019 3,295 -8.4 Africa 796 1,014 -21.5 Total 12,204 12,752 -4.3 Volumes Terminals highlights Terminals participates in the development of three new terminals, while also modernising and adding capacity in existing terminals. Combined with further portfolio optimisation, the company is well positioned for future growth. Modernisation The modernisation project in Los Angeles, USA, is concluding with 100% of the volumes now being managed through the new automated yard. In Mumbai, India, both berths are operational again after a planned temporary closure due to a modernisa- tion programme and volumes are returning. In Onne, Nigeria, the terminal modernisation programme has also been com- pleted, positioning the terminal well for future growth. Portfolio optimisation Terminals divested the terminal facility in Castellón, Spain, (APM Terminals Castellón) upon reaching an agreement with Noatum Terminals, which is part of Noatum, an AD Ports Group company. Further APM Terminals Mauritanie S.A, operating terminals in Nouakchott and Nouadhibou, has been divested to local container operator Terminal à Conteneurs de Nouakchott (TCN). Growth The focus on growing the portfolio continues after Terminals entered into a strategic partnership with Vietnamese HATECO group to develop a new terminal at Haiphong City, Vietnam. Further, the acquisition of a facility in Suape, Brazil, is on track, paving the way for building what will be Brazil’s first 100% electrified terminal. In Lazaro Cardenas, Mexico, the Phase II expansion has started, which will increase the capacity by one million TEUs and position it as a hub for the Americas region. Total revenue per move Total cost per move USD 2019 2020 2021 2022 2023 200 250 300 350 46 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Terminals Terminals make the case for electrified container handling DECARBONISATION A.P. Moller - Maersk’s commitment to decarbonisation also applies to Terminals’ network of owned and operated terminals that connect ocean and landside operations. The challenge in addressing terminal emissions is the fragmented footprint across almost 4,000 pieces of equipment and nearly 40 different locations with unique infrastructure, regulatory and concession context. The key levers in decarbonising terminals are switching to renewable electricity, direct electri- fication, battery electric mobile equipment, energy optimisation and green fuels when needed and possible. In 2023, Terminals published a white paper with multinational logistics company DP World outlining the case for electrified container handling. The current global fleet of container handling equipment is estimated to account for 10-15 million tonnes of scope 1 and scope 2 annual carbon emissions from ports. The whitepaper offers a roadmap for container terminal electrification by engaging with stakeholders across the value chain, including terminal operators, equipment manufacturers, port authorities, affiliated government entities and shipping line operators. Following the launch of the whitepaper, Terminals and DP World announced the formation of the Zero Emission Port Alliance (ZEPA) during COP28 in December 2023. ZEPA is an industry-wide strategic coalition with the goal of accelerating the journey to zero emissions for container handling equipment on ports. In 2023, Terminals completed energy optimisation assessments at 12 terminals to identify solu- tions that will reduce and optimise fuel and electricity use. The first of five electric equipment pilot projects at the Aqaba Container Terminal in Jordan, was also kicked off as a pilot project including electric reach stackers and empty container handlers as well as 10 electric terminal trucks. To reduce scope 2 (purchased electricity) emissions, Terminals switched to 100% renewable electricity in Callao, Peru, and 40% renewable electricity in Pipavav, India. For the year, procured renewable electricity accounted for nearly 40% of Terminals’ total electricity demand. GHG emissions from diesel generators from vessels at ports are Terminals’ largest scope 3 category emissions. In 2023, a number of alternative maritime power systems, which provide vessels with power from shore to reduce fuel use as well as pollution and noise, were evaluated for future consideration. Moin, Costa Rica 47 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Copenhagen, Denmark Revenue Financial and operational performance Revenue in Svitzer increased by USD 66m to USD 839m (USD 774m), and adjusted for foreign exchange rate effects, the increase was 9.5% or USD 74m. Harbour Towage revenue increased by USD 52m, driven by increased volumes of 3.4% across all regions and tariffs in Europe, Australia and Americas, supported by a new port entry in Brazil. Terminal towage revenue increased by USD 10m, driven by tariff adjustments and new contracts commenced in most regions. Towage EBITDA increased to USD 246m (USD 229m), due to increased revenue, partly offset by increased fuel and other operating costs. EBIT increased to USD 145m (USD 116m), driven by the higher EBITDA, slightly offset by higher depreciations and lower result from joint ventures and associated companies, while EBIT in 2022 was negatively impacted by impairment of tugs, driven by the withdrawal from operations in Russia. For Maersk Container Industry, revenue was USD 496m (USD 499m) with 63% related to third-party customers. EBIT increased to USD 30m (USD 22m). Gain on divestments 169m2.1bn (USD 2.3bn) EBIT in Other Maritime Services includes USD 156m (USD 127m) from Höegh Autoliners AS of which USD 57m is a net gain from sale of shares for the full year. Höegh Autoliners AS was fully divested in Q4 2023. The divestment of Maersk Supply Service was completed in May 2023 with a net gain on sale of USD 15m. The divestment of U.S. Marine Management Inc. was completed in Q3 2023 with a net gain on sale before taxes of USD 92m. USDmUSDbn Revenue was USD 2.1bn (USD 2.3bn) with an EBITDA of USD 320m (USD 369m). EBIT increased by USD 150m to USD 457m (USD 307m), mainly due to the gain from the sale of shares in Höegh Autoliners AS and net gain on sale of U.S. Marine Management. Towage & Maritime Services 48 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Quarterly summary 2023 2022 Income statement Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Revenue 11,741 12,129 12,988 14,207 17,820 22,767 21,650 19,292 Profit before depreciation, amortisation and impairment losses, etc. (EBITDA) 839 1,878 2,905 3,969 6,540 10,862 10,327 9,084 Depreciation, amortisation and impairment losses, net 1,580 1,584 1,571 1,880 1,612 1,649 1,418 1,507 Gain on sale of non-current assets, etc., net 84 136 163 140 33 4 37 27 Share of profit/loss in joint ventures and associated companies 120 108 110 97 161 260 42 -331 Profit/loss before financial items (EBIT) -537 538 1,607 2,326 5,122 9,477 8,988 7,273 Financial items, net 101 153 -16 190 171 -303 -203 -294 Profit/loss before tax -436 691 1,591 2,516 5,293 9,174 8,785 6,979 Tax 20 137 104 193 312 263 164 171 Profit/loss for the period -456 554 1,487 2,323 4,981 8,911 8,621 6,808 A.P. Møller - Mærsk A/S’ share -436 521 1,453 2,284 4,950 8,879 8,593 6,776 Underlying profit/loss 1 -442 489 1,346 2,561 4,863 8,818 8,553 7,469 Balance sheet Total assets 82,100 83,459 83,500 85,490 93,680 89,058 80,426 73,031 Total equity 55,090 55,973 56,427 55,833 65,032 60,231 52,586 44,940 Invested capital 50,430 49,080 49,343 50,322 52,410 53,386 49,195 45,167 Net interest-bearing debt -4,658 -6,844 -7,090 -7,002 -12,632 -6,855 -3,356 -689 Cash flow statement Cash flow from operating activities 166 1,385 2,758 5,334 8,200 9,444 8,611 8,221 Repayments of lease liabilities 763 816 822 825 861 811 762 646 Gross capital expenditure, excl. acquisitions and divestments (CAPEX) 1,251 819 738 838 895 906 1,008 1,354 Cash flow from financing activities -1,545 -1,200 -3,334 -10,726 -1,601 -1,968 -3,046 -7,520 Free cash flow -1,714 -124 1,581 4,224 6,462 7,787 6,844 6,014 2023 2022 Financial ratios Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Revenue growth -34.1% -46.7% -40.0% -26.4% -3.7% 37.1% 52.1% 55.1% EBITDA margin 7.1% 15.5% 22.4% 27.9% 36.7% 47.7% 47.7% 47.1% EBIT margin -4.6% 4.4% 12.4% 16.4% 28.7% 41.6% 41.5% 37.7% Cash conversion 20% 74% 95% 134% 125% 87% 83% 90% Return on invested capital after tax (ROIC) (last twelve months) 7.4% 17.7% 34.3% 49.1% 60.4% 66.6% 62.5% 53.6% Equity ratio 67.1% 67.1% 67.6% 65.3% 69.4% 67.6% 65.4% 61.5% Underlying ROIC 1 (last twelve months) 7.5% 17.5% 34.1% 49.0% 61.2% 68.1% 64.2% 55.4% Underlying EBITDA 1 911 1,907 2,916 4,037 6,517 10,851 10,289 9,186 Underlying EBITDA margin 1 7.8% 15.7% 22.5% 28.4% 36.6% 47.7% 47.5% 47.6% Underlying EBIT 1 -520 450 1,469 2,563 5,002 9,381 8,924 7,937 Underlying EBIT margin 1 -4.4% 3.7% 11.3% 18.0% 28.1% 41.2% 41.2% 41.1% Stock market ratios Earnings per share, USD -27 31 85 131 278 488 466 364 Diluted earnings per share, USD -27 31 85 131 277 487 464 363 Cash flow from operating activities per share, USD 16 87 163 306 461 519 467 442 Share price (B share), end of period, DKK 12,140 12,735 11,975 12,445 15,620 13,865 16,555 20,370 Share price (B share), end of period, USD 1,800 1,809 1,745 1,816 2,242 1,817 2,313 3,040 Total market capitalisation, end of period, USD 28,541 29,490 29,273 30,957 39,135 32,099 42,108 55,662 1 Underlying is computed as the relevant performance measure adjusted for the net gains/losses from the sale of non-current assets, etc. and net impairment losses as well as transaction, restructuring and integration costs related to major transactions. The adjustments include A.P. Moller - Maersk’s share of mentioned items in joint ventures and associated companies and, when applicable, the adjustments are net of tax. Amounts in USD million 49 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Governance Shareholder information Corporate governance Remuneration Board of Directors Executive Board and the Executive Leadership Team Delhi, India 50 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Shareholder information published in November 2023, the company readjusted guidance expectations towards the lower end of the financial guidance ranges previously communicated and highlighted the impact of the rapidly increasing oversupply in container shipping, resulting in a share price decline of 17% on the day. From mid-December, Maersk shares rallied strongly in response to a spike in freight rates, resulting from the concerning disruptions in the Red Sea/Gulf of Aden. Maersk B shares closed 2023 at DKK 12,140, representing a decline of 22% on the year. Assuming reinvestment of the dividend paid in March 2023, the total shareholder return over the year was 6%. The Board of Directors in A.P. Møller - Mærsk A/S proposes a dividend of DKK 515 per share based on a pay-out ratio of 30%, corresponding to a dividend yield of 4.2% Total shareholder return 2023 6% 2022 -26% 2021 77% 2020 45% 2019 36% The Maersk B share price decreased by 22% to DKK 12,140 from its closing price at the end of 2022 of DKK 15,620. By comparison, the benchmark indices MSCI Europe Transportation and OMXC25 decreased by 21% and 7%, respectively. The Maersk B share price reached its highest price of DKK 17,050 on 2 March 2023, and its lowest price of DKK 9,826 on 7 November 2023. The total market value of A.P. Møller - Mærsk A/S was USD 28.5bn or DKK 192.5bn at the end of 2023. The Maersk B share closed 2022 at DKK 15,620. Following the return of DKK 74.4bn to share- holders through the full-year dividend paid in March 2023, the share price declined to reflect the post-dividend balance sheet. The share price remained relatively stable over the following seven months, performing in line with the transportation industry peers. In the third quarter results The share price declined over the course of 2023 as the market outlook for the Ocean business progressively deteriorated in light of the increasingly challenging supply- demand situation in the container shipping industry following the pandemic-fuelled years of 2021 and 2022. The share price development also reflected the DKK 74.4bn (USD 10.9bn) returned to shareholders – the highest dividend ever paid in the history of A.P. Moller - Maersk. Share price performance was broadly aligned with global peers. Source: S&P Cap IQ; data rebased from the Maersk B share price at the end of December 2022. 30 15 0 -15 -30 -45 Share price development Price change, % Maersk B MSCI Europe Transportation Index OMXC25 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 51 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Share capital A.P. Møller - Mærsk A/S’ shares are listed on Nasdaq Copenhagen and are divided into two classes: A shares with voting rights and B shares without voting rights. Each DKK 1,000 A share entitles the holder to two votes. On 7 June 2023, the cancellation of 227,390 A shares and 910,056 B shares was completed, corresponding to 6.08% of the total share capital in A.P. Møller - Mærsk A/S before the cancella tion of shares. The A.P. Møller - Mærsk A/S share capital amounts to nominally DKK 17,569,715 divided between 10,107,046 A shares of nominally DKK 1,000 and 7,462,669 B shares of nominally DKK 1,000. Ownership The total number of registered shareholders increased by 18,000 to around 107,000 during 2023. Shareholders with more than 5% of share capital or votes held 59.6% of the share capital, while the 20 largest institutional shareholders together owned around 13.3% of the total share capital and around 32.9% adjusted for the free-float. Danish retail investor holdings were around 11.8% of the total share capital. Treasury shares The A.P. Møller - Mærsk A/S holding of treasury shares comprised 9.03% of the share capital at the end of 2023, cf. note 4.1 in the consolidated financial statements, a total of 306,636 A shares and 1,279,120 B shares. Dividend A.P. Møller - Mærsk A/S’ dividend policy is an annual pay-out ratio of 30-50% of underlying net result adjusted for gains, impairments and restructurings. The Board of Directors proposes a dividend to the shareholders of DKK 515 per share of DKK 1,000 (DKK 4,300 per share of DKK 1,000). Distribution to shareholders of excess cash will take place through dividends and the annual pay- out ratio and distribution will be decided from an evaluation of the outlook, cash flow, capital expenditures for organic CAPEX and merger & acquisition transactions, and the target of having an investment grade rating. The Board of Directors proposes a dividend to the shareholders of DKK 515 per share of DKK 1,000 (DKK 4,300 per share of DKK 1,000). The proposed dividend payment represents a dividend yield of 4.2% (27.5%) and 30% (37.5%) of the net underlying profit, based on the Maersk B share’s closing price of DKK 12,140 as of 29 December 2023. Payment is expected to take place on 19 March 2024. The A.P. Møller - Mærsk A/S share Key figures 2023 2022 2021 2020 2019 Year-end share price (DKK, B share) 12,140 15,620 23,450 13,595 9,608 Share price range (DKK, B share) 7,465 11,550 11,330 9,081 3,410 Market capitalisation at year-end (USDbn, A and B share) 28.5 39.1 64.3 42.0 28.0 Earnings per share – continuing operations (USD) 227 1,600 941 145 -4 Dividend per share (DKK, A and B share) 1 515 4,300 2,500 330 150 Dividend yield (B share) 4.2% 27.5% 10.7% 2.4% 1.6% Total dividends (USDm) 1,169 10,888 7,117 1,092 468 Share buy-back programme (DKKbn) 2,3 21.1 19.8 12.3 5.4 5.3 Share buy-back programme (USDm) 3 3,070 2,785 1,956 806 791 1 Proposed dividend for the year. 2 Actual payments on a cash basis. 3 Includes the shares bought back for the long-term incentive programmes. Shareholders with more than 5% of share capital or votes Shareholders according to section 55 of the Danish Companies Act Share capital Votes A.P. Møller Holding A/S, Copenhagen, Denmark 1 41.5% 51.5% A.P. Møller og Hustru Chastine Mc-Kinney Møllers Familiefond, Copenhagen, Denmark 2 9.8% 14.0% Den A.P. Møllerske Støttefond, Copenhagen, Denmark 3.7% 6.4% A.P. Møller - Mærsk A/S (treasury shares) 9.0% 1.5% 1 A.P. Møller Holding A/S has committed to participate in the company’s share buy-back programme by selling both A and B shares relative to their total ownership and voting rights in the company. Before cancellation of the company’s treasury shares (which is subject to approval at the Annual General Meeting and intended to take place in May 2024), A.P. Møller Holding A/S holds 37.9% of the share capital and 49.9% of the votes of the company. 2 A.P. Møller og Hustru Chastine Mc-Kinney Møllers Familiefond has committed to participate in the company’s share buy- back programme by selling B shares relative to their total ownership in the company. Before cancellation of the company’s treasury shares (which is subject to approval at the Annual General Meeting and intended to take place in May 2024), A.P. Møller og Hustru Chastine Mc-Kinney Møllers Familiefond holds 9.0% of the share capital of the company. 52 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Capital allocation The capital allocation strategy ensures that A.P. Moller - Maersk has sufficient financial flexibility to meet the strategic growth objectives while maximising return to A.P. Moller - Maersk’s shareholders. For 2023-2024, the expectation for the accumulated CAPEX is unchanged at USD 8.0-9.0bn, driven by continued investment in the integrator strategy, with a focus on growth, automation and decarbonisation. A.P. Moller - Maersk is committed to shareholder returns starting with its dividend policy, see above. Funding strategy A.P. Moller - Maersk’s focus is on long-term debt in order to minimise the ongoing refinancing risk and secure a solid capital structure over the business cycle. A.P. Moller - Maersk aims at having a diversified debt portfolio, based on funding from debt capital markets, commercial bank debt, export credit agencies and from multilateral agencies. The target is to have an average maturity of the debt portfolio (excluding the impact of leases) between four to five years, and that the total amount of debt maturing (excluding the impact of leases) in a single 12-month rolling period should not exceed USD 3bn within the next three years. Share buy-back A.P. Moller - Maersk’s share buy-back programme, originally planned for USD 5.0bn over 2022- 2023, has been progressively extended to USD 12.0bn over 2022-2025 or USD 3.0bn annually. Of the planned share buy-back of around USD 12.0bn for the years 2022-2025, A.P. Moller - Maersk has bought back USD 6.3bn as of 31 December 2023. The share buy-back is carried out with the purpose to adjust the capital structure of A.P. Moller - Maersk. At the Annual General Meeting in 2024, it will be proposed that shares which are not used for hedging purposes for the long-term incentive programmes are to be cancelled. No shares may be bought back at a price exceeding the higher of i) share price of latest inde- pendent trade and ii) the highest current independent bid at NASDAQ Copenhagen at the time of trading. The maximum number of A and B shares that may be purchased on each trading day may not exceed 25% of the average daily trading volume of A and B shares, respectively, on NASDAQ Copenhagen or other regulated markets, on which the purchase is carried out, over the last 20 trading days prior to the date of purchase. A and B shares will be acquired in a 20/80 split reflecting the current trading volumes of the two share classes. The company will fulfil its reporting obligations by announcing no later than every seventh trading day the purchases made under the share buy-back programme. Given the heightened uncertainty, the Board of Directors has decided to immediately suspend the share buy-back programme, with a re-initiation to be reviewed once market conditions in Ocean have settled. Annual General Meeting The Annual General Meeting will be held on 14 March 2024 as a virtual event. Investor Relations Investor Relations worked to ensure that the global investment community were kept updated on the latest financial performance and corporate developments. Together with the Executive Leadership Team, Investor Relations engaged with institutional investors, financial analysts and individual investors, discussing our strategy and business transformation. In 2023, the Investor Relations team had around 1,000 interactions, including phone calls, video conferences and road shows. Maintaining a global presence, the Executive Board and IR team met with investors in Copenhagen, Stockholm, London, Paris, Frankfurt, New York, Los Angeles, Singapore and more. A dedicated event was hosted for Denmark-based financial analysts upon the arrival of our first methanol-enabled vessel in Copenhagen in September 2023. An important communi cations channel for IR is the investor website investor.maersk.com, where investors can find the latest financial reports, investor presentations as well as share and bond information. Financial calendar 2024 Thursday, 2 May 2024 Interim Report Q1 Thursday, 31 October 2024 Interim Report Q3 Thursday, 14 March 2024 Annual General Meeting Virtual event Wednesday, 7 August 2024 Interim Report Q2 53 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials A.P. Møller - Mærsk A/S must comply with or explain deviations from the ‘Recommendations for Corporate Governance’ implemented by Nasdaq Copenhagen in the Rules for issuers of shares and section 107b of the Danish Financial Statements Act. The Board of Directors has prepared a statement on corporate governance for the financial year 2023, which can be found on investor.maersk.com/governance/corporate-governance Out of the 40 Recommendations for Corporate Governance, the company complies with 32, complies partly with seven and does not comply with one of the recommendations. Governance structure The shareholders exercise their rights at the Annual General Meeting which is the supreme governing body of the company. The Annual Gen- eral Meeting, inter alia, elects the Board of Directors and the auditors, approves the annual report and adopts the company’s Articles of Association. The company has two share classes: A shares carrying voting rights and B shares without voting rights. A and B shares carry equal economic rights and are traded publicly at NASDAQ Copenhagen. A.P. Møller - Mærsk A/S has a management structure consisting of the Board of Directors and the Executive Board. The governance struc- ture and rules are further described in the Articles of Association, the Corporate Governance Statement and the Rules of Procedure for the Board, all of which are available at investor.maersk.com. The Board of Directors appoints the Executive Board to conduct the day-to-day management of the company. As of 1 January 2023, the Exec- utive Board of A.P. Møller - Mærsk A/S con sisted of Vincent Clerc (CEO), Patrick Jany (CFO) and Henriette Thygesen. On 1 April 2023, Henriette Thygesen stepped down from the Executive Board and became part of the Executive Leadership Team which consists of 12 members (in addition to the CEO and CFO) who are responsible for a specific part of the business. The governance structure supports close coordination between the Board of Directors, the Executive Board and leaders across the organi- sation. The structure promotes the objectives of: • Early identification of opportunities, challenges and risks. • Efficient processes for informed decision-making. • Continuous learning. • Proactive planning and agile execution. • Sound controls, checks and balances and compliance. • Clear allocation of authorities and responsibilities. • Safe operations and consideration for ESG-related matters. Board competences and diversity The Board has identified several key competences needed within the Board to fulfil its responsibilities: shipping, transport, logistics, IT and digital/business transformation, innovation, asset heavy industries, ESG and climate changes, finance and accounting, risk management, global leadership and board service in stock listed companies. Currently, the Board consists of three women and six men. In accord- ance with section 139c of the Danish Companies Act, this is considered equal gender representation in the Board, and no policy or further report- ing is thus required. The Rules of Procedure for the Board are available on the company’s webpage. Board evaluation In 2023, a Board evaluation was conducted, covering topics such as diversity in the Board, content of the work in the Committees and the capabilities needed for best supporting the company’s strategy. All Board members participated in the evaluation. The results were dis- cussed in a plenary Board session, and agreed actions for improvement will be implemented. The Board evaluation 2023 confirmed the composition of the Board with regards to diversity, capabilities and alignment within the Board on the strategic priorities. Board Committees The Rules of Procedure for the Board Committees are available on the company’s webpage. Audit Committee The Audit Committee consists of four Board members. The majority of the members are independent. In 2023, the Audit Committee has, among others, managed the following matters: • Monitoring the financial and non-financial reporting process, including financial reporting risks, accounting estimates and judgments, accounting policies and reporting process integrity. • Monitoring the ESG reporting. • Review of annual and interim financial reports. • Monitoring the effectiveness of internal control systems, fraud risks and fraud prevention. • Discussion of key audit matters, monitoring the services, audit plans, reports, independence of external auditors and recommending statutory auditor for election. • Monitoring the Group Internal Audit function, its independence, scope and performance, resources and reporting, and the resolution of audit findings. • Overseeing the company’s enterprise risk management framework and reviewing key enterprise risks and related mitigation plans. Nomination Committee The Nomination Committee consists of three Board members. One member (of the Nomination Committee) is independent. In 2023 the Nomination Committee has, among others, managed the follow- ing matters: • Review and assessment of the composition, succession planning, competences and diversity of the Board of Directors as a part of the Board evaluation. • Identifying candidates for membership of the Board of Directors. • Assessment of independence criteria of the Board members. Corporate governance 54 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Remuneration Committee The Remuneration Committee consists of three Board members. One member (of the Remuneration Committee) is independent. In 2023, the Remuneration Committee has, among others, managed the following matters: • Review and definition of benchmarks for executive remuneration. • Review, monitoring and proposal to the Board of the scorecards and remuneration packages of the Executive Board for 2023 and 2024. • Review and proposal of a new Remuneration Policy. • Preparation of the Remuneration Report. • Preparation for the appointment and remuneration of a new Executive Leadership Team including contract terms. • Proposal of fees for the members of the Board of Directors. ESG Committee The ESG Committee was formed in March 2023 and consists of four Board members. Two of the members are independent. The chair of the ESG Committee is also member of the Audit Committee to ensure alignment between the two committees’ roles and responsibilities, especially on ESG reporting. In 2023, the ESG Committee has, among others, managed the following matters: • Review of the company’s commitments and scope of reporting within ESG, including future legislation and reporting requirements. • Review of ESG Scorecard for 2023 and 2024 targets. • Review of the company’s DEI policy. • Review of the cultural transformation programme for the fleet. ESG governance The company has adopted policies and strategies for responsible business practices and sustainability to support its business strategy and deliver value for customers, investors and broader society in line with the recommendations of the UN Global Compact. The company publishes an annual Sustainability Report, which can be found on the company’s website. The Board of Directors monitors sustainability and ESG in the company and approves the ESG strategy and annual reporting. In 2023, the Board further decided to establish an ESG Committee with specific focus on ESG-related topics. The Audit Committee monitors the ESG reporting. Internal control and risk management systems The company’s risk management and internal controls in connection with its financial reporting are planned to reduce the risk of errors and omissions in the financial reporting. Control environment The Board of Directors, the Audit Committee and the Executive Board regularly assess material risks and internal controls in connection with the company’s financial reporting process. The Audit Committee has a supervisory responsibility and reports to the Board of Directors. The responsibility for the maintenance of an efficient control environment in connection with the financial reporting rests with the Executive Board. The Board of Directors and the Executive Board prepare and approve policies, procedures and controls in significant areas in connection with the company’s financial reporting. Risk assessment and management At least once a year, the Board of Directors, the Audit Committee and the Executive Board undertake a general identification and assessment of risks, including the risk of fraud, and consider measures to be imple- mented to reduce or eliminate such risks, based on an assessment of materiality and probability of errors and omissions. Control activities Specific control activities related to financial reporting risks have been defined and implemented for each business segment. Monitoring The monitoring of risk management and control systems in connection with financial reporting takes the form of ongoing assessments and con- trol at different levels within the company. Material weaknesses, omis- sions and violations are reported to the Executive Board. The Board of Directors and Audit Committee receive reports from the Executive Board and from Group Internal Audit on the compliance with the guidelines. Group Internal Audit Group Internal Audit provides assurance to the Board of Directors and the Audit Committee and acts independently of the Executive Board. Group Internal Audit’s focus is to review the effectiveness of internal controls, procedures and systems to prevent and detect irregularities. The Head of Group Internal Audit reports to the Chair of the Board of Directors and to the Audit Committee. Overview of committee members and attendance rate for 2023 Board meeting Audit Committee Nomination Committee Remuneration Committee ESG Committee 1 Transformation & Innovation Committee 2 Robert Mærsk Uggla 9/9 (Chair) 6/6 (Chair) 7/7 4/4 1/1 Marc Engel 8/9 6/6 7/7 (Chair) 4/4 1/1 (Chair) Arne Karlsson 9/9 8/8 (Chair) Bernard L. Bot 9/9 8/8 Amparo Moraleda 3 8/9 8/8 3/7 4/4 (Chair) 1/1 Marika Fredriksson 4 8/9 7/8 3/7 Kasper Rørsted 5 7/9 5 6/6 3/4 Thomas Lindegaard Madsen 9/9 Julija Voitiekute 9/9 Overall attendance rate 96.2% 96.9% 100% 95.2% 93.8% 100% 1 In March 2023, the ESG Committee was established. 2 In March 2023, the Transformation & Innovation Committee was dissolved. 3 Amparo Moraleda stepped down from the Remuneration Committee in March 2023. 4 Marika Fredriksson joined the Remuneration Committee in March 2023. 5 Kasper Rørsted joined the Board in March 2023. 55 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Remuneration In conjunction with the change of leadership of A.P. Moller - Maersk early 2023, the remuneration structure of the members of the Executive Board was changed to further align remuneration with business results and shareholder interests both short and long term. This has resulted in an increase of the variable pay relative to base salary for the Executive Board members. Additionally, the focus has been on the implementation of the new Performance Share Plan that incorporates not only financial performance goals, but also ESG goals as outlined in the 2023 Remuneration Policy. Remuneration policy at a glance The Policy supports the business needs by enabling an appropriate total remuneration package that has a clear link to the business strategy and aligns with shareholder interests. The objectives of the Policy are to: • Ensure appropriate total remuneration: The remuneration design and decisions are guided by market practice, reflected in the remuneration components offered and the total remuneration value provided. • Link to business strategy: The Policy supports the business plan and the need for executive leaders to focus on delivering an on - going progress to achieve the company’s strategic goals, reflected in a combination of short and long term incentive components. • Align with shareholder interest: The Policy is designed to support the delivery of strong financial and operational results over time, which ultimately grow shareholder value. The current Policy applies to members of the Executive Board and the Board of Directors and was adopted at the company’s Annual General Meeting in 2022. Board of Directors The members of the Board of Directors receive a fixed annual fee which is differentiated based on the role: • Ordinary Board members receive a fixed amount, and the Chair and Vice Chair receive fixed multiples thereof. Board of Directors members serving on the Board committees or performing ad hoc work beyond the normal responsibilities receive an additional fee. This does not apply to the Chair where the fixed annual fee is all inclusive. Executive Board The remuneration of the Executive Board members consists of a fixed base salary, a benefit allowance, short-term incentive as well as long-term incentive components. The remuneration structure is intended to drive a ‘reward for performance’ culture by aligning individual reward to company per- formance and shareholder value creation. The individual remuner- ation level is set and reviewed based on peer companies of similar size and complexity to ensure they remain comparable and fit for the business. Total remuneration 2023 The table shows the total remuneration awarded to members of the Board of Directors and the Executive Board in aggregate from 2019 to 2023, as set out in note 2.2 of the consolidated financial statements. Further information regarding the share-based incentives is detailed in note 5.2 of the consolidated financial statements as cal culated according to IFRS 2. Long-term share-based incentives are different in both reporting and methodology in the company’s Remuneration Report 2023, which is available at the company’s website on: investor.maersk.com/financials/financial-reports The remuneration of the Executive Board members for the financial year 2023 reflects a year in which A.P. Moller - Maersk was operating in a market environment that was significantly different from the most recent years, impacting key performance criteria and the remuneration outcome for 2023. 2019–2023 Remuneration USD million Remuneration awarded 2023 2022 2021 2020 2019 Board of Directors Fixed annual fee 2 2 3 3 3 Total 2 2 3 3 3 Executive Board Fixed pay 3 8 9 8 10 Short-term cash incentive 2 6 8 6 5 Long-term share-based incentives 1 2 8 3 2 1 Remuneration in connection with redundancy, resignations and release from duty to work -1 8 - - 6 Total 6 2 30 20 16 22 1 During 2022, it was announced that Morten Engelstoft would leave A.P. Moller - Maersk effective end June 2022 and Søren Skou effective end December 2022. In accordance with the terms and conditions of the restricted share plan and the stock option plan, any remaining expenses related to previous years’ plans were accelerated and recognised in 2022 for plans that were kept, and previously recognised expenses are reversed for cancelled plans. This resulted in an increase in the long-term share-based incentives remuneration in 2022. 2 In 2023, the Executive Board was reduced from five to two members. 56 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Board of Directors Robert Mærsk Uggla Chair, chair of the Nomination Committee, member of the ESG Committee and the Remuneration Committee. CEO, A.P. Moller Holding A/S. Not considered independent due to the position as CEO of A.P. Møller Holding A/S. • Swedish nationality • Male, born 1978 • Joined the Board in 2014 • Current election period: 2022-2024 Other management duties, etc. • A.P. Moller Capital P/S (Chair) • Maersk Tankers A/S (Chair) • Agata ApS (CEO) • Estemco XII ApS (CEO) • IMD (Director of the foundation Board) • International Business Leaders’ Advisory Council, IBLAC (member) • Board positions in a number of controlled subsidiaries of A.P. Møller Holding A/S Education • MSc in Business Administration (2003), Stockholm School of Economics, including studies at Università Commerciale Luigi Bocconi • Executive education at The Wharton School of the University of Pennsylvania, Stanford Business School, Harvard Business School, and IMD. Qualifications Leadership experience within transportation and infrastructure-related activities. Marc Engel Vice chair, chair of the Remuneration Committee, and member of the Nomination Committee and the ESG Committee. CEO, Unilabs. Not considered independent due to his position in Unilabs, an A.P. Møller Holding company. • Dutch nationality • Male, born 1966 • Joined the Board in 2019 • Current election period: 2023-2025 Other management duties, etc. • ACT commodities (Supervisory Board Member) Education • MSc, Applied Physics, University of Groningen, Groningen, Netherlands Qualifications International experience in general manage- ment, sustainability, procurement and supply chain. Insight from a customer’s perspective in both shipping and broader logistics space. Bernard L. Bot Member of the Audit Committee. CFO, Kingfisher Plc. 1 Considered independent. • Dutch nationality • Male, born 1966 • Joined the Board in 2019 • Current election period: 2023-2025 Other management duties, etc. • None Education • MSc in Economics, Erasmus University, Rotterdam, the Netherlands • MBA, University of Chicago Booth School of Business, Chicago, USA Qualifications Experience within the transport and logistics sector and listed companies. Technical financial skills, knowledge of global business- to- business technology and customer markets. Marika Fredriksson Member of the Audit Committee and the Remuneration Committee. Considered independent. • Swedish nationality • Female, born 1963 • Joined the Board in 2022 • Current election period: 2022-2024 Other management duties, etc. • AB Industrivärden 1 (Board member) • Sandvik AB 1 (Board member) • Emagine Consulting (Chair) • Axcel (Advisory Board member) • Ecolean AB (Board member) • Kone Oy (Board member) Education • Master’s degree from the Swedish School of Economics, Helsinki, Finland Qualifications International experience as CFO and member of the Board of directors of listed companies within construction. Arne Karlsson Chair of the Audit Committee. Not considered independent due to being member of the Board for minimum 12 years. • Swedish nationality • Male, born 1958 • Joined the Board in 2010 • Current election period: 2023-2025 Other management duties, etc. • Einar Mattsson (Chair) • FAPM Fastighets AB (Chair) • Fastighets AB Stadshus (Chair) • KANA I Ramundberget AB (Chair) • Ramisverket AB (Deputy Board member) • Swedish Securities Council (Board member) • Advisory Board for The ESS (European Spallation Source) (member) • Origover AB (Board member) Education • Bachelor’s degree in Business and Economics, Stockholm School of Economics, 1982 Qualifications Experience as CEO and Board member of pri- vate equity and industrial companies and with managing and developing a diverse portfolio of businesses operating in different markets. 1 Listed company 57 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Thomas Lindegaard Madsen Captain, Maersk Line. Not considered independent due to employment in A.P. Moller - Maersk. • Danish nationality • Male, born 1972 • Joined the Board in 2018 • Current election period: 2022-2024 Other management duties, etc. • None Education • Graduated Master, 1996, Svendborg Navigations Skole Qualifications Captain in Maersk Line since 2011 and Chief Officer in Maersk Line from 2004-2011. Technical, maritime and operational knowledge. Amparo Moraleda Member of the Audit Committee and chair of the ESG Committee. Considered independent. • Spanish nationality • Female, born 1964 • Joined the Board in 2021 • Current election period: 2023-2025 Other management duties, etc. • Caixabank 1 (Board member) • Airbus SE 1 (Board member) • Vodafone Group 1 (Board member) Education • Industrial Engineer by ICAI, Universidad Pontificia de Comillas, 1988 • Advance Management programme (PDG) by IESE Business School, Universidad de Navarra 1995 Qualifications Board experience from international listed technology, chemical, aerospace, transporta- tion, automotive, and innovation companies and from the financial sector. Management experience from global, listed IT and electric utility companies. Digital transformation and strategy experience. Julija Voitiekute Energy transformation academy lead, A.P. Møller - Mærsk A/S. Not considered independent due to employment in A.P. Moller - Maersk. • Lithuanian nationality • Female, born 1981 • Joined the Board in 2022 • Current election period: 2022-2024 Other management duties, etc. • Innovation Committee of Danish Shipping (member) Education • Master’s degree in International Strategy, Copenhagen Business School • Bachelor in Finance and Banking from St. Petersburg University of Economics and Finance Qualifications Knowledge in ship operation, technical management, future trends and innovation. Kasper Rørsted Member of the Nomination Committee and the ESG Committee. Considered independent. • Danish nationality • Male, born 1962 • Joined the Board in 2023 • Current election period: 2023-2025 Other management duties, etc. • Siemens AG, Germany (Board member and member of the Innovation Committee) • Woom, Austria (Chair) • Accell Group N.V., Netherlands (Chair) • IISS, Think Tank, Board of Trustees (member) Education • International Business Studies, Copenhagen Business College, Denmark • Executive Program, Harvard Business School, USA Qualifications Experience as global CEO and Board member in listed international companies in IT, consumer goods, and chemicals. Strong competencies in digital transformation, leader ship development, sustainability and global business trends. 1 Listed company Board of Directors 58 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Executive Leadership Team The Executive Leadership Team’s responsibilities Vincent Clerc 1 , Chief Executive Officer Corporate functions Patrick Jany 1 , Chief Financial Officer Katharina Poehlmann, Head of Strategy Susana Elvira, Chief People Officer Caroline Pontoppidan, Chief Corporate Affairs Officer Navneet Kapoor, Chief Technology & IS Officer Running the business Karsten Kildahl, CCO & LAM & IMEA Aymeric Chandavoine, President Europe Charles van der Steene, President North America Ditlev Blicher, President Asia Pacific Johan Sigsgaard, Chief Product Officer – Ocean Narin Phol, Chief Product Officer – Logistics & Services Rabab Boulos, Chief Operating Officer Keith Svendsen, CEO APM Terminals A.P. Moller - Maersk’s Executive Leadership Team includes leaders with a long tenure within A.P. Moller - Maersk, and leaders with experience from outside the company, bringing increased diversity of thought, age, gender and nationality. The organisational structure is shaped around 13 roles and areas of responsibility. The Executive Leadership Team jointly owns the execution of A.P. Moller - Maersk’s Integrator strategy and is composed to create strong alignment across the enterprise as well as clear ownership and accountability for key aspects of the next phase of A.P. Moller - Maersk’s strategy. Vincent Clerc Registered as CEO, A.P. Møller - Mærsk A/S Chief Executive Officer (CEO) since January 2023. • Swiss nationality • Male, born 1972 • Joined the Executive Leadership Team in 2017 • Joined A.P. Moller - Maersk in 1998 Other management duties, etc. • European Round Table of Industrialists Education • Bachelor in Political Science, Lausanne, Switzerland • MBA, Columbia Business School, New York, and London Business School Qualifications Vincent has held various roles in North America and Copen hagen. In December 2015, Vincent was appointed Chief Commercial Officer in Maersk Line before being appointed as member of the Executive Board as Chief Commercial Officer of A.P. Moller - Maersk in 2017. In December 2019, Vincent Clerc was appointed CEO of Ocean & Logistics at A.P. Moller - Maersk. Patrick Jany Registered as CFO, A.P. Møller - Mærsk A/S Chief Financial Officer (CFO) since May 2020. • German and Swiss nationality • Male, born 1968 • Joined the Executive Leader ship Team in 2020 • Joined A.P. Moller - Maersk in 2020 Other management duties, etc. • Comet AG, Switzerland (Board member) Education • Master in Business Administration, Finance, ESCP (École Supérieure de Commerce de Paris) Qualifications Before joining A.P. Moller - Maersk, Patrick was CFO and member of the Executive Committee in Clariant AG, Switzerland. Prior to his role as CFO, Patrick held several leadership positions within finance, general management and corporate development in Clariant in Germany, Mexico, Singapore, Indonesia and Spain. 1 Executive Board Executive Board 59 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Financials Consolidated financial statements Parent company financial statements Management’s statement Independent Auditor’s Reports New Jersey, United States 60 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Consolidated financial statements Consolidated income statement Consolidated statement of comprehensive income Consolidated balance sheet at 31 December Consolidated cash flow statement Consolidated statement of changes in equity Notes to the consolidated financial statements Consolidated financial statements Parent company financial statements 61 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Amounts in USD million Consolidated income statement Note 2023 2022 2.1 Revenue 51,065 81,529 2.2 Operating costs 41,574 44,882 Other income 117 319 Other costs 17 153 2.1 Profit before depreciation, amortisation and impairment losses, etc. (EBITDA) 9,591 36,813 2.3, 3.1, 3.2, 3.3 Depreciation, amortisation and impairment losses, net 6,615 6,186 2.4 Gains on sale of non-current assets, etc., net 523 101 Share of profit/loss in joint ventures and associated companies 435 132 Profit/loss before financial items (EBIT) 3,934 30,860 4.4 Financial income 1,804 1,088 4.4 Financial expenses 1,376 1,717 Profit before tax 4,362 30,231 5.1 Tax 454 910 Profit for the year 3,908 29,321 Of which: Non-controlling interests 86 123 A.P. Møller - Mærsk A/S’ share 3,822 29,198 4.1 Earnings per share, USD 227 1,600 4.1 Diluted earnings per share, USD 227 1,595 Consolidated statement of comprehensive income Note 2023 2022 Profit for the year 3,908 29,321 Translation from functional currency to presentation currency: Translation impact arising during the year -16 -551 Reclassified to income statement, gain on sale of non-current assets, etc., net 44 53 4.4 Cash flow hedges: Value adjustment of hedges for the year 27 -36 Reclassified to income statement – revenue 8 7 – operating costs -41 127 – financial expenses 22 17 5.1 Tax on other comprehensive income -6 -10 Share of other comprehensive income of joint ventures and associated companies, net of tax -1 6 Total items that have been or may be reclassified subsequently to the income statement 37 -387 4.6 Other equity investments (FVOCI), fair value adjustments for the year 17 54 4.3 Actuarial gains/losses on defined benefit plans, etc. 9 36 5.1 Tax on other comprehensive income 3 30 Total items that will not be reclassified to the income statement 29 120 Other comprehensive income, net of tax 66 -267 Total comprehensive income for the year 3,974 29,054 Of which: Non-controlling interests 71 92 A.P. Møller - Mærsk A/S’ share 3,903 28,962 Consolidated financial statements Parent company financial statements 62 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Amounts in USD million Consolidated balance sheet at 31 December Assets Note 2023 2022 3.1 Intangible assets 10,124 10,785 3.2 Property, plant and equipment 27,059 28,194 3.3 Right-of-use assets 9,670 10,967 Investments in joint ventures 751 772 Investments in associated companies 999 1,246 4.6 Other equity investments 398 377 4.5 Derivatives 11 10 4.3 Pensions, net assets 120 134 Loan receivables 112 25 3.5 Other receivables 1,491 708 Financial non-current assets, etc. 3,882 3,272 5.1 Deferred tax 343 399 Total non-current assets 51,078 53,617 Inventories 1,658 1,604 4.5 Trade receivables 4,881 6,971 Tax receivables 355 231 4.5 Derivatives 137 198 3.5 Loan receivables 12,844 17,652 Other receivables 1,387 1,094 Prepayments 1,269 1,245 Receivables, etc. 20,873 27,391 Securities, etc. - 942 Cash and bank balances 6,701 10,057 3.6 Assets held for sale or distribution 1,790 69 Total current assets 31,022 40,063 Total assets 82,100 93,680 Equity and liabilities Note 2023 2022 4.1 Share capital 3,186 3,392 Reserves 50,844 60,599 Equity attributable to A.P. Møller - Mærsk A/S 54,030 63,991 Non-controlling interests 1,060 1,041 Total equity 55,090 65,032 4.2 Lease liabilities, non-current 7,798 8,582 4.2 Borrowings, non-current 4,169 3,774 4.3 Pensions and similar obligations 191 191 3.7 Provisions 897 842 4.5 Derivatives 323 495 5.1 Deferred tax 766 883 Tax payables 438 410 Other payables 37 150 Other non-current liabilities 2,652 2,971 Total non-current liabilities 14,619 15,327 4.2 Lease liabilities, current 2,650 3,032 4.2 Borrowings, current 197 255 3.7 Provisions 812 777 Trade payables 6,401 6,804 Tax payables 442 569 4.5 Derivatives 72 77 Other payables 1,479 1,696 Deferred income 90 102 Other current liabilities 9,296 10,025 3.6 Liabilities associated with assets held for sale or distribution 248 9 Total current liabilities 12,391 13,321 Total liabilities 27,010 28,648 Total equity and liabilities 82,100 93,680 Consolidated financial statements Parent company financial statements 63 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Amounts in USD million Consolidated cash flow statement Note 2023 2022 Profit before financial items 3,934 30,860 2.3, 3.1, 3.2, 3.3 Depreciation, amortisation and impairment losses, net 6,615 6,186 2.4 Gain on sale of non-current assets, etc., net -523 -101 Share of profit/loss in joint ventures and associated companies -435 -132 5.5 Change in working capital 417 -1,808 Change in provisions and pension obligations, etc. 150 162 Other non-cash items 166 110 Cash flow from operating activities before tax 10,324 35,277 Taxes paid -681 -801 Cash flow from operating activities 9,643 34,476 5.5 Purchase of intangible assets and property, plant and equipment -3,646 -4,163 Sale of intangible assets and property, plant and equipment 601 303 3.4 Acquisition of subsidiaries and activities -140 -4,774 Sale of subsidiaries and activities 953 2 Acquisition of joint ventures and associated companies -18 -46 Sale of joint ventures and associated companies 356 219 Dividends received 305 327 Sale of other equity investments 22 31 3.5 Other financial investments, net 4,687 -12,580 Purchase/sale of securities, trading portfolio 957 -938 Cash flow from investing activities 4,077 -21,619 4.2 Repayment of borrowings -660 -800 4.2 Repayments of lease liabilities -3,226 -3,080 4.2, 4.4 Proceeds from borrowings 845 83 Purchase of treasury shares -3,120 -2,738 Financial income received 1,086 233 Financial expenses paid -233 -471 4.2, 4.4 Financial expenses paid on lease liabilities -563 -518 Sale of treasury shares 24 31 Dividends distributed -10,876 -6,847 Dividends distributed to non-controlling interests -92 -78 Sale of non-controlling interests - 1 Acquisition of non-controlling interest -16 - Other equity transactions 26 49 Cash flow from financing activities -16,805 -14,135 Net cash flow for the year -3,085 -1,278 Note 2023 2022 Cash and cash equivalents 1 January 10,038 11,565 Currency translation effect on cash and cash equivalents -223 -249 Cash and cash equivalents 31 December 6,730 10,038 Of which classified as assets held for sale -47 -1 Cash and cash equivalents 31 December 6,683 10,037 Cash and cash equivalents Cash and bank balances 6,701 10,057 Overdrafts 18 20 Cash and cash equivalents 31 December 6,683 10,037 Cash and bank balances include USD 1.0bn (USD 1.4bn) relating to cash and bank balances in countries with exchange control or other restrictions. These funds are not readily available for general use by the parent company or other subsidiaries. Consolidated financial statements Parent company financial statements 64 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Amounts in USD million Consolidated statement of changes in equity A.P. Møller - Mærsk A/S Note Share capital Translation reserve Reserve for other equity investments Reserve for hedges Retained earnings Total Non- controlling interests Total equity Equity 1 January 2022 3,513 -767 135 -160 41,787 44,508 1,080 45,588 Other comprehensive income, net of tax - -465 90 103 36 -236 -31 -267 Profit for the year - - - - 29,198 29,198 123 29,321 Total comprehensive income for the year - -465 90 103 29,234 28,962 92 29,054 Dividends to shareholders - - - - -6,845 -6,845 -80 -6,925 5.2 Value of share-based payments - - - - 26 26 - 26 Sale of non-controlling interests - - - - 1 1 -1 - Sale of subsidiaries - - - - - - -67 -67 4.1 Purchase of treasury shares - - - - -2,785 -2,785 - -2,785 4.1 Sale of treasury shares - - - - 31 31 - 31 4.1 Capital increases and decreases -121 - - - 121 - 17 17 4.6 Transfer of gain/loss on disposal of equity investments to retained earnings - - -13 - 13 - - - Transfer of cash flow hedge reserve to non-current assets - - - 30 - 30 - 30 Other equity movements - - - - 63 63 - 63 Total transactions with shareholders -121 - -13 30 -9,375 -9,479 -131 -9,610 Equity 31 December 2022 3,392 -1,232 212 -27 61,646 63,991 1,041 65,032 2023 Other comprehensive income, net of tax - 84 -25 12 10 81 -15 66 Profit for the year - - - - 3,822 3,822 86 3,908 Total comprehensive income for the year - 84 -25 12 3,832 3,903 71 3,974 Dividends to shareholders - - - - -10,824 -10,824 -94 -10,918 5.2 Value of share-based payments - - - - 28 28 - 28 Acquisition of non-controlling interests - - - - -16 -16 15 -1 Sale of non-controlling interests - - - - - - 1 1 4.1 Purchase of treasury shares - - - - -3,072 -3,072 - -3,072 4.1 Sale of treasury shares - - - - 24 24 - 24 4.1 Capital increases and decreases -206 - - - 206 - 26 26 4.6 Transfer of gain/loss on disposal of equity investments to retained earnings - - 2 - -2 - - - Transfer of cash flow hedge reserve to non-current assets - - - -4 - -4 - -4 Total transactions with shareholders -206 - 2 -4 -13,656 -13,864 -52 -13,916 Equity 31 December 2023 3,186 -1,148 189 -19 51,822 54,030 1,060 55,090 Consolidated financial statements Parent company financial statements 65 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Notes 1. Basis of preparation 1.1 General accounting policies .................... 67 1.2 Significant accounting estimates and judgements ........................................ 69 2. Operating profit 2.1 Segment information ............................... 70 2.2 Operating costs .......................................... 73 2.3 Depreciation, amortisation and impairment losses, net ............................ 74 2.4 Gain on sale of non-current assets, etc., net ......................................... 74 3. Invested capital 3.1 Intangible assets ....................................... 75 3.2 Property, plant and equipment .............. 77 3.3 Right-of-use assets .................................. 79 3.4 Acquisition/sale of subsidiaries and activities .............................................. 80 3.5 Term deposits and Other receivables, non-current ................................................ 82 3.6 Assets held for sale or distribution ........ 82 3.7 Provisions ................................................... 83 4. Capital and financing 4.1 Share capital and earnings per share .... 84 4.2 Borrowings and lease liability reconciliation .............................................. 85 4.3 Pensions and similar obligations ............ 87 4.4 Financial income and expenses .............. 89 4.5 Financial instruments and risks .............. 90 4.6 Financial instruments by category ......... 96 5. Other disclosures 5.1 Tax and deferred tax ................................. 98 5.2 Share-based payments ............................ 100 5.3 Commitments ............................................ 102 5.4 Contingent liabilities ................................. 103 5.5 Cash flow specifications .......................... 103 5.6 Related parties .......................................... 104 Company overview ................................................ 105 Hamburg, Germany Consolidated financial statements Parent company financial statements 66 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Amounts in USD million 1. Basis of preparation This section sets out general accounting policies for the Group that relate to the financial statements as a whole. Where an accounting policy is generally applicable to a specific note to the financial statements, the policy is described within that note. In addition, this section describes the significant accounting estimates and judgements that Management has identified as having a potentially material impact on the Group’s con- solidated financial statements. Reference is made to the specific note in the financial statements which is impacted by the significant accounting estimates and judgements. Further, details are provided on the new accounting pronouncements that the Group will adopt in the coming years and on the Group’s current view of the impact such pronouncements will have on the financial reporting. 1.1 General accounting policies .............................................................. 67 1.2 Significant accounting estimates and judgements ............................... 69 Note 1.1 General accounting policies Basis of preparation The consolidated financial statements for 2023 for A.P. Moller - Maersk have been prepared on a going con- cern basis and in accordance with IFRS Accounting Stand- ards as adopted by the EU and additional Danish disclo- sure requirements for listed companies. The consolidated financial statements of A.P. Moller - Maersk are included in the consolidated financial statements of A.P. Møller Holding A/S. The accounting policies are consistent with those applied in the consolidated financial statements for 2022, except for the changes to accounting standards that were effective from 1 January 2023 and were endorsed by the EU. The changes have not had a material impact on the financial statements. ESEF/iXBRL reporting A.P. Møller - Mærsk A/S is required to prepare and file the annual report in the European Single Electronic Format (ESEF), and the annual report for 2023 is therefore prepared in the XHTML format that can be displayed in a standard browser. The primary statements and the notes to the consolidated financial statements are tagged using inline eXtensible Business Reporting Language (iXBRL). The iXBRL tags comply with the ESEF taxonomy, which is included in the ESEF Regulation and developed based on the IFRS taxonomy published by the IFRS Foundation. Where a financial statement line item or note is not de- fined in the ESEF taxonomy, an extension to the taxonomy has been created. Extensions are anchored to elements in the ESEF taxonomy, except for extensions which are subtotals. The Annual Report submitted to the Danish Financial Supervisory Authority consists of the XHTML document together with certain technical files, all in- cluded in a file named APMM-2023-12-31-en.zip. Consolidation The consolidated financial statements comprise the parent company A.P. Møller - Mærsk A/S, its subsidiaries and proportionate shares in joint arrangements classified as joint operations. Subsidiaries are entities controlled by A.P. Møller - Mærsk A/S. Control is based on the power to direct the relevant activities of an entity and the expo- sure, or right, to variable returns arising from it. In that connection, relevant activities are those that significantly affect the investee’s returns. Control is usually achieved by directly or indirectly owning or in other ways controlling more than 50% of the voting rights or by other rights, such as agreements on management control. Joint arrangements are entities in which A.P. Moller - Maersk, according to contractual agreements with one or more other parties, has joint control. The arrangements are classified as joint ventures, if the contracting parties’ rights are limited to net assets in the separate legal entities, and as joint operations, if the parties have direct and unlimited rights to the assets and obligations for the liabilities of the arrangement. Entities in which A.P. Moller - Maersk exercises a signif- icant but non-controlling influence are considered associ- ated companies. A significant influence is usually achieved by directly or indirectly owning or controlling 20-50% of the voting rights. Agreements and other circumstances are considered when assessing the degree of influence. Consolidation is performed by summarising the finan- cial statements of the parent company and its subsidiar- ies in accordance with A.P. Moller - Maersk’s accounting policies. Intra-group income and expenses, shareholdings, dividends, intra-group balances and gains on intra-group transactions are eliminated. Unrealised gains on transac- tions with associated companies and joint arrangements are eliminated in proportion to A.P. Moller - Maersk’s owner ship share. Unrealised losses are eliminated in the same way unless they indicate impairment. Non-controlling interests’ share of profit/loss for the year and of equity in subsidiaries is included as part of A.P. Moller - Maersk’s profit and equity respectively but shown as separate items. Foreign currency translation The consolidated financial statements are presented in USD, the functional currency of the parent company. In the translation to the presentation currency for sub- sidiaries, associates or joint arrangements with func- tional currencies other than USD, the total comprehensive income is translated into USD at average exchange rates, and the balance sheet is translated at the exchange rates as at the balance sheet date. Exchange rate dif- ferences arising from such translations are recognised Consolidated financial statements Parent company financial statements 67 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Amounts in USD million Note 1.1 General accounting policies – continued directly in other comprehensive income and in a separate reserve of equity. The functional currency varies from business area to business area. For A.P. Moller - Maersk’s principal shipping activities, the functional currency is typically USD. This means, among other things, that the carrying amounts of property, plant and equipment and intangible assets and, hence, depreciation and amortisation, are maintained in USD from the date of acquisition. For other activities, including container terminal activities and land-based logistics activities, the functional currency is generally the local currency of the country in which such activities are performed, unless circumstances suggest a different currency is appropriate. Transactions in currencies other than the functional currency are translated at the exchange rate prevailing at the date of the transaction. Monetary items in foreign currencies not settled at the balance sheet date are translated at the exchange rate as at the balance sheet date. Foreign exchange gains and losses are included in the income statement as financial income or expenses. Share of profit/loss in associated companies and joint ven- tures is recognised net of tax and corrected for the share of unrealised intra-group gains and losses. The item also comprises any impairment losses for such investments and their reversal. Statement of comprehensive income Other comprehensive income consists of gains and losses not recognised in the income statement, including exchange rate adjustments arising from the translation from functional currency to presentation currency, fair value adjustments of other equity investments (at FVOCI), cash flow hedges, forward points and currency basis spread as well as actuarial gains/losses on defined benefit plans, etc. A.P. Moller - Maersk’s share of other comprehensive income in associated companies and joint ventures is also included. On disposal or discontinuation of an entity, A.P. Moller - Maersk’s share of the accumulated exchange rate adjustments relating to the relevant entity with a functional currency other than USD, is reclassified to the income statement. Accumulated value adjustments of equity instruments classified as equity instruments at fair value through other comprehensive income will remain in equity upon disposal. Other comprehensive income includes current and deferred income tax to the extent that the items rec- ognised in other comprehensive income are taxable or deductible. Balance sheet Investments in associated companies and joint ventures are recognised as A.P. Moller - Maersk’s share of the equity value inclusive of goodwill less any impairment losses. Goodwill is an integral part of the value of associ- ated companies and joint ventures and is therefore sub- ject to an impairment test together with the investment. Impairment losses are reversed to the extent the original value is considered recoverable. Equity instruments etc., including shares, bonds and similar securities, are recognised on the trading date at fair value, and subsequently measured at the quoted market price for listed securities and at esti- mated fair value for non-listed securities. Fair value adjustments from equity investments at fair value through other comprehensive income (FVOCI) remain in equity upon disposal. Dividends are recognised in the income statement. Inventories mainly consist of bunker, spare parts not qualifying for property, plant and equipment, and other consumables. Inventories are measured at the lower of cost and net realisable value, primarily according to the FIFO method. The cost of finished goods and work in progress includes direct and indirect production costs. Loans and receivables are initially recognised at fair value, plus any direct transaction costs, and subsequently measured at amortised cost using the effective interest method. For loans and other receivables, write-downs are made for expected losses based on specific individual or group assessments. For trade receivables, the loss allow- ance is measured by the simplified approach according to IFRS 9, applying a provision matrix to calculate the expected lifetime losses. The provision matrix includes an impairment for non-due receivables. Climate-related risks When preparing the consolidated financial statements, Management considers climate-related risks, where these could potentially impact reported amounts materially. The areas in which A.P. Moller - Maersk has assessed climate- related risks at the end of 2023 are included in the indi- vidual notes outlined below: Note 3.2 – Property, plant and equipment New financial reporting requirements A.P. Moller - Maersk has not yet adopted new or amended accounting standards and requirements that have not yet become effective. The changes to IFRS Accounting Standards are not expected to have any significant impact on recognition and measurement. Amendments to IAS 12 Income Taxes In May 2023, the IASB issued amendments to IAS 12 Income Taxes, which provides temporary relief from the requirement to recognise and disclose deferred taxes arising from enacted or substantively enacted tax law that implements the Pillar Two Model Rules published by the OECD, including tax law that implements qualified domestic minimum top-up taxes. The amendments have been adopted by the EU and the company has applied this relief. Deferred tax related to assets and liabilities arising from a single transaction: The amendments narrow the scope of the initial recognition exception so that it no longer applies to transactions that give rise to equal taxable and deduct- ible temporary differences such as leases and decom- missioning liabilities. The amendments have no material impact on the Group’s consolidated financial statements. Consolidated financial statements Parent company financial statements 68 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials BASIS OF PREPARATION Amounts in USD million Note 1.2 Significant accounting estimates and judgements The preparation of the consolidated financial statements requires Management to make estimates and judge- ments on an ongoing basis, and to form assumptions that affect the reported amounts. Management forms its estimates and judgements based on historical experience, independent advice, external data points as well as on in-house specialists and other factors believed to be reasonable under the circumstances. In its assumption setting, Management deals with various aspects of uncertainty. One aspect of uncertainty is the assessment of control over investments classified as associates, joint ventures and subsidiaries, where the assessment forms the basis for classification. Another aspect is measurement uncertainty, where Management makes assumptions that derive the value of recognised assets and liabilities. These assumptions concern the timing and amount of future cash flows as well as the risks inherent in these. In certain areas, the outcome of business plans, including ongoing negotiations with external parties to execute those plans or the outcome of negotiations to settle claims that are raised against A.P. Moller - Maersk, is highly uncertain. Therefore, assumptions may change, or the outcome may differ in the coming years, which could require a material upward or downward adjustment to the carrying amounts of assets and liabilities. The areas – and their related impact – in which A.P. Moller - Maersk is particularly exposed to material uncertainty over the carrying amounts as at the end of 2023 are included in the individual notes as outlined below: Note Key accounting estimates and judgements Estimate / ImpactJudgementNote 2.2 Vessel sharing agreements (cost-sharing arrangements) estimates EstimateNote 3.1 Cash-generating unit determination JudgementNote 3.1 Impairment testing key assumptions EstimateNote 3.2 Useful life and residual value estimates EstimateNote 3.7 Provisions for legal disputes assumptions EstimateNote 5.1 Recognition and measurement of deferred tax assets and uncertain tax positions EstimateNote 5.5 Operations in countries with limited access to repatriating surplus cash assumptions Judgement Level of potential impact to the consolidated financial statements: Low Medium High 2. Operating profit The Group’s businesses are managed from the perspective of the operating segments, and selected financial data is presented in this section on this basis. Further, detailed below are the key amounts recognised when arriving at the Group’s operating profit. 2.1 Segment information ....................................................................... 70 2.2 Operating costs ............................................................................... 73 2.3 Depreciation, amortisation and impairment losses, net ........................ 74 2.4 Gain on sale of non-current assets, etc., net ....................................... 74 Consolidated financial statements Parent company financial statements 69 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials BASIS OF PREPARATION Amounts in USD million Note 2.1 Segment information Ocean Logistics Terminals Towage & Unallo-Elimina-Consol-& ServicesMaritime cated tionsidated Servicesitemstotal2023External revenue 32,149 14,075 2,859 1,865 117 - 51,065Inter-segment revenue 1,504 -159 985 295 39 -2,664 - Total revenue 33,653 13,916 3,844 2,160 156 -2,664 51,065Profit before depreciation, amortisation and impair-ment losses, etc. (EBITDA) 6,940 1,251 1,278 320 -192 -6 9,591Depreciation and amorti-sation 4,746 817 520 162 10 -17 6,238Profit before financial items (EBIT) 2,227 446 980 457 -187 11 3,934Key metrics:Invested capital 29,851 10,779 7,813 2,037 -12 -38 50,430Gross capital expenditures, excl. acquisitions and divest-ments (CAPEX) 1,987 771 541 318 42 -13 3,646 Reference is made to the income statement for a reconciliation from EBIT to profit before tax. The segment assets, segment liabilities and the sum of invested capital per segment can be reconciled to the assets and liabilities as per the balance sheet. Assets Liabilities Invested capital2023Segment invested capital 62,477 11,997 50,480 Unallocated items 1,048 1,060 Eliminations -1,307 -1,269 Consolidated invested capital 62,218 11,788 50,430 Add back:Cash and bank balances 6,701 - Interest-bearing receivables (current and non-current) 13,005 - Equity investments, etc. - - Lease liabilities and borrowings (current and non-current) - 14,814 1Fair value of derivatives - 351Other 176 57 Consolidated balance sheet at 31 December 82,100 27,010 1 Relates to the fair value of derivatives that hedge net interest-bearing debt, including interest rate and cross currency swaps. Ocean Logistics Terminals Towage & Unallo-Elimina-Consol-& ServicesMaritime cated tionsidated Servicesitemstotal2022External revenue 61,497 14,710 3,323 1,894 105 - 81,529Inter-segment revenue 2,802 -287 1,048 399 26 -3,988 -Total revenue 64,299 14,423 4,371 2,293 131 -3,988 81,529Profit before depreciation, amortisation and impair-ment losses, etc. (EBITDA) 33,770 1,378 1,535 369 -207 -32 36,813Depreciation and amorti-sation 4,762 517 515 179 6 -19 5,960Profit before financial items (EBIT) 29,149 814 832 307 -229 -13 30,860Key metrics:Invested capital 32,368 9,858 7,593 2,794 -145 -58 52,410Gross capital expenditures, excl. acquisitions and divest-ments (CAPEX) 2,620 657 516 350 35 -15 4,163 Assets Liabilities Invested capital2022Segment invested capital 65,406 12,793 52,613Unallocated items 883 1,028Eliminations -1,408 -1,350Consolidated invested capital 64,881 12,471 52,410Add back:Cash and bank balances 10,057 -Interest-bearing receivables (current and non-current) 17,690 -Equity investments, etc. 942 -Lease liabilities and borrowings (current and non-current) - 15,6431Fair value of derivatives- 520Other 110 14Consolidated balance sheet at 31 December 93,680 28,648 1 Relates to the fair value of derivatives that hedge net interest-bearing debt, including interest rate and cross currency swaps. The segment disclosures provided above reflect the information which the Executive Board receives monthly in its capacity as ‘chief operating decision maker’ as defined in IFRS 8. The allocation of resources and the segment perfor- mance are evaluated based on revenue and profitability measured on earnings before interest and taxes (EBIT). Consolidated financial statements Parent company financial statements 70 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials OPERATING PROFIT Amounts in USD million Note 2.1 Segment information – continued A.P. Moller - Maersk has organised segments in ‘Ocean’, ‘Logistics & Services’, ‘Terminals’ and ‘Towage & Maritime Services’. The Ocean segment with the activities of Maersk Liner Business includes Maersk Line and Aliança and business from the retired brands Sealand – A Maersk Company and Hamburg Süd as well as strategic transhipment hubs under the APM Terminals brand. Inland activities related to Maersk Liner Business are included in the Logistics & Services segment. The Logistics & Services segment includes the activities from Managed by Maersk, Fulfilled by Maersk and Transported by Maersk. The Terminals segment includes gateway terminals, involving landside activities such as port activities where the customers are mainly the carriers. The Towage & Maritime Services segment includes towage services under the Svitzer brand, Maersk Container Industry and others. Types of revenue 2023 2022Ocean Freight revenue 28,421 56,499Other revenue, including hubs 5,232 7,8001 Logistics & Services Managed by Maersk2,168 2,4911 Fulfilled by Maersk5,452 4,9161 Transported by Maersk6,296 7,016Terminals Terminal services 3,844 4,371Towage & Maritime Services Towage services 839 774Sale of containers and spare parts 496 4992 Offshore supply services111 3902 Other shipping activities263 282Other services 451 348Unallocated activities and eliminations -2,508 -3,857Total revenue 51,065 81,529Of which recognised over time 47,569 78,722Of which recognised at a point in time 6,004 6,664 1 The 2022 by Maersk revenue figures have been restated in order to reflect changes within the Logistics & Services model definition. 2 Revenue from US Marine Management and Maersk Supply Service are included in Other shipping activities and Offshore supply services, respectively, for the period 1 January 2023 until divestment. 2023 2022Revenue from contracts with customers 49,997 80,179Revenue from other sourcesVessel-sharing and slot charter income 938 1,229Lease income 16 14Others 114 107Total revenue 51,065 81,529 Set out above is the reconciliation of the revenue from contracts with customers to the amounts disclosed as total revenue. Contract balances 2023 2022Trade receivables from revenue from contracts with customers 4,533 6,508Accrued income – contract asset 192 263Deferred income – contract liability 47 45 Accrued income included in trade receivables in the balance sheet constitutes contract assets comprising unbilled amounts to customers representing the Group’s right to consideration for the services transferred to date. Any amount previously recognised as accrued income is reclassified to trade receivables at the time the service is completed. Deferred income is recognised in the income statement within 12 months. Under the payment terms generally applicable to the Group’s revenue-generating activities, prepayments are received only to a limited extent. Typically, payment is due upon or after completion of the services. Part of the deferred income presented in the balance sheet constitutes contract liabilities which represent advance payments and billings in excess of revenue recognised. There were no significant changes in accrued income and deferred income during the reporting period. Impairment losses disclosed in note 4.5 relate to receivables arising from contracts with customers. 1 External revenue Non-current assetsGeographical split 2023 2022 2023 2022Denmark 869 1,002 23,592 22,031Australia 1,284 1,984 68 400Brazil 1,431 2,574 207 240China and Hong Kong 2,796 3,564 1,643 5,429Costa Rica 384 429 795 832Germany 1,668 2,607 1,345 618India 1,397 1,827 629 618Mexico 1,364 2,301 613 491Morocco 300 492 1,605 1,439Netherlands 1,603 2,944 1,165 1,219Singapore 992 794 3,853 5,070Spain 1,337 1,981 1,068 1,040UK 1,823 3,247 320 449USA 11,457 19,885 6,210 6,254Other 22,360 35,898 3,740 3,816Total 51,065 81,529 46,853 49,946 1 Comprise intangible assets, property, plant and equipment and right-of-use assets, excluding financial non-current assets relating to continuing operations. Geographical information Revenue on shipping activities is based on the port of discharge for all vessels operated by the Group, including leased vessels on time charter agreements. Revenue for leasing out the vessels on time charter agreement, where the Group acts as a lessor, is based on the customer location. For non-current assets (e.g. terminals), which cannot be easily moved, geographical location is where the assets are located. For all other assets, geographical location is based on the legal ownership. These assets consist mainly of vessels and containers registered in China, Denmark, Singapore and the USA. Consolidated financial statements Parent company financial statements 71 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials OPERATING PROFIT Amounts in USD million Note 2.1 Segment information – continued ACCOUNTING POLICIES Segment information The allocation of business activities into segments re- flects A.P. Moller - Maersk’s character as an integrated container logistics business and is in line with the internal management reporting. The reportable segments are as follows: Ocean Global container shipping activities, including strategic transhipment hubsLogistics Integrated transportation, fulfilment & Servicesand management solutions, including landside and air transportation as well as warehousing and supply chain management offeringsTerminals Gateway terminal activitiesTowage & Towage and related marine activities, Maritime production of reefer containers, Servicesproviding offshore supply service and trading and other businesses Operating segments have not been aggregated. The reportable segments comprise: Ocean Ocean activities Activities under Maersk Line and Aliança and the retired brands Hamburg Süd and Sealand – A Maersk company, with ocean container freight being the main revenue stream. Ocean container freight is defined as the cost- per-weight measure of transporting goods on board a container vessel across the ocean, including demurrage and detention, terminal handling, documentation ser- vices, container services as well as container storage. Hub activities Activities under the APM Terminals brand-generating reve- nue by providing port services only in major transhipment ports such as Maasvlakte-II, Algeciras, Tangier, Tangier- Med II, Port Said, and joint ventures in Salalah and Tanjung Pelepas. The respective terminals are included under the Ocean segment, as the primary purpose of those ports is to provide transhipment services to A.P. Moller - Maersk’s Ocean business, whereas third-party volumes sold in those locations are considered secondary. Maersk Energy Markets Sourcing marine fuels for A.P. Moller - Maersk’s fleet and third-party customers, in addition to operating a fuel infrastructure in key bunker ports. Logistics & Services Managed by Maersk Service the supply chain with Lead Logistics (Supply Chain Management and 4PL), Cold Chain logistics and Custom Services, enabling customers to control or outsource part of or all their supply chain. Fulfilled by Maersk Activities such as Contract Logistics (Warehousing, Distribution and Depot) and e-commerce supporting integrated fulfilment solutions, to improve customer consolidation. Transported by Maersk Integrated transportation solutions supported by Land- side Transportation (Intermodal and Intercontinental Rail), Value Protect, Air & Less Than Container Load (LCL), Full Container Load (FCL) and Maersk Air Cargo, to facilitate supply chain control across A.P. Moller - Maersk. Terminals Terminals activities Activities in ports fully or partially controlled by the APM Terminals brand, with the main revenue stream being port activities not considered a hub activity as described above. Towage & Maritime Services Towage activities Activities under the Svitzer brand, a provider of offshore towage and marine services. Maersk Container Industry Manufacturer that produces reefer containers. Maersk Supply Service Provides marine services and integrated solutions to the energy sector worldwide with a large fleet of anchor handling tug supply vessels and subsea support vessels. The company was divested in May 2023. Other businesses Consists of Maersk Growth, Maersk Training and other services to the maritime industry. Unallocated items and inter-segment revenue Most Group-related costs in A.P. Moller - Maersk’s corpo- rate functions are not included in the reportable segments. These functions are reported as unallocated items. Reve- nue between segments is limited, except for the Terminals segment, where a large part of the services is delivered to the Ocean segment as well as the sale of containers from Maersk Container Industry to the Ocean segment. Income statement Revenue for all businesses is recognised when the perfor- mance obligation has been satisfied, which happens upon transfer of control to the customer at an amount that re- flects the consideration to which the Group expects to be entitled in exchange for the goods and services. Revenue from shipping activities is recognised over time as the performance obligation is satisfied, including a share of revenue from incomplete voyages at the bal- ance sheet date. Invoiced revenue related to an estimated proportion of remaining voyage time and activities at the destination port is deferred. Percentage of completion is calculated as the number of days of a voyage as a per- centage of the total number of days a voyage is estimated to last. Detention and demurrage fees are recognised over time up until the time of the customer’s late return or pick-up of containers. Revenue from terminal operations and towing activi- ties is recognised upon completion of the service. In con- tainer terminals operated under certain restrictive terms of pricing and service, etc., the value of tangible assets constructed on behalf of the concession grantor is recog- nised as revenue during the construction. Revenue from most freight forwarding activities is recognised over time. Revenue from the sale of goods is recognised upon the transfer of control to the buyer. No significant element of financing is deemed present as sales are made with a credit term of 20-45 days, which is consistent with market practice. Revenue from sales is recognised based on the price specified in the contract, net of the estimated volume discounts. Accumulated experience is used to estimate and provide for the dis- counts, using the expected value method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. Consolidated financial statements Parent company financial statements 72 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials OPERATING PROFIT Amounts in USD million Note 2.2 Operating costs 2023 2022Costs of goods sold 1,999 1,849Bunker costs 6,037 8,041Terminal costs 6,381 6,958Intermodal costs 4,094 4,532Port costs 2,261 2,188Rent and lease costs 1,380 1,539Staff costs 7,361 7,087Other 12,061 12,688Total operating costs 41,574 44,882 Remuneration of employeesWages and salaries 6,370 6,237Severance payments 206 97Pension costs, defined benefit plans 63 35Pension costs, defined contribution plans 290 256Other social security costs 587 513Total remuneration 7,516 7,138Of which:Recognised in the cost of assets 7 8Included in restructuring costs 148 43Expensed as staff costs 7,361 7,087 Average number of employees 105,909 104,260 Customary agreements have been entered into with employees regarding compensation in connection with resignation with consideration for local legislation and collective agreements. For information about share-based payments, reference is made to note 5.2. Fees and remuneration to Executive Board and other key management personnel 2023 2022Fixed pay 3 8Short-term cash incentive 2 61Long-term share-based incentives2 8Remuneration in connection with redundancy, resignation and release from duty to work -1 82Total remuneration to Executive Board and other key management personnel 630 1 During 2022, it was announced that Morten Engelstoft would leave A.P. Moller - Maersk effective end June 2022 and Søren Skou effective end December 2022. In accordance with the terms and conditions of the restricted share plan and the stock option plan, any remaining expenses related to previous years’ plans were accelerated and recognised in 2022 for plans that were kept, and previously recognised expenses were reversed for cancelled plans. This resulted in an increase in long-term share-based incentives remuneration in 2022. 2 In 2023, the Executive Board and other key management personnel was reduced from six to two members. The contract of employment for the Executive Board contains terms customary in Danish listed companies, including termination notice and non-competition clauses. In connection with a possible takeover offer, neither the Executive Board nor the Board of Directors will receive special remuneration. Fees and remuneration do not include pension. Key management comprises of the Executive Board, Board of Directors, and other key management personnel. Total fees paid to other key management personnel in 2022 was USD 1.9m, comprising short-term employee bene- fits of USD 1.8m and long-term share-based incentives of USD 0.1. There were no key management personnel in 2023. The Board of Directors has received fees of USD 2m (USD 2m). For disclosure of remuneration to the Executive Board of the parent company, refer to note 2.2 of the parent company financial statements. Fees to the statutory auditors 2023 2022Statutory audit 16 15Other assurance services 2 -Tax, VAT and advisory services 1 1Other services 1 3Total fees 20 19 Fees for other services other than statutory audit of the financial statements provided by PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab to A.P. Moller - Maersk mainly consist of transaction advice, accounting and tax-related services. SIGNIFICANT ACCOUNTING ESTIMATES Vessel-sharing agreements (cost-sharing arrangements) Vessel-sharing agreements in shipping require that some vessels are committed towards specific service routes. The committed vessel’s capacity is then shared with one or more container shipping providers in proportion to each party’s contribution to the joint service. In practice, it is not always possible to provide tonnage precisely as agreed in the sharing arrangements, therefore financial settlement often takes place on the basis of relative capacity over/under-utilised on a monthly basis or other mutually agreed cycle. At A.P. Moller - Maersk, these capacity adjustments are settled as close to actual costs incurred as possible based on market rates applicable at that time. Consolidated financial statements Parent company financial statements 73 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials OPERATING PROFIT Amounts in USD million Note 2.3 Depreciation, amortisation and impairment losses, net 2023 2022Total depreciation 5,856 5,595Total amortisation 382 365Total impairment, net 377 226Depreciation, amortisation and impairment losses, net 6,615 6,186 Depreciation is related to property, plant and equipment of USD 2.6bn (USD 2.5bn) and to right-of-use assets of USD 3.3bn (USD 3.1bn). Total net impairments are primarily due to property, plant and equipment of USD 55m (USD 139m) and intangible assets of USD 322m (USD 68m), of which USD 299m is from the impairment of brands. Refer to note 3.1 Intangible assets and note 3.2 Property, plant and equipment. Note 2.4 Gains on sale of non-current assets, etc., net 2023 2022Gains 565 204Losses 42 103Gains on sale of non-current assets, etc., net 523 101 Gains in 2023 are primarily related to the sale of US Marine Management Inc. of USD 92m, the sale of shares in Höegh Autoliners AS of USD 57m, the sale of Maersk Supply Service of USD 15m, the sale of containers of USD 127m (USD 127m) and the sale of vessels of USD 181m (USD 56m). Losses in 2023 are primarily related to the sale of containers of USD 22m (USD 25m). In 2022, losses also consisted of the wind-down of operations in Russia of USD 53m. 3. Invested capital Invested capital is primarily made up of intangible assets, property, plant and equipment and right-of-use assets. The intangible assets mainly con- sist of goodwill, terminal and concession rights and customer relationships. Goodwill arises when the Group acquires a business and pays a higher amount than the fair value of its net assets, primarily due to the synergies the Group expects to create. Goodwill is not amortised, but is subject to annual impairment reviews. For further details refer to ‘Significant accounting estimates and judgements’ within note 3.1 to the consolidated financial statements. 3.1 Intangible assets ............................................................................. 75 3.2 Property, plant and equipment ......................................................... 77 3.3 Right-of-use assets ......................................................................... 79 3.4 Acquisition/sale of subsidiaries and activities ...................................... 80 3.5 Term deposits and Other receivables, non-current ................................ 82 3.6 Assets held for sale or distribution ..................................................... 82 3.7 Provisions ...................................................................................... 83 Consolidated financial statements Parent company financial statements 74 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials OPERATING PROFIT Amounts in USD million Note 3.1 Intangible assets 3 Goodwill Terminal Customer Other incl. Totaland service relationships IT softwareconcession and brandsrightsCost1 January 2023 5,554 2,985 3,043 1,371 12,953Additions - 21 - 183 2041Additions from acquired companies- - 14 - 14Disposals 6 - 402 234 642Transfers, assets held for sale -332 - -11 -13 -356Exchange rate adjustments 14 25 15 16 7031 December 2023 5,230 3,031 2,659 1,323 12,243Amortisation and impairment losses1 January 2023 349 824 491 504 2,168Amortisation - 103 158 121 382Impairment losses - - 299 23 322Disposals - - 402 79 481Transfers, assets held for sale -279 - -9 -9 -297Exchange rate adjustments -1 10 5 11 2531 December 2023 69 937 542 571 2,119Carrying amount:22,117 75231 December 2023 5,161 2,09410,124 1 Acquisition of Martin Bencher and Grindrod. 2 Of which USD 49m is under development. USD 34m is related to terminal rights with indefinite useful lives in Poti Sea Port Corp. Service concession rights with a carrying amount of USD 70m have restricted title. 3 Of which USD 162m is related to ongoing development of software. 3 Goodwill Terminal Customer Other incl. Totaland service relationships IT softwareconcession and brandsrightsCost1 January 2022 1,928 3,132 1,579 1,205 7,844Additions - 25 - 324 3491Additions from acquired companies3,667 - 1,474 213 5,354Disposals - - - 352 352Transfers - -4 - 4 - Transfers, assets held for sale - -104 - 1 -103Exchange rate adjustments -41 -64 -10 -24 -13931 December 2022 5,554 2,985 3,043 1,371 12,953Amortisation and impairment losses1 January 2022 367 794 324 590 2,075Amortisation - 110 147 108 365Impairment losses - 15 21 32 68Disposals - - - 221 221Transfers - -3 - 3 - Transfers, assets held for sale - -79 - 1 -78Exchange rate adjustments -18 -13 -1 -9 -4131 December 2022 349 824 491 504 2,168Carrying amount:22,552 86731 December 2022 5,205 2,16110,785 1 Acquisition of LF Logistics, Pilot, Senator International and ResQ. 2 Of which USD 38m is under development. USD 34m is related to terminal rights with indefinite useful lives in Poti Sea Port Corp. Service concession rights with a carrying amount of USD 70m have restricted title. 3 Of which USD 141m is related to ongoing development of software. Goodwill carrying amountOperating segment Cash-generating unit 2023 2022Ocean Ocean 316 316 Logistics & Services Logistics & Services 4,599 4,582 Terminals Multiple terminals 241 248 Towage & Maritime Services Towage – Port Towage Amsterdam and Others 5 58 Other - 1 Total 5,161 5,205 Consolidated financial statements Parent company financial statements 75 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials INVESTED CAPITAL Amounts in USD million SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS Significant accounting judgements Determination of cash-generating units Judgement is applied in the determination of cash- generating units to which goodwill is allocated for impair- ment testing and in the selection of methodologies and assumptions applied in impairment tests. The determination of cash-generating units differs based on the business area. Ocean operates its fleet of container vessels and hub terminals in an integrated net work. Consequently, the Ocean activities are tested for impairment as a single cash-generating unit. Logistics & Services, including intermodal activities, is considered a single cash-generating unit. Management views the Logistics & Services products as an integrated network, with the activities tested for impairment as a single cash-generating unit. In Terminals, each terminal is considered an individual cash-generating unit for impairment tests, except when the capacity is managed as a portfolio. Towage & Maritime Services includes towage activi- ties made up of two separate cash-generating units as well as several individual businesses, including Maersk Container Industry, which are each considered one cash-generating unit. Significant accounting estimates Impairment – assessment inputs The recoverable amount of each cash-generating unit is determined based on the higher of its value in use and fair value less costs to sell. The estimated value in use is calculated using certain key assumptions for the ex- pected future cash flows and applied discount factor. Current market values for vessels, etc., are estimated using acknowledged brokers. The cash flow projections are based on financial budgets and business plans. In nature, these projections are subject to judgement and estimates that are uncer- tain, though based on experience and external sources where available. Centralised processes and involvement of corporate functions ensure that indices and data sources are selected consistently while observing differ- ences in risks and other circumstances. The discount rates applied reflect the time value of money as well as the specific risks related to the under- lying cash flows, i.e., project and/or country-specific risk premium. Further, any uncertainties reflecting past per- formance and possible variations in the amount or timing of the projected cash flows are generally reflected in the discount rates. Impairment – key assumptions applied The outcome of impairment tests is subject to estimates of the future development of freight rates and volumes, oil prices and the discount rates applied. Management determines these key assumptions by considering past experience as well as market analysis and future expec- tations based on supply and demand trends. Further, the value in use calculation is highly sensitive to the terminal growth rate, which is determined based on the future expected economic growth rate, and replace- ment CAPEX during the terminal period, which is deter- mined based on Management’s plans and expectations for the future. The future development in freight rates is a significant factor impacting the Ocean segment in particular and is influenced by regional and global economic environments, trade patterns, and by industry-specific trends in respect of capacity supply and demand. Freight rates have dete- riorated throughout 2023 as a result of the pronounced market normalisation and are expected to face continued pressure for the next 1-2 years. The future development of oil prices is also uncertain and is a significant factor impacting accounting estimates across A.P. Moller - Maersk, either directly or indirectly. Ocean is directly impacted by the bunker oil price, where the competitive landscape determines the extent to which the development is reflected in the freight rates charged to the customer. Bunker consumption is expected to continue to decline compared to 2023, driven by fleet outsourcing and efficiency improvements. Logistics & Services is impacted by rates and volumes across the Logistics & Services product lines, particularly in the air and haulage business. The future growth and productivity of the Fulfilled by Maersk product range is also considered a key assumption as volumes are sensitive to the development of the global economy. Management considers both the future economic outlook in key regions, namely North America and Europe, as well as expected synergies from completed acquisitions when determining the growth and productivity of Fulfilled by Maersk. Terminals located in oil-producing countries, e.g., Nigeria and Brazil, are indirectly impacted by the develop- ment in oil prices and the consequences for the respective countries’ economies, which not only affects volumes handled in the terminals, but also foreign exchange rates. Continued economic deterioration and a lack of cash repatriation opportunities in certain oil-producing coun- tries could also put pressure on the carrying amounts of individual terminals. The other key sensitivities impacting Terminals include container moves, revenue and cost per move, and local port rates, all of which are impacted by the local economic outlook and competition, as well as concession right extensions and the discount rate applied. Inflation is also expected to continue to have a high impact across A.P. Moller - Maersk in 2024, impacting both the discount rate and terminal growth rates. Impairment – results of impairment assessments The Ocean cash flow projection is based on the forecast as per Q3 2023, covering the five-year business plan for 2024-28. Management applied an assumption of growth in volumes based on a calculated terminal value with growth equal to 2.7% (2.5%) p.a. In the annual impairment test carried out in November 2023, a pre-tax discount rate of 9.8% (9.2%) p.a. was applied. The impairment test showed headroom between the value in use and the carrying amount. The major part of the carrying amount is comprised of vessels. Management is of the opinion that the assumptions applied are sustainable. The Group’s most significant goodwill component relates to the Logistics & Services segment. The annual impairment test is based on the estimated value in use from the five-year business plan for 2024-28, where the volume and improved margin growth assumptions, which are region-specific, reflect the current expec- tations for the relevant period. The applied terminal growth is 2.7% (2.0%). A discount rate of 9.0% (8.4%) p.a. before tax or 8.8% (8.2%) p.a. after tax was applied. The impairment test showed headroom from the value in use to the carrying amount. Management is of the opinion that the assumptions applied are sustainable. In Terminals, Management assesses indicators of impairment including decreasing volumes and based on these indicators, estimates the recoverable amounts of the individual terminals whereby impairment indi- cators exist. Management also tests for impairment of the CGUs to which goodwill or indefinite life intangible assets are allocated. The cash flow projections for each terminal cover the concession period and extension options deemed likely to be exercised. The growth rates assumed reflect current market expectations for the rel- evant period, and the discount rates applied are between Note 3.1 Intangible assets – continued Impairment lossesOperating segment Cash-generating unit 2023 20221Ocean Ocean 319 28 1Logistics & Services Logistics & Services 2 21 Terminals Various terminals - 17 Towage & Maritime Services Maersk Container Industry 1 2 Total 322 68 1 On 27 January 2023, it was announced that the Group would move towards a singular and unified brand by integrating the A.P. Moller - Maersk brands. Existing brands were retired during Q1 2023, resulting in the recognition of impairment losses of the full carrying amount of each respective retired brand on the balance sheet. Total impairment losses related to the retirement of brands in 2023 recognised in the income statement is USD 299m, of which USD 297m is within Ocean and USD 2m is within Logistics & Services. Consolidated financial statements Parent company financial statements 76 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials INVESTED CAPITAL Amounts in USD million Note 3.1 Intangible assets – continued 7.4% and 12.1% (7.2% and 13.0%) p.a. after tax. The im- pairment tests considered fair value less cost of disposal compared to the carrying amount and resulted in im- pairment losses of USD 134m across multiple terminals in 2023, of which USD 94m relates to a CGU in the Medi- terranean, caused by lower-than-expected volumes, and is primarily related to equipment. Impairment losses of an immaterial amount across two terminals was recog- nised in 2022 as well as USD 350m on Terminals’ minority stake in Global Ports Investments (GPI), which was sold in 2022. For more information on fair value determination, refer to Note 4.6 Financial instruments by category. Impairment – key assumptions sensitivity Using the discount rate as of 31 December 2023 and keeping all other assumptions constant, the Ocean CGU showed headroom of USD 3.9bn between the value in use and the carrying amount. The following changes in assumptions reflect the related impact on the value in use and thus the headroom for the Ocean CGU. The sensitivities are prepared with all other assumptions kept constant. Key Ocean CGU assumption Assumption Change Effect on value in useGrowth in terminal period 2.7% +/- 0.5 ppts USD 2.9bnDiscount rate p.a. before tax as of 31 December 2023 9.2% +/- 0.5 ppts USD 3.4bn ACCOUNTING POLICY Intangible assets are measured at cost less accumulated amortisation and impairment losses. Amortisation is cal- culated on a straight-line basis over the estimated useful life of the assets. For container terminals operated under certain restrictive price and service conditions, etc., con- cessional rights to collect usage charges are included un- der intangible assets. The cost includes the present value of minimum payments under concession agreements and the cost of property, plant and equipment constructed on behalf of the grantor of a concession. The rights are am- ortised from the commencement of operations over the concession period. The concession period ranges from 10 to 34 years, with an average of 17 years. Goodwill and terminal rights have indefinite useful lives while all other classes have definite lives. Intangible assets regarding acquired customer relationships and technology are amortised over a useful life of 10-24 years and 5-10 years, respectively. Internally developed IT software is amortised over a useful life of 5 years. Impairment losses are recognised when the carrying amount of an asset or a cash-generating unit exceeds the higher of the estimated value in use and fair value less costs of disposal. Goodwill is attributed to cash- generating units on acquisition and impaired before other assets. Intangible assets and property, plant and equipment are tested for impairment if there is an indication of impair- ment. However, annual impairment tests are carried out for goodwill and other intangible assets with indefinite useful lives as well as intangible assets that are not yet in use. Impairment losses are included in depreciation, amortisa- tion and impairment, net, in the income statement. Note 3.2 Property, plant and equipment Vessels, Production Construction Totalaircraft, facilities and work in con tainers, equipment, progress and etc.etc.payments on accountCost1 January 2023 48,699 8,209 2,296 59,204Additions 698 124 2,834 3,656Additions from acquired companies - 15 - 15Disposals 1,785 162 6 1,953Disposals from companies sold 3,197 62 164 3,423Transfers 401 855 -1,256 -Transfers, assets held for sale -1,939 -67 -83 -2,089Reclassification from/to right-of-use assets 35 4 -3 36Exchange rate adjustments 49 32 13 9431 December 2023 42,961 8,948 3,631 55,540Depreciation and impairment losses1 January 2023 26,966 4,039 5 31,010Depreciation 2,100 506 - 2,606Impairment losses 6 134 - 140Reversal of impairment losses 12 73 - 85Disposals 1,542 163 4 1,709Disposals from companies sold 2,650 62 1 2,713Transfers, assets held for sale -781 -37 - -818Reclassification from/to right-of-use assets 9 2 - 11Exchange rate adjustments 21 18 - 3931 December 2023 24,117 4,364 - 28,481Carrying amount:31 December 2023 18,844 4,584 3,631 27,059 Vessels, buildings etc. with a carrying amount of USD 0.8bn (USD 0.8bn) have been pledged as security for loans of USD 0.4bn (USD 0.5bn). Consolidated financial statements Parent company financial statements 77 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials INVESTED CAPITAL Amounts in USD million Note 3.2 Property, plant and equipment – continued Vessels, Production Construction Totalaircraft, facilities and work in con tainers, equipment, progress and etc.etc.payments on accountCost1 January 2022 47,804 7,946 1,177 56,927Additions 1,507 169 1,965 3,641Additions from acquired companies 1 200 9 210Disposals 1,075 124 - 1,199Transfers 531 322 -853 - Transfers, assets held for sale -51 -54 16 -89Reclassification from/to right-of-use assets 84 -8 -3 73Exchange rate adjustments -102 -242 -15 -35931 December 2022 48,699 8,209 2,296 59,204Depreciation and impairment losses1 January 2022 25,890 3,734 - 29,624Depreciation 2,064 453 - 2,517Impairment losses 17 112 10 139Disposals 950 102 1 1,053Transfers, assets held for sale -33 -63 -1 -97Reclassification from/to right-of-use assets 35 -7 - 28Exchange rate adjustments -57 -88 -3 -14831 December 2022 26,966 4,039 5 31,010Carrying amount:31 December 2022 21,733 4,170 2,291 28,194 Net impairment losses recognised on property, plant and equipment are specified as follows: Impairment losses Reversal of impairment lossesOperating segment Cash-generating unit 2023 2022 2023 2022Ocean Ocean - 14 12 - Logistics & Services Logistics & Services 6 46 - - Terminals Various terminals 134 58 73 - Towage & Maritime Services Towage - 1 - - Maersk Container - 17 - - IndustryOthers - 3 - - Total 140 139 85 - Impairment analysis For more information on impairment tests, reference is made to note 3.1 Intangible assets. SIGNIFICANT ACCOUNTING ESTIMATES Useful life and residual values Useful lives are estimated based on experience. When an asset’s useful life changes, Management revises the esti- mates for individual assets or groups of assets with similar characteristics due to factors such as quality of mainte- nance and repair, technical development, or environmen- tal requirements. Management has also considered the impact of decarbonisation and climate- related risks on the useful lives of existing assets. Such risks include new climate-related legislation restricting the use of certain assets, new technology demanded by climate-related leg- islation and the increase in restoration costs for terminal sites due to new and/or more comprehensive policies. The useful lives of vessels and related assets that operate on bunker fuel have been considered in conjunction with the net zero by 2040 target. Residual values of vessels are difficult to estimate given their long useful lives, the uncertainty of future economic conditions, the market for conventional fuel vessels and the uncertainty of future steel prices, which is considered the main determinant of the residual value. Additionally, the acceleration of development of vessels with a lower carbon footprint may generate downward pressure on the market for second-hand conventional fuel vessels. Generally, the residual values of vessels are initially estimated at 10% of the purchase price excluding dry-docking costs. ACCOUNTING POLICY Property, plant and equipment are valued at cost less ac- cumulated depreciation and impairment losses. Deprecia- tion is charged to the income statement on a straight-line basis over the useful life at an estimated residual value. The useful lives of new assets are typically as follows: Vessels, etc. 20-25 yearsContainers, etc. 15 yearsBuildings 10-50 yearsTerminal infrastructure 10-30 years or concession period, if shorterWarehouses and related 5-25 years, or lease term, infrastructure if shorterAircraft and related 3-30 yearscomponents Plant and machinery, cranes 5-25 yearsand other terminal equipmentOther operating equipment, 3-7 yearsfixtures, etc. Estimated useful lives and residual values are reassessed on a regular basis. The cost of an asset is divided into separate compo- nents, which are depreciated separately if the useful life of the individual component differs. Dry-docking costs are recognised in the carrying amount of vessels when incurred and depreciated over the period until the next dry-docking. The cost of assets constructed by A.P. Moller - Maersk includes directly attributable expenses. For assets with a long construction period, borrowing costs during the con- struction period from specific as well as general borrow- ings are attributed to cost. In addition, the cost includes the net present value of estimated costs of removal and restoration. Consolidated financial statements Parent company financial statements 78 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials INVESTED CAPITAL Amounts in USD million Note 3.3 Right-of-use assets Vessels, Concession Real estate Totalcontainers, agreementsand other etc.leasesRight-of-use assets1 January 2023 6,344 2,411 2,212 10,967Additions 1,007 69 1,088 2,164Additions from acquired companies - - 29 29Disposals 154 1 57 212Depreciation 2,504 191 555 3,250Transfers, assets held for sale -17 - -36 -53Transfers, owned assets, etc. -25 - - -25Exchange rate adjustments 1 29 20 5031 December 2023 4,652 2.317 2,701 9,6701 January 2022 6,136 2,550 1,220 9,906Additions 3,093 157 960 4,210Additions from acquired companies - - 570 570Disposals 307 - 129 436Depreciation 2,532 184 362 3,078Transfers, owned assets, etc. -45 - - -45Exchange rate adjustments -1 -112 -47 -16031 December 2022 6,344 2,411 2,212 10,967 Amounts recognised in profit and loss 2023 2022Depreciation on right-of-use assets 3,250 3,078Interest expenses (included in finance costs) 563 518Expenses relating to service elements of leases 868 976Expenses relating to short-term leases 189 248Expenses relating to variable lease payments 297 292Expenses relating to leases of low-value assets 26 23Total recognised in operating costs 1,380 1,539 As part of the Group’s activities, customary leasing agreements are entered, especially regarding the chartering of vessels and leasing of containers and other equipment. In some cases, the leasing agreements comprise purchase options exer- cisable by the Group and options for extending the lease term. The Group also enters into concession agreements that provide the right-to-use some existing infrastructure or land as required to carry out the terminal business. To optimise lease costs during the contract period, the Group sometimes provides residual value guarantees in relation to equipment leases. At the end of 2023, the expected residual values were reviewed if these reflect the actual residual values achieved on comparable assets and expectations about future prices. At 31 December 2023, USD 226m (USD 226m) is expected to be payable and is included in the measurement of the lease liabilities. Leases to which A.P. Moller - Maersk is committed, but for which the lease term has not yet commenced, have an undiscounted value of USD 2.6bn (USD 1.6bn). They comprise approx. 35 contracts commencing in 2024-2026. Certain terminal concession agreements contain variable payment terms that are linked to future performance, i.e., number of containers handled. Such payments are recognised in the income statement in the period in which the condi- tion that triggers those payments occurs. Total cash outflow from leases was USD 5.2bn (USD 5.1bn), of which USD 3.2bn (USD 3.1) relates to repayment of lease liabilities, USD 1.4bn (USD 1.5bn) to other lease expenses and USD 563m (USD 518m) to interest expenses. Lease liabilities are disclosed in notes 4.2 and 4.5. ACCOUNTING POLICY Right-of-use assets are mainly leased vessels, containers, concession arrangements and real estate property. Lease contracts for vessels and containers are typically made for fixed periods of about five years, but may have exten- sion options as described together with lease liabilities. Concession arrangements and real estate contracts are negotiated on an individual basis and contain a wide range of terms and conditions. Leases are recognised as a right-of-use asset with a corresponding lease liability at the date on which the leased asset is available for use. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Payments associated with short-term leases and leases of low-value assets are recognised on a straight- line basis as an expense in the income statement. Consolidated financial statements Parent company financial statements 79 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials INVESTED CAPITAL Amounts in USD million Note 3.4 Acquisition/sale of subsidiaries and activities Acquisitions during 20231Martin Grindrod OtherTotal Bencher2023Fair value at time of acquisitionIntangible assets 21 5 -12 14Property, plant and equipment 1 43 - 44Current assets 54 15 -10 59Provisions 1 - 1 2Liabilities 33 34 -50 17Net assets acquired 42 29 27 98Non-controlling interests - -20 - -20A.P. Møller - Mærsk A/S’ share 42 9 27 78Goodwill 11 15 -26 -Purchase price 53 24 1 78Change in payables on purchase price, etc. - - 28 28Contingent consideration assumed - - -7 -7Contingent consideration paid - - 67 67Cash and bank balances assumed -15 - -2 -17Non-cash consideration - -9 - -9Cash flow used for acquisition of subsidiaries and activities 38 15 87 140 1 Relate to changes in the provisional amounts of 2022 business combinations taken up as 2023 adjustments. Martin Bencher Group (Logistics & Services) On 2 January 2023, the Group acquired 100% of the shares in Martin Bencher Group, a Denmark-based project logistics company with premium competencies within non-containerised project logistics. The acquisition of Martin Bencher Group will complement the existing project logistics services already available at A.P. Moller - Maersk, with a specialised service offering the combination of solution design, special cargo transportation and project management services. It will build on existing infrastructures and know-how across the existing Project Logistics vertical in Sales & Marketing, Ocean and Logistics & Services Special Project Logistics (SPL). The purchase price is USD 53m and resulted in goodwill of USD 11m. Acquired goodwill is not allowable for tax purposes. Martin Bencher contributed revenue of USD 160m and an insignificant net profit to the Group equivalent to its entire revenue and net profit in 2023. Grindrod Intermodal Group (Logistics & Services) On 2 January 2023, the Group completed the acquisition of Grindrod Logistics. The Group partnered with Grindrod Inter modal Group to merge the logistics activities of Grindrod Intermodal business and the ocean activities of the Ocean Africa Container Lines (OACL) with the current A.P. Moller - Maersk Logistics & Services products in South Africa. The Grindrod Intermodal Group is a well-known and trusted partner in South Africa with a range of logistics and services offerings. The Group has a controlling interest of 51%. The purchase price and non-controlling interest amounted to USD 44m and resulted in goodwill of USD 15m. Acquired goodwill is not allowable for tax purposes. The non-controlling interest in Grindrod is measured at the non-controlling interest’s proportionate share of the acquired net identifiable assets. Grindrod contributed revenue of USD 42m and an insignificant net profit to the Group equivalent to its entire revenue and net profit in 2023. In Q4 2023, the purchase price allocations for the 2023 business combinations were finalised. Acquisitions during 2022LF Logistics Pilot Senator Other Total 2022Fair value at time of acquisitionIntangible assets 807 650 223 7 1,687 Property, plant and equipment 533 185 48 14 780 Financial assets 110 4 6 - 120 Deferred tax assets 5 - - - 5 Current assets 436 271 398 6 1,111 Provisions 18 4 - - 22 Liabilities 793 1,207 316 24 2,340 Net assets acquired 1,080 -101 359 3 1,341 A.P. Møller - Mærsk A/S’ share 1,080 -101 359 3 1,341Goodwill 2,291 1,145 225 6 3,667 Purchase price 3,371 1,044 584 9 5,008Change in payables on purchase price, etc. -24 8 - - -16Contingent consideration assumed -60 - - - -60Contingent consideration paid - 19 - - 19Cash and bank balances assumed -126 -9 -40 -2 -177Cash flow used for acquisition of subsidiaries and activities 3,161 1,062 544 7 4,774 LF Logistics Holdings Limited (Logistics & Services) On 31 August 2022, the Group signed an agreement to acquire 100% of the shares in LF Logistics Holdings Limited, a leading omnichannel fulfilment contract logistics company in Asia Pacific. The acquisition further strengthens A.P. Moller - Maersk’s capabilities as an integrated container logistics company, offering global end-to-end supply chain solutions to its customers. The total purchase price was USD 3.3bn, which included the fair value of contingent consid- eration of USD 60m, contingent upon LF Logistics’ future financial performance, and has a maximum payment value of USD 160m. As of 31 December 2023, the fair value of contingent consideration was USD 10m. Of the consideration paid, USD 2.3bn was related to goodwill, while USD 806m was related to intangible assets, mainly customer relationships. USD 177m was related to trade receivables, and USD 362m was related to RoU assets. Liabilities were mainly related to trade payables and lease liabilities. Goodwill was mainly attributable to commercial and operational future expected synergies, driven by cross-selling and improved productivity. Acquired goodwill is not allowable for tax purposes. From the acquisition date to 31 December 2022, LF Logistics contributed revenue of USD 360m and an insignificant net profit. Had the acquisition occurred on 1 January 2022, the impact on the Group’s revenue would have been USD 1,013m. The net profit impact to the Group would have been USD 42m, including amortisation of intangible assets recognised in the acquisition. Acquisition-related costs of USD 12m were recognised as operating costs in the income statement of the Logistics & Services segment in 2021, and in operating cash flow in the cash flow statement in 2022. Consolidated financial statements Parent company financial statements 80 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials INVESTED CAPITAL Amounts in USD million Note 3.4 Acquisition/sale of subsidiaries and activities – continued Pilot Freight Services (Logistics & Services) On 2 May 2022, the Group acquired 100% of the shares in Pilot Freight Services, a US-based first, middle and last mile cross-border solutions provider. Pilot has specialised in the big and bulky freight segment in North America. Pilot Freight Services will add specific new services within the fast-growing big and bulky e-commerce segment to the Group, thus increasing cross-selling opportunities. The total purchase price was USD 1.6bn, of which USD 597m was related to the set- tlement of debt. In Q2 2023, the provisional purchase price allocation was finalised, resulting in a reduction of goodwill of USD 30m, primarily related to the valuation of customer relationships and deferred tax liabilities. Of the consideration paid, USD 1.1bn was related to goodwill, while USD 640m was related to intangible assets, mainly customer relationships. USD 226m was related to trade receivables, and USD 174m was related to RoU assets. Liabilities were mainly related to trade payables, lease liabilities and debt settled as part of the transaction. Goodwill was mainly attributable to commer- cial and operational future expected synergies, driven by cross-selling, network optimisations and improved productivity. Goodwill of USD 96m related to the acquisition is expected to be deductible for tax purposes. From the acquisition date to 31 December 2022, Pilot Freight Services contributed revenue of USD 987m and an insig- nificant net profit. Had the acquisition occurred on 1 January 2022, the impact on the Group’s revenue would have been USD 1.5bn. The net profit impact to the Group would have been insignificant. Acquisition-related costs of USD 15m were recognised as operating costs in the income statement of the Logistics & Services segment in 2021 and 2022, and in operating cash flow in the cash flow statement in 2022. Senator International (Logistics & Services) On 2 June 2022, the Group acquired 100% of the shares in Senator International, a well-renowned German air-based freight carrier company. Senator International contributes with offerings within air freight out of Europe into the USA and Asia, and thereby adds strong capabilities and geographical reach to the integrator vision. The total purchase price was USD 584m. In Q2 2023, the provisional purchase price allocation was finalised, resulting in an increase in goodwill of USD 5m primarily related to the valuation of tax payables. Of the consideration paid, USD 230m was related to goodwill, while USD 223m was related to intangible assets, mainly customer relationships. USD 220m was related to trade re- ceivables, and the rest is mainly related to other receivables. Liabilities were mainly related to accrued expenses and deferred tax. Goodwill was mainly attributable to commercial and operational future expected synergies, driven by cross-selling, network optimisations and improved productivity. Acquired goodwill is not deductible for tax purposes. From the acquisition date to 31 December 2022, Senator International contributed revenue of USD 787m and a net profit of USD 40m. Had the acquisition occurred on 1 January 2022, the impact on the Group’s revenue would have been USD 1.6bn and a net profit of USD 105m, including amortisation of intangibles assets recognised in the acquisition. Acquisition-related costs of USD 9m were recognised as operating costs in the income statement of the Logistics & Services segment in 2021, and in operating cash flow in the cash flow statement in 2022. Sales in 2023 US Marine Management An agreement was reached to divest U.S. Marine Management LLC in Q3 2023. On 20 September 2023, the sale of US Marine Management LLC was completed and resulted in a net gain of USD 92m or USD 74m after tax. The net gain before tax is classified as the gain on sale of non-current assets in the income statement. Maersk Supply Service On 15 May 2023, the sale of Maersk Supply Service to A.P. Møller Holding was completed for cash proceeds net of cash sold of USD 685m and resulted in a net gain of USD 15m, which includes the reclassification of the translation reserve loss of USD 40m from equity to the income statement. The gain is classified as the gain on sale of non-current assets in the income statement. The net profit for US Marine Management and Maersk Supply Service until divestment is included in the Towage & Maritime Services segment as per Note 2.1 Segment information. Höegh Autoliners The Group completed the sale of the 26.4% shareholding in Höegh Autoliners in three tranches during 2023. The transactions aggregated to a net price of USD 362m and a gain of USD 57m included in Towage & Maritime Services segment. Sales during the year 2022 In 2022, Terminals completed the sale of the 30.75% minority stake in Global Ports Investments in Russia for USD 135m. The transaction included an option for Terminals to re-enter the partnership in the future. Consolidated financial statements Parent company financial statements 81 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials INVESTED CAPITAL Amounts in USD million Note 3.4 Acquisition/sale of subsidiaries and activities – continued ACCOUNTING POLICY Acquisition/sale of subsidiaries and activities Upon acquisition of new entities, the acquired assets, liabilities and contingent liabilities are measured at fair value at the date when control was achieved using the acquisition method. Identifiable intangible assets are rec- ognised if they arise from a contractual right or can oth- erwise be separately identified. The difference between the fair value of the acquisition cost and the fair value of acquired identifiable net assets is recognised as goodwill. Contingent consideration is measured at fair value and any subsequent changes to contingent consideration are recognised as financial income or financial expense in the income statement. If contingent consideration is settled by issuing a predetermined number of shares, the contingent consideration is classified as equity and is sub- sequently not remeasured at fair value. Transaction costs are recognised as operating costs as they are incurred. When A.P. Moller - Maersk ceases to have control of a subsidiary, the value of any retained investment is remeasured at fair value, and the value adjustment is recognised in the income statement as a gain/loss on the sale of non-current assets. The difference between sales proceeds and the carrying amount of the subsidiary is recognised in the income statement including fair value of contingent consideration at the time of sale. Contingent consideration is remeasured at fair value with changes recognised in the income statement. The effect of the purchase and sale of non-controlling interests without changes in control is included directly in equity. Note 3.5 Term deposits and Other receivables, non-current Loan receivables, current, amount to USD 12.8bn (USD 17.7bn) and consist primarily of term deposits with a maturity of more than three months amounting to USD 12.8bn (USD 17.6bn). For details on the assessment of the loss allowance on term deposits, reference is made to note 4.5 Financial instruments and risks. Other receivables, non-current, primarily consist of prepayments made for operational activities that will be utilised after twelve months amounting to USD 1.3bn (USD 0.5bn). Note 3.6 Assets held for sale or distribution 2023 2022Balance sheet items comprise:Intangible assets 59 - Property, plant and equipment and right-of-use assets 1,303 13Deferred tax assets 52 1Other assets 167 51Non-current assets 1,581 65Current assets 209 4Assets held for sale or distribution 1,790 69Provisions 12 1Deferred tax liabilities 27 - Other liabilities 209 8Liabilities associated with assets held for sale or distribution 248 9 Assets held for sale in 2023 relate to one terminal within Terminals (2022: two terminals) and Svitzer (towage) within Towage & Maritime Services due to Management’s commitment to its sale or distribution as of the balance sheet date. Svitzer is classified as held for sale or distribution and presented separately in the balance sheet. Comparative figures have not been restated. No gains or losses resulting from the fair value measurement of Svitzer have been recognised. Svitzer’s results continue to be included in the Towage & Maritime Services segment and are included in note 2.1 Segment information as such. ACCOUNTING POLICY Assets held for sale are recognised when the carrying amount of an individual non-current asset, or disposal group of assets, is recovered principally through a sales transaction rather than through continued use. Assets are classified as held for sale when activities to carry out a sale have been initiated, when the activities are avail- able for immediate sale in their present condition, and when the activities are expected to be disposed of within 12 months. Liabilities directly associated with assets held for sale are presented separately from other liabilities. Assets held for sale are measured at the lower of carry- ing amount immediately before classification as held for sale and fair value less costs to sell. Impairment tests are performed immediately before classification as held for sale. Non-current assets are not depreciated or amortised while classified as held for sale. Measurement of deferred tax and financial assets and liabilities is unchanged. When an asset or a disposal group has been classified as held for sale or distribution, but the requirements are no longer met, the assets and related liabilities ceases to be classified as held for sale. The cessation of the classi- fication as held for sale will be reflected in the period in which the change of circumstances has occurred. Com- parative figures are not restated, and any adjustments to the carrying value of assets and liabilities previously classified as held for sale are recognised in the period in which the circumstances have changed. Consolidated financial statements Parent company financial statements 82 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials INVESTED CAPITAL Amounts in USD million Note 3.7 Provisions Restructuring Legal dis-Other Totalputes, etc.1 January 2023 68 1,182 369 1,619Provision made 151 488 283 922Amount used 61 239 144 444Amount reversed 34 238 57 328Additions from acquired companies - - 2 2Disposals from companies sold - 1 28 29Transfers, assets held for sale - -12 - -12Exchange rate adjustments 2 -4 -18 -2031 December 2023 126 1,176 407 1,709Of which:Classified as non-current 11 691 195 897Classified as current 115 485 212 812Non-current provisions expected to be realised after more than five years 1 36 27 64 Restructuring includes provisions for decided and publicly announced restructurings and includes mainly staff redundancy costs. Legal disputes, etc. include, among other things, indirect tax and duty disputes. Other primarily includes provisions for warranties, and onerous contracts. Reversals of provisions primarily relate to legal disputes and contractual disagreements, which are recognised in the income statement under operating costs and tax. SIGNIFICANT ACCOUNTING ESTIMATES Provisions for legal disputes Management’s estimate of the provisions for legal dis- putes, including disputes regarding taxes and duties, is based on the knowledge available on the substance of the cases and a legal assessment of these. The resolution of legal disputes through either negotiations or litigation can take several years to be reached and the outcomes are subject to considerable uncertainty. ACCOUNTING POLICY Provisions are recognised when A.P. Moller - Maersk has a present legal or constructive obligation from past events. The item includes, among other things, legal disputes and provisions for onerous contracts and unfavourable contracts acquired as part of a business combination. Provisions are recognised based on best estimates and are discounted where the time element is significant and where the time of settlement is reasonably determinable. 4. Capital and financing A.P. Moller - Maersk has continued its commitment to distribute value to its shareholders through both dividends and the buy-back of shares through- out 2023. This section provides details on the movement in the Group’s share capital, including the shares bought back and cancelled during the year. The movements within borrowings and lease liabilities provide insights into the development in the Group’s net interest bearing debt. This section also includes details on the treasury management and financial risk management objectives and policies, as well as the exposure and sensitivity of the Group to credit, liquidity, interest and foreign exchange risk, and the policies in place to monitor and manage these risks. 4.1 Share capital and earnings per share .................................................. 84 4.2 Borrowings and lease liability reconciliation ........................................ 85 4.3 Pensions and similar obligations ........................................................ 87 4.4 Financial income and expenses ......................................................... 89 4.5 Financial instruments and risks ......................................................... 90 4.6 Financial instruments by category ..................................................... 96 Consolidated financial statements Parent company financial statements 83 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials INVESTED CAPITAL Amounts in USD million Note 4.1 Share capital and earnings per share Development in the number of shares: A shares of B shares of Nominal valueDKK 1,000 DKK 500 DKK 1,000 DKK 500 DKK million USD million1 January 2022 10,468,107 216 8,907,718 166 19,376 3,513Conversions 1 -2 3 -6 - - Cancellations 133,779 - 535,076 - 669 12131 December 2022 10,334,329 214 8,372,645 160 18,707 3,3921 January 2023 10,334,329 214 8,372,645 160 18,707 3,392Conversions 1 -2 1 -2 - -Cancellations 227,390 - 910,056 - 1,137 20631 December 2023 10,106,940 212 7,462,590 158 17,570 3,186 All shares are fully issued and paid up. One A share of DKK 1,000 holds two votes. B shares have no voting rights. At the Annual General Meeting of A.P. Møller - Mærsk A/S on 28 March 2023, the shareholders decided on the cancellation of treasury shares, whereby the share capital would be decreased. On 7 June 2023, the company’s share capital was decreased from nominally DKK 18,707,161,000 to nominally DKK 17,569,715,000. The reduction in the share capital has been recorded by applying the historical rate of exchange of USD/DKK 5.5153. Development in the holding of treasury shares: No. of shares of DKK 1,000 Nominal value DKK million % of share capitalTreasury shares 2023 2022 2023 2022 2023 2022A shares1 January 201,717 120,494 202 121 1.08% 0.62%Additions 332,309 215,002 332 215 1.89% 1.15%Cancellations 227,390 133,779 227 134 1.22% 0.69%31 December 306,636 201,717 307 202 1.75% 1.08%B shares1 January 887,557 549,587 888 550 4.74% 2.84%Additions 1,327,842 904,856 1,328 905 7.54% 4.83%Cancellations 910,056 535,076 910 535 4.86% 2.76%Disposals 26,223 31,810 27 32 0.14% 0.17%31 December 1,279,120 887,557 1,279 888 7.28% 4.74% Disposals of treasury shares are related to the share option plan and the restricted shares plan. From 1 January 2023 to 31 December 2023, A.P. Moller - Maersk bought back as treasury shares 171,022 A shares, with a nominal value of DKK 171m, and 514,238 B shares, with a nominal value of DKK 514m, from A.P. Møller Holding A/S and 162,005 B shares, with a nominal value of DKK 162m, from A.P. Møller og Hustru Chastine Mc-Kinney Møllers Familie- fond, which are considered related parties. The share buy-back was carried out with the purpose to adjust the capital structure of the company. Cancellation of shares which are not used for hedging purposes for the long-term incentive programmes will be proposed at the Annual General Meeting. Capital management The capital structure is managed for the Group in accordance with the financial policy, as approved by the Board of Directors. Capital is managed to meet the objective of a solid capital structure over the business cycle and to maintain a liquidity profile in line with an investment grade credit rating. A.P. Moller - Maersk remains investment grade-rated and holds a Baa2 (positive outlook) rating from Moody’s and a BBB+ (stable) rating from Standard & Poor’s. The equity share of total equity and liabilities was 67% (69%) at the end of 2023. Share buy-backs of maximum 15% of the share capital can be de- cided by the Board of Directors, and dividends paid out are to be between 30-50% of the underlying profit in accordance with the company’s dividend policy. The basis for calculating earnings per share is the following:A.P. Møller - Mærsk A/S’ share of: 2023 2022Profit for the period 3,822 29,198 2023 2022Issued shares 1 January 18,707,161 19,376,016Average number of treasury shares 1,213,793 720,802Average number of cancelled shares 648,188 404,978Average number of shares (basic) 16,845,180 18,250,236Dilutive effect of outstanding restricted and performance shares and share options 28,862 57,522Average number of shares (diluted) 16,874,042 18,307,758Basic earnings per share (USD) 227 1,600Diluted earnings per share (USD) 227 1,595 Consolidated financial statements Parent company financial statements 84 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials CAPITAL AND FINANCING Amounts in USD million Note 4.1 Share capital and earnings per share – continued Dividends The dividend of DKK 4,300 per share of DKK 1,000 was paid on 31 March 2023 – a total of DKK 74.4bn equivalent to USD 10.9bn, excluding treasury shares (dividend of DKK 2,500 per share of DKK 1,000 paid – total of DKK 46.8bn, equivalent to USD 6.9bn). The Board of Directors proposes a dividend to the shareholders of DKK 515 per share of DKK 1,000 – a total of DKK 8.1bn, equivalent to USD 1.2bn (DKK 4,300 per share of DKK 1,000 – a total of DKK 74.4bn equivalent to USD 10.9bn). Payment of dividends is expected to take place on 19 March 2024. Payment of dividends to shareholders does not trigger taxes to A.P. Moller - Maersk. ACCOUNTING POLICY Earnings per share is calculated as A.P. Møller - Mærsk A/S’ share of the profit for the year divided by the average number of shares outstanding (of DKK 1,000 each), ex- cluding A.P. Moller - Maersk’s holding of treasury shares. Diluted earnings per share are adjusted for the dilutive effect of the average number of restricted shares, perfor- mance shares and share options outstanding as issued by the parent company. Equity includes total comprehensive income for the year comprising the profit for the year and other comprehen- sive income. Proceeds on the purchase and sale of treasury shares and dividend from such shares are recognised in equity. The translation reserve is comprised of A.P. Moller - Maersk’s share of accumulated exchange rate differences arising on translation from functional currency into presentation currency. The reserve for other equity investments is com- prised of accumulated changes in the fair value of equity investments (at FVOCI), net of tax. Reserves for hedges includes the accumulated fair value change of derivatives qualifying for cash flow hedge accounting, less amounts already reclassified to the income statement or trans- ferred as basis adjustments, net of tax, as well as forward points and currency basis spread. Note 4.2 Borrowings and lease liability reconciliation Net debt Cash flows Non-cash changes Net debt 31 December31 December12022 FromOther Addi- Dis posals Transfers, Foreign Other2023financingtionsassets exchange activitiesheld for move- salementsBorrowings:Bank and other credit institutions 1,053 -88 -3 3 - - 8 - 9732Issued bonds2,976 308 - - - - 53 56 3,3933Total borrowings 4,029 220-3 3 - - 61 56 4,366Classified as non-current 3,774 4,169Classified as current 255 197Leases:4Lease liabilities 11,614 -3,226 3 2,268-241 -56 84 2 10,448Classified as non-current 8,582 7,798Classified as current 3,032 2,650Total borrowings and leases 15,643 -3,006 - 2,271 -241 -56 145 58 14,814Derivatives hedge of borrowings, net 532 -46 - - - - -53 -81 352 1 Other includes fair value changes and amortisation of fees. 2 Of the total issued bonds at 31 December 2023, USD 1.3bn are green bonds primarily used to finance the construction of green methanol vessels. 3 Cash flows from financing activities of USD 220m are made up of repayments of borrowings of negative USD 660m, adjusted for cash flows from hedges of USD 35m and proceeds from borrowings of USD 845m. 4 Additions include USD 29m of lease liabilities from businesses acquired during 2023. The maturity analysis of lease liabilities is disclosed in note 4.5. Consolidated financial statements Parent company financial statements 85 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials CAPITAL AND FINANCING Amounts in USD million Note 4.2 Borrowings and lease liability reconciliation – continued 4 Net debt Cash flows Non-cash changes Net debt 31 December31 December12021 FromOther Addi- Dis posals Transfers, Foreign Other2022financingtionsassets exchange activitiesheld for move- salementsBorrowings:Bank and other credit institutions 1,443 -717 -282 612 - -13 10 - 1,0532Issued bonds3,341 - - - - - -177 -188 2,9763-282Total borrowings 4,784 -717612 - -13 -167 -188 4,029Classified as non-current 4,315 3,774Classified as current 436 255Leases:5Lease liabilities 10,551 -3,080 -10 4,776-433 -13 -173 -4 11,614Classified as non-current 8,153 8,582Classified as current 2,398 3,032Total borrowings and leases 15,335 -3,797 -292 5,388 -433 -26 -340 -192 15,643Derivatives hedge of borrowings, net 194 14 - - - - 188 136 532 1 Other includes fair value changes and amortisation of fees. 2 Of the total issued bonds at 31 December 2022, USD 552m are green bonds used to finance acquisitions of green methanol vessels. 3 Cash flows from financing activities of negative USD 717m are made up of repayments of borrowings of negative USD 800m, and proceeds from borrowings of USD 83m. 4 Cash flows from other include a decrease in cash overdrafts of USD 282m. 5 Additions include USD 571m of lease liabilities from businesses acquired during 2022. The maturity analysis of lease liabilities is disclosed in note 4.5. ACCOUNTING POLICY Financial liabilities are initially recognised at fair value less transaction costs. Subsequently, the financial liabilities are measured at amortised cost using the effective inter- est method, whereby transaction costs and any premium or discount are recognised as financial expenses over the term of the liabilities. Fixed interest loans subject to fair value hedge accounting are measured at amortised cost with an adjustment for the fair value of the hedged inter- est component. Lease liabilities are measured at the present value of the lease payments over the lease term, at the interest rate implicit in the lease, or at A.P. Moller - Maersk’s incremen- tal borrowing rate (IBR). A.P. Moller - Maersk’s IBR reflects the Group’s credit risk, leased amount, and contract duration, as well as the nature and quality of the asset’s security and economic environment in which the leased assets operate. To determine the IBR, where possible, A.P. Moller - Maersk uses recent third-party financing received by the individual lessee as a starting point, with adjustments to reflect changes in financing conditions since that financing was received. Where such financing is not available, A.P. Moller - Maersk uses a build-up ap- proach that starts with a risk- free interest rate adjusted by credit risk and specific risks faced by the lessee such as asset type, geographical risks, etc. Subsequently, the lease liability is measured at amor- tised cost with each lease payment allocated between the repayment of the liability and financing cost. The finance cost is charged to the income statement over the lease period, using the IBR that was used to discount the lease payments. The following lease payments are included in the net present value: • fixed payments (including in-substance fixed payments), less any lease incentives receivable • variable lease payments that are based on an index or a rate • amounts expected to be payable by the lessee under residual value guarantees • the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and pay- ments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option. Extension and termination options in lease contracts are included in contracts where it is reasonably certain that A.P. Moller - Maersk will exercise the options. These terms are used to maximise operational flexibility in terms of managing contracts. In determining the lease term, Man- agement considers all facts and circumstances that cre- ate an economic incentive to exercise an extension option or to not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if it is reasonably certain that the lease will be extended or not terminate. Most of the exten- sion and termination options held are exercisable only by A.P. Moller - Maersk and not by the respective lessor. This assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment, and which is within the control of the lessee. Where A.P. Moller - Maersk will probably exercise specific purchase options, those options are included in the measurement of the lease liability with corresponding right-of-use asset depreciated over the asset’s useful life rather than lease term. Consolidated financial statements Parent company financial statements 86 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials CAPITAL AND FINANCING Amounts in USD million Note 4.3 Pensions and similar obligations UK Other Total UK Other Total2023 2023 2023 2022 2022 2022Specification of net liabilityPresent value of funded plans 1,539 170 1,709 1,396 374 1,770Fair value of plan assets -1,652 -108 -1,760 -1,583 -301 -1,884Net liability of funded plans -113 62 -51 -187 73 -114Present value of unfunded plans - 102 102 - 105 105Impact of minimum funding requirement/asset ceiling 20 - 20 66 - 66Net liability 31 December -93 164 71 -121 178 57Of which:Pensions, net assets 120 134Pensions and similar obligations 191 191UK Total UK TotalSignificant financial assumptions 2023 2023 2022 2022Discount rate 4.5% 4.5% 4.8% 4.7%Inflation rate 3.3% 3.3% 3.5% 3.3% As employer, the Group participates in pension plans according to normal practice in the countries in which the Group operates. Generally, the pension plans within the Group are defined contribution plans, where contributions are recog- nised in the income statement on an accrual basis. A number of entities have defined benefit plans, in which retirement benefits are based on length of service and salary level. To a limited extent, these defined benefit plans also include payment of medical expenses, etc. In 2024, the Group expects to pay contributions totalling USD 17m (USD 25m) to funded defined benefit plans. 85% of the Group’s defined benefit liabilities are in the UK. All of the plans in the UK are funded. Although all of the UK plans are now closed to new entrants, active members in the two largest plans continue to accrue new benefits. The smaller UK plans are all closed to new accruals, although a salary link remains in some of the plans. Overall, the plans have an average duration of 11 years, and approximately 60% of the obligation is related to pensioner members. As well as being subject to the risks of falling interest rates, which would increase the obligation, poor asset returns and pensioners living longer than anticipated, the Group is also subject to the risk of higher-than- expected inflation. This is because many pension benefits, particularly in the UK plans, increase in line with inflation although some minimum and maximum limits apply. 31 DecemberLife expectancy 2023 2043 2022 204265-year-old male in the UK 21.7 23.3 22.0 23.565-year-old female in the UK 24.1 25.8 24.3 25.8 The sensitivity of the liabilities and pension costs to the key assumptions are as follows: Increase DecreaseSensitivities for key assumptions in the UKFactors ‘Change in liability’ 2023 2023Discount rate Increase/(decrease) by 25 basis points -42 44Inflation rate Increase/(decrease) by 25 basis points 19 -24Life expectancy Increase/(decrease) by one year 62 -61 UK Other Total UK Other TotalSpecification of plan assets 2023 2023 2023 2022 2022 2022Insurance contracts 1,255 54 1,309 1,172 54 1,226 Shares 21 14 35 52 15 67 Government bonds 225 10 235 130 37 167 Corporate bonds 68 7 75 53 176 229 Real estate 10 5 15 8 6 14 Other assets 73 18 91 168 13 181 Fair value 31 December 1,652 108 1,760 1,583 301 1,884 Rates of life expectancy reflect the most recent mortality investigations, and in line with market practice an allowance is made for future improvements in life expectancy. The Group assumes that future improvements will be in line with the latest projections of 1.25% for all UK plans. The liabilities are calculated using assumptions that are the Group’s best estimate of future experience bearing in mind the requirements of IAS 19. The Group’s plans are funded in accordance with applicable local legislation. In the UK, each plan has a Trustee Board that is required to act in the best interests of plan members. Every three years, a formal valuation of the plan’s liabilities is carried out using a prudent basis, and if the plan is in deficit, the Trustees agree with the Group or the sponsoring employer on a plan for recovering that deficit. Around 80% of the UK liabilities are now covered by insurance policies. Therefore, movement in the liabilities due to change in assumptions would equally impact the assets value related to the buy-in policies, resulting in a reduced movement in the overall balance sheet position. Consolidated financial statements Parent company financial statements 87 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials CAPITAL AND FINANCING Amounts in USD million Note 4.3 Pensions and similar obligations – continued The expected contribution to the UK plans for 2024 are USD 12m (USD 0m in 2023). In most of the UK plans, any surplus remaining after the last member dies may be returned to the Group. However, the Merchant Navy Ratings Pension Fund (MNRPF), and the Merchant Navy Officers Pension Fund (MNOPF) contributions paid by the Group are not refundable in any circumstance and the balance sheet liability reflects an adjustment for any agreed deficit recovery contributions in excess of deficit determined using the Group’s assumptions. In 2023, an adjustment of USD 11m (USD 3m) was applied in this respect. Other than the insurance contracts and a small proportion of other holdings, the plan assets held by the Group are quoted investments. Present Fair value Adjust-Net Of which:value of of plan mentsliabilityUKChange in net liabilityobligationsassets1 January 2023 1,875 1,884 66 57 -121Current service costs, administration costs, etc. 57 -6 - 63 41Calculated interest expense/income 83 86 3 - -5Recognised in the income statement in 2023 140 80 3 63 36Return on plan assets, excluding amounts included in interest - -6 - 6 3Actuarial gains/losses from changes in demographic assumptions -18 - - -18 -19Actuarial gains/losses from changes in financial assumptions4 - - 4 13Experience adjustments 51 - - 51 53Adjustments for unrecognised assets due to asset ceiling - - -52 -52 -52Recognised in other comprehensive income in 2023 37 -6 -52 -9 -2Contributions from the Group and employees 1 23 - -22 -Benefit payments -146 -140 - -6 -Settlements1-186 -181 - -5 -Transfers, assets held for sale -3 - - -3 -Exchange rate adjustments 93 100 3 -4 -631 December 2023 1,811 1,760 20 71 -93 1 Relates to the termination and settlement via insurance of the US Maersk Pension Plan. Present Fair value Adjust-Net Of which:value of of plan mentsliabilityUKChange in net liabilityobligationsassets1 January 2022 2,843 2,858 82 67 -138Current service costs, administration costs, etc. 23 -11 - 34 8Calculated interest expense/income 53 53 1 1 -2Recognised in the income statement in 2022 76 42 1 35 6Return on plan assets, excluding amounts included in interest - -638 - 638 562Actuarial gains/losses from changes in demographic financial assumptions6 --6 7Actuarial gains/losses from changes in financial assumptions-776 - - -776 -672Experience adjustments 104 - - 104 107Adjustments for unrecognised assets due to asset ceiling - - -8 -8 -8Recognised in other comprehensive income in 2022 -666 -638 -8 -36 -4Contributions from the Group and employees - 3 - -3 - Benefit payments -132 -119 - -13 - Effect of business combinations and disposals 3 - - 3 - Exchange rate adjustments -249 -262 -9 4 1531 December 2022 1,875 1,884 66 57 -121 Consolidated financial statements Parent company financial statements 88 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials CAPITAL AND FINANCING Amounts in USD million Note 4.4 Financial income and expenses 2023 20221,4Interest expenses on liabilities904 8152Borrowing costs capitalised on assets133 49Interest income on loans and receivables 1,202 436Fair value adjustment transferred from equity hedge reserve (loss) 21 33Net interest expenses -410 363Exchange rate gains on bank balances, borrowings and working capital 335 596Exchange rate losses on bank balances, borrowings and working capital 522 586Net foreign exchange gains/losses -187 10Fair value gains from derivatives 200 54Fair value losses from derivatives 56 319Net fair value gains/losses 144 -2653Dividends received from securities1 - Gains on payable contingent consideration 66 - Impairment losses on financial assets 6 13Reversal of impairment losses on financial assets - 2Financial expenses, net -428 629Of which:Financial income 1,804 1,088Financial expenses 1,376 1,717 1 Of which USD 563m (USD 518m) relates to interest expenses on lease liabilities. 2 The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is 7.2% (4.6%). 3 Of which USD 1m (USD 0m) pertains to shares held at the end of the year and USD 0m (USD 0m) pertains to shares sold during the year. 4 Of which USD 10m (USD 0m) relates to expenses from prepayment of issued bonds. For an analysis of gains and losses from derivatives, reference is made to note 4.5. Note 4.3 Pensions and similar obligations – continued Multi-employer plans Under collective agreements, certain entities in the Group participate together with other employers in defined benefit pension plans as well as welfare/medical plans (multi-employer plans). In general, the contributions to the schemes are based on man hours worked or cargo tonnage handled, or a combination of these. For the defined benefit pension plans, the Group has joint and several liabilities to fund total obligations. While the welfare/medical plans are by nature contribution plans funded on a pay-as-you-go basis. The Group’s contributions to the pension and welfare/medical plans in 2023 are estimated at USD 86m (USD 124m) and USD 259m (USD 371m), respectively. The contributions to be paid in 2024 are estimated at USD 82m (USD 125m) for the pension plans and USD 249m (USD 374m) for the welfare/medical plans. No reliable basis exists for allocation of the schemes’ obligations and plan assets to individual employer participants. For the pension plans where the Group has an interest and there is a deficit, the net obligations for all employers amount to USD 216m (USD 19m). This net obligation is based on the most recent available financial data from the plan’s trustees, calculated in accordance with the rules for such actuarial calculation in US GAAP. The deficit in some of the schemes may necessitate increased contributions in the future. Welfare/medical plans are pay-as-you-go and form a part of the Group’s US collective bargaining agreements. They cover a limited part of employees’ medical costs as occurred. ACCOUNTING POLICY Pension obligations are the net liabilities of defined benefit obligations and the dedicated assets adjusted for the effect of minimum funding and asset ceiling require- ments. Plans with a funding surplus are presented as net assets on the balance sheet. The defined benefit obliga- tions are measured at the present value of expected future payments to be made in respect of services pro- vided by employees up to the balance sheet date. Plan assets are measured at fair value. The pension cost charged to the income statement consists of calculated amounts for vested benefits and interest in addition to settlement of gains or losses, etc. Interest on plan assets is calculated at the same rates as used for discounting the obliga tions. Actuarial gains/losses are recognised in other comprehensive income. Pension plans where A.P. Moller - Maersk, as part of col- lective bargaining agreements, participates together with other enterprises – so called multi-employer plans – are treated as other pension plans in the financial statements. Defined benefit multi-employer plans, where sufficient information to apply defined benefit accounting is not available, are treated as defined contribution plans. Consolidated financial statements Parent company financial statements 89 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials CAPITAL AND FINANCING Amounts in USD million Note 4.5 Financial instruments and risks The gain/losses of the derivatives are recognised as follows: 2023 2022Hedging foreign exchange risk on revenue -8 -7Hedging foreign exchange risk on operating costs 41 -127Hedging interest rate risk -21 -33Hedging foreign exchange risk on the cost of non-current assets 4 -30Total effective hedging 16 -197Ineffectiveness recognised in financial expenses -1 16Total reclassified from equity reserve for hedges 15 -181Derivatives accounted for as held for trading:Currency derivatives recognised directly in financial income/expenses 154 -276Interest rate derivatives recognised directly in financial income/expenses 44 -196Oil prices and freight rate derivatives recognised directly in other income/costs -23 -150Net gains/losses recognised directly in the income statement 175 -622Total 190 -803 The Group’s derivatives are presented at fair value in the balance sheet. The Group’s activities expose it to a variety of financial risks: • Market risks, i.e., currency risk, interest rate risk and oil price risk • Credit risk • Liquidity risk The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise the potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures. Risk management is carried out by a central finance department under policies approved by the Board of Directors. The finance department identifies, evaluates and hedges financial risks in close cooperation with the Group’s entities. Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Group’s profit or the value of its holdings of financial instruments. The sensitivity analyses in the currency risk and interest rate risk sections relate to the position of financial instruments at 31 December 2023. The sensitivity analyses for currency risk and interest rate risk have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and the proportion of financial instruments in foreign currencies remain unchanged from hedge designations in place at 31 December 2023. Furthermore, it is assumed that the exchange rate and interest rate sensitivities have a symmetric impact, i.e. an increase in rates results in the same ab- solute movement as a decrease in rates. The sensitivity analyses show the effect on profit and equity of a reasonably possible change in exchange rates and interest rates. Hedges comprise primarily currency derivatives and interest rate derivatives, which are further described in the following sections. Currency risk The Group’s currency risk relates to the fact that while income from Ocean activities is denominated mainly in USD, the related expenses are incurred in both USD and a wide range of other currencies such as EUR, DKK, CNY, HKD and SGD. As the net income is in USD, this is also the primary financing currency. Income and expenses from other activities are mainly denominated in local currencies, thus reducing the Group’s exposure to these currencies. The main purpose of hedging the Group’s currency risk is to hedge the USD value of the Group’s net cash flow and reduce fluctuations in the Group’s profit. The Group uses various financial derivatives, including forwards, option contracts and cross-currency swaps, to hedge these risks. The key aspects of the currency hedging policy are: • Net cash flows in significant currencies other than USD are hedged using a layered model with a 12-month horizon • Significant capital commitments or divestments in currencies other than USD are hedged • Most non-USD debt is hedged, however, depending on the asset-liability match and the currency of the generated cash flow. Currency derivatives hedge future revenue, operating costs and investments/divestments, and are recognised on an ongoing basis in the income statement and the cost of property, plant and equipment, respectively. There is not any proxy hedging for the currency risk hedging, and therefore the economic relationship between the hedged exposure and the hedge is high. Effectiveness is assessed using the critical terms match approach according to IFRS 9. Hedges of future revenue and operating costs matures within a year (matures within a year). There are no hedges of investments at the end of 2023 (matures within one year). For hedges related to operating and investment cash flows, a loss of USD 8m in 2023 (gain of USD 94m) is recognised in other comprehensive income, and the cash flow hedge reserve amounts to a gain of USD 43m at 31 December (gain of USD 51m). For hedges where the cost of hedging is applied, the forward points are recognised in other com- prehensive income and transferred with the effective hedge when the hedged transaction occurs. The cost of hedging reserve amounts to USD 0m (USD 0m). There was no ineffectiveness in 2023 (no ineffectiveness). Besides the designated cash flow hedges in the table, the Group uses derivatives to hedge currency exposures that do not qualify for hedge accounting. These derivatives are classified as fair value through profit or loss. The average FX hedge rates for swaps in cash flow hedge were EUR/USD 1.18 (1.18) and GBP/USD 1.52 (1.52). The average FX hedge rates for swaps in combined fair value hedge were EUR/USD 1.24 (1.24), GBP/USD 1.52 (1.52), USD/NOK 8.25 (8.25) and USD/JPY 119.39 (119.39). Consolidated financial statements Parent company financial statements 90 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials CAPITAL AND FINANCING Amounts in USD million Note 4.5 Financial instruments and risks – continued Derivatives recognised at fair value in the balance sheet 2023 2022Non-current receivables 11 10Current receivables 137 198Non-current liabilities 323 495Current liabilities 72 77Liabilities, net 247 364 Hedge of operating and investment cash Fair value, Fair value, Nominal Average flows in foreign currenciesassetliabilityamount of hedge ratederivativeMain currencies hedged2023EUR 14 2 1,017 EUR/USD 1.10DKK 3 1 286 USD/DKK 6.76CNY 5 1 249 USD/CNY 7.04HKD - - 193 USD/HKD 7.78Other currencies 33 8 1,119 N/ATotal 55 122022EUR 24 5 749 EUR/USD 1.05DKK 14 3 312 USD/DKK 7.08CNY 3 1 82 USD/CNY 7.01HKD 1 - 210 USD/HKD 7.81Other currencies 32 14 974 N/ATotal 74 23 Fair valueOther hedges recognised at fair value through profit and loss 2023 2022Currency derivatives 43 86Total 43 86 The Group’s sensitivity to an increase in the USD exchange rate of 10% against all other significant currencies to which the Group is exposed is estimated to have the following impact. The sensitivities are based only on the impact of financial instruments that are outstanding at the balance sheet date and are thus not an expression of the Group’s total currency risk. Profit before tax Equity before taxCurrency sensitivity for financial instruments 2023 2022 2023 20221 EUR41 167 -50 99CNY 31 34 8 27DKK 9 -221 -17 -249Other -45 -133 -145 -224Total 36 -153 -204 -347 1 EUR sensitivity has been restated for 2022 from USD 30m/USD -38m to USD 167m/USD 99m for profit before tax and equity before tax, respectively. Consolidated financial statements Parent company financial statements 91 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials CAPITAL AND FINANCING Amounts in USD million Note 4.5 Financial instruments and risks – continued Interest rate riskMaturityFair Fair Nominal 0-1 year 2-5 years 5- years Gain/loss Gain/loss Average value, value, amount on on hedge Interest rate assetliabilityof hedged hedging ratehedging of derivativeiteminstru-borrowingsment2023Combined fair value hedge, hedge of borrowingsEUR - 90 503 - 415 88 15 -32 7.3%GBP - 24 89 - 89 - 2 -6 7.9%JPY - 17 88 - 88 - - -2 7.2%NOK - 68 216 - 216 - 12 -18 7.9%Fair value hedge, hedge of borrowingsUSD 11 44 850 - 200 650 32 -33 7.7%Cash flow hedge, hedge of borrowingsEUR - 88 967 - 414 553 - -29 3.2%GBP - 33 162 - 162 - - -1 4.6%USD 2 - 64 - 30 34 - 2 2.6%Total 13 364 2,939 - 1,614 1,325 61 -1192022Combined fair value hedge, hedge of borrowingsEUR - 127 486 - 401 85 35 -54 6.2%GBP - 29 84 - 84 - 4 -7 6.8%JPY - 12 95 - 95 - - -3 6.1%NOK - 64 223 - 223 - 17 -22 6.8%Fair value hedge, hedge of borrowingsUSD - 73 900 - 500 400 75 -73 6.7%Cash flow hedge, hedge of borrowingsEUR - 145 934 - 400 534 - -56 3.2%GBP - 77 277 - 277 - - -5 4.6%NOK - 5 26 26 - - - - 3.3%SEK - 11 61 - 61 - - - 1.7%USD 11 - 391 150 200 41 - 12 2.7%Total 11 543 3,477 176 2,241 1,060 131 -208 The Group has most of its debt denominated in USD, but part of the debt (e.g. issued bonds) is in other currencies such as EUR, GBP, NOK and JPY. The Group strives to maintain a combination of fixed and floating interest rates on its net debt, reflecting expectations and risks. Interest rate risk is managed within a range set for the percentage of gross debt carrying fixed interest, net of hedging. The level at 31 December is 41% (43%) excluding IFRS 16 Leases. A general increase in interest rates by 1 percentage point is estimated, all else being equal, to affect profit before tax and equity, excluding tax effect, positively by approx. USD 134m (positively by USD 215m) and positively by approx. USD 113m (positively by USD 199m), respectively. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The hedging of the interest rate risk is done by cross-currency swaps and interest rate swaps. The hedging is a mix of fair value hedging, combined fair value hedging and cash flow hedging. Combined fair value hedging is applied when cross-currency swaps are entered into to hedge the risk of debt denom- inated in currencies other than USD. Each hedge relationship is split into a fair value hedge, where value changes from market rates are recognised directly in profit or loss, and a cash flow hedge, where the value changes from the exchange rate exposure of the credit margin are recognised in other comprehensive income. Ineffectiveness from cash flow hedges due to buy-back of issued bonds is recognised in the income statement with a cost of USD 1m (USD 0m). The hedges are expected to be highly effective due to the nature of the economic relationship between the exposure and the hedge. The source of ineffectiveness is the credit risk of the hedging instruments. For hedges where the cost of hedging is applied, the change in basis spread is recognised in other comprehensive income and is a time effect during the lifetime of the swap and at maturity amounts to 0. If the hedged transaction is prepaid, the change in basis spread will be recognised in profit or loss as ineffectiveness. The cost of hedging reserve amounts to a gain of USD 7m (gain of USD 15m). Consolidated financial statements Parent company financial statements 92 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials CAPITAL AND FINANCING Amounts in USD million Note 4.5 Financial instruments and risks – continued Carrying Next interest rate fixingamountBorrowings and lease liabilities by interest rate levels inclusive of interest rate swaps 0-1 year 1-5 years 5- years20230-3% 981 252 123 6063-6% 9,952 2,390 3,830 3,7326%- 3,881 2,709 605 567Total 14,814 5,351 4,558 4,905Of which:Bearing fixed interest 12,377Bearing floating interest 2,43720220-3% 1,095 202 120 7733-6% 12,117 3,607 5,214 3,2966%- 2,431 1,918 231 282Total 15,643 5,727 5,565 4,351Of which:Bearing fixed interest 13,400Bearing floating interest 2,243 Oil price riskMaturityQuantity, Average trade Average Fair value 0-3 months 4-12 monthsmillion price per durationmetric tonnesmetric tonne2023Oil swaps -1 0-1 year 10 2 8Buy 12 480 -231 -204 -27Sell -13 519 241 206 35Oil futures -1 0-1 year 8 7 1Buy - 633 -1 -1 -Sell -1 639 9 8 1Total -2 18 9 92022Oil swaps -1 0-1 year 25 20 5Buy 10 517 -132 -135 3Sell -11 512 157 155 2Oil futures - 0-1 year 5 5 -Buy 1 739 -2 -3 1Sell -1 749 7 8 -1Total -1 30 25 5 The majority of the Group’s trading of commodity products is related to inventory stocks of crude oil and bunker oil, as the products are bought in larger quantities and stored for processing and re-sale. The oil price risk arising from these oil price exposures is mitigated by entering into commodity derivative agreements. The overall exposure limit is set in the Group’s risk policy, defining a maximum net open position for the Group. On 31 December 2023, the Group entered into oil derivative positions as shown in the table. The Group’s sensitivity to an increase in the oil price of 5% is estimated, all else being equal, to affect profit and equity before tax negatively by approx. USD 24m (negatively by USD 21m), and negatively by USD 24m (negatively USD 21m), respectively. The sensitivities are based on the impact of financial instruments that are outstanding at the balance sheet date. Consolidated financial statements Parent company financial statements 93 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials CAPITAL AND FINANCING Amounts in USD million Note 4.5 Financial instruments and risks – continued Credit riskMaturity analysis of trade receivables 2023 2022Receivables not due 3,587 5,220Less than 90 days overdue 1,140 1,66091 – 365 days overdue 253 264More than 1 year overdue 127 92Receivables, gross 5,107 7,236Provision for bad debt 226 265Carrying amount 4,881 6,971 The loss allowance provision for trade receivables as at 31 December 2023 reconciles to the opening loss allowance as follows: Change in provision for bad debt 2023 20221 January 265 205Provision made 258 331Amount used 88 105Amount reversed 210 165Acquired in business combinations 4 13Disposal on the sale of businesses 1 -Transfers, assets held for sale -2 -13Exchange rate adjustments and others - -131 December 226 265 Trade receivables The Group has exposure to financial and commercial counterparties but has no particular concentration of customers or suppliers. To minimise the credit risk, financial vetting is undertaken for all major customers and financial institutions, adequate security is required for commercial counterparties, and credit limits are set for financial institutions and key commercial counterparties. The Group applies the simplified approach to providing the expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. In accordance with IFRS 9, non-due trade receivables have also been considered for impairment. Approximately 50% (31%) of the provision for bad debt is related to trade receivables overdue by more than one year. Other financial assets at amortised cost Other financial assets at amortised cost comprise loans receivable, finance lease receivables and other receivables. These financial assets are considered to have low credit risk, and thus the impairment provision calculated based on 12 months of expected losses is considered immaterial. The financial assets are considered to be low-risk when they have a low risk of default, and the issuer has a strong capacity to meet its contractual cash flow obligations in the near term. Financial institutions Deposits and bank balances are primarily held in relationship banks with a credit rating of at least A-. No individual exposure is above 10%. A.P. Moller - Maersk has ISDA agreements for trading of derivatives, under which the Group has a right to net settlement in the event of certain credit events. This results in the credit risk being limited to the net position per counterparty. Liquidity riskNet interest-bearing debt and liquidity reserve 2023 2022Borrowings 14,814 15,643Net interest-bearing debt -4,658 -12,632Cash and bank balances 6,701 10,057Restricted cash -1,024 -1,358Term deposits not included in cash and bank balances 12,693 17,615 Securities - 942Undrawn revolving credit facilities > 12 months 6,050 6,0001Liquidity reserve24,420 33,256 1 Liquidity reserve is defined as undrawn committed revolving facilities with more than one year to expiry, securities, term deposits and cash and bank balances, excluding securities and balances in countries with exchange control or other restrictions. For information about cash and bank balances in countries with exchange control or other restrictions, refer to note 5.5 Cash flow specifications. Based on the liquidity reserve, loans for the financing of specific assets, the maturity of outstanding loans, and the current investment profile, the Group’s financial resources are deemed satisfactory. The average term to maturity of loan facilities in the Group was about five years (about five years) at 31 December 2023. Consolidated financial statements Parent company financial statements 94 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials CAPITAL AND FINANCING Amounts in USD million Note 4.5 Financial instruments and risks – continued Carrying Cash flows including interestMaturities of liabilities amountand commitments0-1 year 1-5 years 5- years Total2023Bank and other credit institutions 973 259 676 273 1,208Lease liabilities 10,448 3,120 5,811 4,292 13,223 – of which interest 458 1,078 1,239 2,775Issued bonds 3,393 115 1,907 2,105 4,127Trade payables 6,401 6,401 - - 6,401Other payables 1,516 1,479 24 13 1,516Non-derivative financial liabilities 22,731 11,374 8,418 6,683 26,475Derivatives 395 72 241 82 395Total recognised in balance sheet 23,126 11,446 8,659 6,765 26,870Capital commitments 1,955 2,228 683 4,866Total 13,401 10,887 7,448 31,7362022Bank and other credit institutions 1,053 293 493 550 1,336Lease liabilities 11,614 3,479 6,467 4,239 14,185 – of which interest 448 1,010 1,113 2,571Issued bonds 2,976 113 2,141 1,130 3,384Trade payables 6,804 6,804 - - 6,804Other payables 1,846 1,696 129 21 1,846Non-derivative financial liabilities 24,293 12,385 9,230 5,940 27,555Derivatives 572 77 356 139 572Total recognised in balance sheet 24,865 12,462 9,586 6,079 28,127Capital commitments 1,313 3,007 705 5,025Total 13,775 12,593 6,784 33,152 It is of great importance for the Group to maintain a financial reserve to cover the Group’s obligations and investment opportunities and to provide the capital necessary to offset changes in the Group’s liquidity due to changes in the cash flow from operating activities. The flexibility of the financial reserve is subject to ongoing prioritisation and optimisation, among other things by focusing on the release of capital and following up on the development in working capital. ACCOUNTING POLICY Derivative financial instruments are recognised on the trading date and measured at fair value using generally acknowledged valuation techniques based on relevant observable swap curves and exchange rates. The effective portion of changes in the value of deriv- ative financial instruments designated to hedge highly probable future transactions is recognised in other com- prehensive income until the hedged transactions are realised. At that time, the accumulated gains/losses are transferred to the items in which the hedged trans actions are recognised. The effective portion of changes in the value of de- rivative financial instruments used to hedge the value of recognised financial assets and liabilities is recognised in the income statement together with changes in the fair value of the hedged assets or liabilities that can be attrib- uted to the hedging relationship. Currency basis spread and forward points are considered a cost of hedging and recognised in other comprehensive income and deferred in equity until realisation. The ineffective portion of hedge transactions and changes in the fair values of derivative financial instruments, which do not qualify for hedge accounting, are recognised in the income statement as financial income or expenses for interest and currency-based instruments, and as other income/costs for oil price hedges and forward freight agreements. Consolidated financial statements Parent company financial statements 95 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials CAPITAL AND FINANCING Amounts in USD million Note 4.6 Financial instruments by category Fair value 3 Carrying amount 2023 2022 2023 2022Carried at amortised costLoan receivables 12,956 17,677 12,973 17,618Lease receivables 49 13Other interest-bearing receivables and deposits 117 106Trade receivables 4,881 6,971Other receivables (non-interest-bearing) 2,712 1,680Securities - 942Cash and bank balances 6,701 10,057Financial assets at amortised cost 27,416 37,446Derivatives 148 208Carried at fair value through profit/loss1Other receivables (non-interest-bearing) - 3Securities - - Financial assets at fair value through profit or loss - 3Carried at fair value through other comprehensive income2Equity investments (FVOCI)398 377Financial assets at fair value through OCI 398 377Total financial assets 27,962 38,034Carried at amortised costBank and other credit institutions 973 1,053 1,000 1,054Lease liabilities 10,448 11,614Issued bonds 3,393 2,976 3,339 2,855Trade payables 6,401 6,804Other payables 1,500 1,716Financial liabilities at amortised cost 22,715 24,163Derivatives 395 572Carried at fair valueOther payables 16 130Financial liabilities at fair value 16 130Total financial liabilities 23,126 24,865 1 Relates to contingent considerations receivable. 2 Designated at initial recognition in accordance with IFRS 9. 3 Where no fair value is stated, the amount equals carrying amount. Movement during the year Other equityOther Total Other Total in level 3investmentsreceivablesfinancial payablesfinancial (FVOCI)assetsliabilitiesCarrying amount 1 January 2023 342 3 345 130 130Additions 25 - 25 22 22Disposals 5 3 8 70 70Gains/losses recognised in the income statement - - - -66 -66Gains/losses recognised in other comprehensive income 15 - 15 - - Carrying amount 31 December 2023 377 - 377 16 16Carrying amount 1 January 2022 263 3 266 110 110Additions 36 - 36 84 84Disposals 28 - 28 63 63Gains/losses recognised in the income statement - - - -2 -2Gains/losses recognised in other comprehensive income 71 - 71 - - Exchange rate adjustments, etc. - 1 1Carrying amount 31 December 2022 342 3 345 130 130 Financial instruments measured at fair value Financial instruments measured at fair value can be divided into three levels: Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 — Inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) and Level 3 — Inputs for the asset or liability that are not based on observable market data. Fair value of listed securities is within level 1 of the fair value hierarchy. Non-listed shares and other securities are within level 3 of the fair value hierarchy. Fair value of derivatives is mainly within level 2 of the fair value hierarchy and is calculated based on observable market data as of the end of the reporting period. A minor amount of crude oil price derivatives is within level 1 of the fair value hierarchy. Fair value of level 3 assets and liabilities is primarily based on the present value of expected future cash flows. A reasonably possible change in the discount rate is not estimated to affect the Group’s profit or equity significantly. Consolidated financial statements Parent company financial statements 96 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials CAPITAL AND FINANCING Note 4.6 Financial instruments by category – continued Financial instruments carried at amortised cost Fair value of the short-term financial assets and other financial liabilities carried at amortised cost is not materially different from the carrying amount. In general, fair value is determined primarily based on the present value of expected future cash flows. Where a market price was available, however, this was deemed to be the fair value. Fair value of listed issued bonds is within level 1 of the fair value hierarchy. Fair value of the remaining borrowing items is within level 2 of the fair value hierarchy and is calculated based on discounted future cash flows. Other equity investments (FVOCI) The Group has investments in equity shares of both listed and non-listed companies. The Group holds non-controlling interests (between 0.1% and 15%) in these companies. These investments were irrevocably designated at fair value through OCI as the Group considers these investments to be strategic in nature. 5. Other disclosures Global shipping activity is subject to various tax regimes, including tonnage tax which calculates corporate income tax based on the net tonnage of the fleet. These regimes apply to the vast majority of A.P. Moller - Maersk’s activities and result in a stable annual tax liability. Given that the liability to tonnage tax is not impacted by financial profits and is payable even in loss-making years, the effective tax rate can fluctuate significantly. Further, disclosures are given on other statutory information not directly related to the operating activities of the Group. 5.1 Tax and deferred tax ........................................................................ 98 5.2 Share-based payments .................................................................... 100 5.3 Commitments ................................................................................. 102 5.4 Contingent liabilities ........................................................................ 103 5.5 Cash flow specifications ................................................................... 103 5.6 Related parties ............................................................................... 104 Consolidated financial statements Parent company financial statements 97 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials CAPITAL AND FINANCING Amounts in USD million Amounts in USD million Note 5.1 Tax and deferred tax 2023 2022Tax recognised in the income statementCurrent tax on profits for the year 595 782Adjustment for current tax of prior periods -65 44Utilisation of previously unrecognised deferred tax assets -169 -23Total current tax 361 803Origination and reversal of temporary differences -43 -143Adjustment for deferred tax of prior periods -38 49Recognition of previously unrecognised deferred tax assets 22 - Reassessment of recoverability of deferred tax assets, net 17 1Total deferred tax -42 -93Total income tax 319 710Tonnage and freight tax 135 200Total tax expense 454 910Tax reconciliationProfit/loss before tax 4,362 30,231Profit/loss subject to Danish and foreign tonnage taxation, etc. -2,526 -28,999Share of profit/loss in joint ventures -148 192Share of profit/loss in associated companies -287 -324Profit/loss before tax, adjusted 1,401 1,100Tax using the Danish corporation tax rate (22%) 309 242Tax rate deviations in foreign jurisdictions 66 31Non-taxable income -23 -21Non-deductible expenses 65 171Adjustment to previous years’ taxes -103 94Change in recoverability of deferred tax assets -130 -22Deferred tax asset not recognised 19 29Withholding taxes 107 157Other differences, net 9 29Total income tax 319 710Effective tax rate 10.4% 3.0%Tax recognised in other comprehensive income and equity 3 -20Of which:Current tax 7 -26Deferred tax -4 6 Recognised deferred tax assets and liabilities are attributable to the following:Assets Liabilities Net liabilities2023 2022 2023 2022 2023 2022Intangible assets 40 44 561 453 521 409Property, plant and equipment 40 51 278 314 238 263Provisions, etc. 255 248 48 173 -207 -75Tax loss carry- forwards 75 103 - - -75 -103Other 150 119 96 106 -54 -13Total 560 565 983 1,046 423 481Offsets -217 -166 -217 -163 - 3Total 343 399 766 883 423 484 Change in deferred tax, net, during the year 2023 20221 January 484 164Intangible assets -11 39Property, plant and equipment -10 21Provisions, etc. 21 -146Tax loss carry-forwards -5 27Other -37 -34Recognised in the income statement -42 -93Transfer to held for sale 25 -14Other including business combinations -44 42731 December 423 484 Unrecognised deferred tax assets 2023 2022Deductible temporary differences 103 125Tax loss carry-forwards 780 782Unused tax credits 12 11Total 895 918 The unrecognised deferred tax assets have no significant time limitations. There are no substantial unrecognised tax liabilities on investments in subsidiaries, associated companies and joint ventures. Consolidated financial statements Parent company financial statements 98 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials OTHER DISCLOSURES Amounts in USD million Note 5.1 Tax and deferred tax – continued Taxation of activities As a global integrator of container logistics, A.P. Moller - Maersk generates profits from ocean, air or land-based activities. The land-based activities, which are subject to normal corporate income tax, include terminals, logistics, services and shipping agencies through which the Group operate one of the world’s most comprehensive port and integrated logistics service networks. The logistics products include transportation, warehousing and distribution including cold storage, customs services and supply chain management services. This expanding land-based activity has prompted the estab- lishment and acquisition of entities in numerous countries. On the ocean, A.P. Moller - Maersk moves millions of TEUs every year and operates hundreds of vessels delivering cargo to every corner of the globe, including dry cargo commodities, refrigerated cargo and dangerous cargo. This ocean activity, which represents the vast majority of the Group’s current revenues, may be subject to special shipping tax rules, including tonnage and freight taxes. Global Minimum Taxation (OECD Pillar Two) In an effort to end tax avoidance and to address concerns about the erosion of the global corporate tax base, a global framework for corporate taxation has been formed by the OECD/G20 Inclusive Framework and is supported by over 135 jurisdictions. One of the key elements is to introduce a global minimum tax rate of 15%, based on group accounting income per jurisdiction. The minimum tax rules are designed as a hierarchy of the right to claim income tax. If the income is not subject to a minimum effective tax rate of 15% in the country where it is earned, then the remaining tax payment (top-up tax) can be picked up by another jurisdiction where the Group is active. For the Group, Denmark will add top-up tax if not applied locally as the ultimate parent entity of the Group, A.P. Møller Holding A/S, is located in Denmark. The Danish implementation of Council Directive (EU) 2022/2523 of 14 December 2022 is effective from 1 January 2024. This means that A.P. Moller - Maersk’s income is subject to the minimum tax rules for all jurisdictions via Danish implementation for the financial year 2024 and onwards. It is expected that many jurisdictions will implement similar legislation. Because the Danish implementation covers the Group’s global activities, it is not expected that other national imple- mentations will have a significant additional impact to the global tax payments of the Group. It may, however, have an impact on the location where potential top-up taxes will be paid. Three elements are key to understanding how the rules will impact the Group. First, the Group does not set up artificial structures in low-tax jurisdictions for tax purposes or earn significant profits in such jurisdictions, which means that our business structure itself is not impacted significantly by the rules, but some additional tax may become payable where services are provided in low-tax jurisdictions. Second, tax incentives given to capital projects, such as critical infrastructure, will be considered less effective going forward as it will impact the effective tax rate and thereby the basis for potential top-up tax. Third, although the rules exclude ‘international shipping income’, the definition is more restrictive than the global definitions usually applied under a tax treaty following the OECD Model Tax Convention or under Danish tonnage tax. Also, inland transportation is not a part of the international shipping income under the global minimum tax rules. This is relevant for the part of our land transport linked directly to ocean transportation which is recognised as shipping income for tax treatment in the OECD Model Tax Convention. The Group is awaiting further guidance on the application of the shipping income provision from the OECD Secretariat. Contrary to the purpose of the rules, top-up tax could be triggered by the shipping classification in years where shipping net income is negative. Due to the design of tonnage tax- ation, the Group’s effective tax rate fluctuates significantly depending on the yearly results and will also be calculated on a consolidated basis with other activities in the given country in accordance with the global minimum tax rules. Taking the transitional Safe Harbour regulations into consideration, our analysis shows that no material top-up tax should apply to A.P. Moller - Maersk in 2024. SIGNIFICANT ACCOUNTING ESTIMATES Deferred tax assets Judgement has been applied with respect to A.P. Moller - Maersk’s ability to utilise deferred tax as- sets. Management considers the likelihood of utilisation based on the latest business plans and the recent finan- cial performances of the individual entities. Net deferred tax assets recognised in entities having recognised an accounting loss in either the current or preceding period amount to USD 156m (USD 163m). These assets mainly relate to unused tax losses or deductible temporary dif- ferences generated during the construction of terminals, where taxable profits have been generated either in the current period or are expected to be generated within the foreseeable future. Uncertain tax positions A.P. Moller - Maersk is engaged in a number of disputes with tax authorities of varying scope. Appropriate pro- visions and recognition of uncertain tax positions have been made where the probability of the tax position being upheld in individual cases is considered less than 50%. Claims for which the probability of A.P. Moller - Maersk’s tax position being upheld is assessed by Management to be at least 50%, are not provided for. Such risks are instead evaluated on a portfolio basis by geographical area and country risk. Provisions and uncertain tax liabili- ties are recognised when the aggregated probability of the tax position being upheld is considered less than 50%. ACCOUNTING POLICY Tax comprises an estimate of current and deferred in- come tax as well as adjustments to previous years taxes. Income tax is tax on taxable profits, and consists of cor- poration tax, withholding tax of dividends, etc. In addition, tax comprises tonnage tax. Tonnage tax is classified as tax when creditable in, or paid in lieu of, income tax. Tax is recognised in the income statement to the extent that it arises from items recognised in the income statement, including tax on gains on intra-group transactions that have been eliminated in the consolidation. Deferred tax is calculated on temporary differences be- tween the carrying amounts and tax bases of assets and liabilities. Deferred tax is not recognised for differences on the initial recognition of assets or liabilities, where at the time of the transaction neither accounting nor taxable profit/loss is affected, unless the differences arise in a business combination. In addition, no deferred tax is rec- ognised for undistributed earnings in subsidiaries, when A.P. Moller - Maersk controls the timing of dividends. No taxable dividends are currently expected. A deferred tax asset is recognised to the extent that it is probable that it can be utilised within a foreseeable future. Consolidated financial statements Parent company financial statements 99 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials OTHER DISCLOSURES Amounts in USD million Note 5.2 Share-based payments Members of Employees Total Total fair 1,2the Executive value1BoardOutstanding performance shares No. No. No. USD million1 January 2023 - - - Granted 2,028 4,040 6,068 9Outstanding 31 December 2023 2,028 4,040 6,068 1 The fair value per performance share is equal to the volume weighted average share price on the date of grant i.e., 1 April 2023, adjusted for expected dividends during the vesting period. The fair value per performance share in 2023 is DKK 10,299 for members of the Executive Board and employees. 2 Total fair value is at the time of grant. Performance shares plan From 2023, performance shares are granted to members of the Executive Board and certain key employees. Each performance share granted is a right to potentially receive an existing B share of nominal DKK 1,000 in A.P. Møller - Mærsk A/S. Transfer of B shares is contingent upon the fulfilment of certain performance criteria being met, which may include, but are not limited to return on invested capital, relative share performance, revenue growth and ESG elements. Vesting is also contingent upon the employee still being employed and not under notice of termination when three years have passed from the date of granting. Employees are not entitled to any dividends during the vesting period. Special conditions apply regarding illness, death and resignation as well as changes in the company’s capital structure, etc. A part of A.P. Møller - Mærsk A/S’ treasury B shares will be used to meet the company’s obligations in connection with the performance shares plan. The recognised remuneration expense related to the performance shares plan is USD 2m (USD 0m). The average remaining contractual life of the performance shares as per 31 December 2023 is 2.3 years (N/A in 2022). Members of Other key Total Total fair 1,2the Executive management value1Boardpersonnel and 4employeesOutstanding restricted shares No. No. No. USD million1 January 2023 6,557 17,253 23,810Granted - 14,600 14,600 233Exercised and vested941 6,146 7,087Forfeited - 1,183 1,183Cancelled - 12 12Outstanding 31 December 2023 5,616 24,512 30,1281 January 2022 5,268 16,618 21,886Granted 1,289 5,431 6,720 173Exercised and vested - 4,458 4,458Forfeited - 338 338Outstanding 31 December 2022 6,557 17,253 23,810 1 The fair value per RSU is equal to the volume weighted average share price on the date of grant i.e., 1 April 2023 (1 April 2022), adjusted for expected dividends during the vesting period. The fair value per RSU is DKK 10,299 (DKK 17,466) for employees and DKK 9,295 (DKK 15,763) for members of the Executive Board and other key management personnel. 2 Total fair value is at the time of grant. 3 The weighted average share price at the settlement date was DKK 12,732 (DKK 20,372). 4 Restricted shares granted to other key management personnel in 2022 was 115 and outstanding shares at year-end 2022 was 403. There were no key management personnel in 2023. Restricted shares plan Restricted shares are granted to members of the Executive Board and certain key employees. Each restricted share granted is a right to receive an existing B share of nominal DKK 1,000 in A.P. Møller - Mærsk A/S. Transfer of B shares is contingent upon the employee still being employed and not under notice of termination and takes place when three years have passed from the date of granting. For members of the Executive Board the vesting period is five years. Employees are not entitled to any dividends during the vesting period. Special conditions apply regarding illness, death and resignation as well as changes in the company’s capital structure, etc. A part of A.P. Møller - Mærsk A/S’ treasury B shares will be used to meet the company’s obligations in connection with the restricted shares plan. The recognised remuneration expense related to the restricted shares plan is USD 16m (USD 15m). The average remaining contractual life of the restricted shares as per 31 December 2023 is 1.6 years (1.6 years). Consolidated financial statements Parent company financial statements 100 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials OTHER DISCLOSURES Amounts in USD million Note 5.2 Share-based payments – continued Members of Other key Total Average Total fair the Executive management exercise valueBoardpersonnel and price 2employeesOutstanding share options No. No. No. DKK USD million1 January 2023 19,600 73,436 93,036 13,452Granted - 23,323 23,323 13,257 101Exercised 4,439 14,697 19,136 8,633Forfeited - 3,436 3,436 15,327Outstanding 31 December 2023 15,161 78,626 93,787 14,318Exercisable 31 December 2023 4,302 22,882 27,184 8,3091 January 2022 24,930 77,831 102,761 9,873Granted 4,677 15,481 20,158 25,096 91Exercised 8,866 18,486 27,352 7,998Forfeited 1,141 1,390 2,531 19,818Outstanding 31 December 2022 19,600 73,436 93,036 13,452Exercisable 31 December 2022 - 7,071 7,071 8,637 1 The weighted average share price at the dates of exercise of share options exercised in 2023 was DKK 12,674 (DKK 19,833). 2 Share options granted to other key management personnel during 2022 was 570 and shares outstanding at year-end 2022 was 2,243. There were no key management personnel in 2023. Share options plan A.P. Moller - Maersk also has a share option plan granted to members of the Executive Board and other key employees. Each share option granted is a call option to buy an existing B share of nominal DKK 1,000 in A.P. Møller - Mærsk A/S. The share options are granted at an exercise price corresponding to 110% of the average of the market price on the first five trading days following the release of A.P. Møller - Mærsk A/S’ most recent Annual Report. Exercise of the share options is contingent upon the option holder still being employed at the time of vesting, which takes place when three years have passed from the date of grant. The share options can then be exercised when at least three years and no more than six years (seven years for share options granted to employees not members of the Executive Board) have passed from the date of grant. Special conditions apply regarding illness, death and resignation as well as changes in the company’s capital structure etc. The share options can only be settled in shares. A part of A.P. Møller - Mærsk A/S’ holding of treasury B shares will be used to meet the company’s obligations in respect of the share option plan. The recognised remuneration expense related to the share option plan is USD 10m (USD 11m). The average remaining contractual life of the outstanding share options as per 31 December 2023 is 4.4 years (4.6 years) and the range of exercise prices for the outstanding share options as per 31 December 2023 is DKK 7,605 to DKK 25,096 (DKK 7,605 to DKK 25,096). The following principal assumptions are used in the 2023 granted share options valuation:Share options grantedShare options granted to to members of the employees Executive Board and other key management personnel2023 2022 2023 2022Share price, volume weighted average at the date of grant, 1 April, DKK 20,372 12,732 20,372Share price, five days volume weighted average 1after publication of Annual Report, DKK22,814 11,992 22,814Exercise price, DKK 25,096 13,191 25,096Expected volatility (based on historic volatility) 33% 35% 33%Expected term (years) 5 5.75 5.75Expected dividend per share, DKK 5.0% 5.0% 5.0%Risk-free interest rate 0.31% 2.65% 0.35%Fair value per option at grant date, DKK N/A 2,859 3,067 3,082 1 In 2023, the exercise price was determined based on the five-day volume-weighted average share price after the Annual General Meeting. The fair value of the options granted is based on the Black-Scholes option pricing model using the assumptions in the table above. ACCOUNTING POLICY Equity-settled performance shares, restricted shares and share options granted to members of the Executive Board and to employees of A.P. Moller - Maersk as part of A.P. Moller - Maersk’s long-term incentive programme are recognised as remuneration expenses over the vesting period as per the estimated fair value at the grant date and result in a corresponding adjustment to equity. At the end of each reporting period, A.P. Moller - Maersk revises its estimated number of awards that are expected to vest based on the non-market vesting conditions and service conditions. Any impact of the revision is recognised in the income statement with a corresponding adjustment to equity. Consolidated financial statements Parent company financial statements 101 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials OTHER DISCLOSURES Amounts in USD million Note 5.3 Commitments The future charter and operating lease payments are:Ocean Logistics Terminals Towage Total& Services& Maritime Lease commitmentsServices2023Within one year 129 25 10 - 164Total 129 25 10 - 1642022Within one year 53 41 12 2 108Total 53 41 12 2 108 Ocean Logistics Terminals Towage Total& Services& Maritime Capital commitmentsServices2023Capital commitments relating to acquisition of non-current assets 3,302 98 363 50 3,813Commitments towards concession grantors - - 1,053 - 1,053Total capital commitments 3,302 98 1,416 50 4,8662022Capital commitments relating to acquisition of non-current assets 3,036 140 414 505 4,095Commitments towards concession grantors - - 930 - 930Total capital commitments 3,036 140 1,344 505 5,025 Short-term and low-value leases As part of the Group’s activities, customary agreements are entered into regarding charter and operating leases of vessels, containers, port facilities etc. Capital commitments of USD 4.9bn (USD 5.0bn) relate to investments, mainly within Ocean and Terminals. Commitments related to the newbuilding programme are USD 2.8bn (USD 2.7bn) for container vessels, USD 95m (USD 89m) for aircraft and USD 43m (USD 110m) for tugboats. Newbuilding programme at 31 December 2023, number of assets 2024 2025 2026 2027 TotalContainer vessels 8 16 - - 24Aircraft 2 - - - 2Tugboats and other vessels 10 - - - 10Total 20 16 - - 36 Capital commitments relating to the newbuilding programme at 31 December 2023 2024 2025 2026 2027 TotalContainer vessels 960 1,827 - - 2,787Aircraft 95 - - - 95Tugboats and other vessels 43 - - - 43Total 1,098 1,827 - - 2,925 Consolidated financial statements Parent company financial statements 102 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials OTHER DISCLOSURES Amounts in USD million Note 5.4 Contingent liabilities Contingent liabilities consist of legal cases, tax issues, custom bonds, volume commitments and other disputes. Legal The Group is involved in several legal cases and other disputes. Some of these involve significant amounts and are subject to considerable uncertainty. Management continuously assesses the risks associated with the cases and disputes, and their likely outcome. It is the opinion of Management that, apart from items recognised in the financial statements, the outcome of these cases and disputes are not probable or cannot be reliably estimated in terms of amount or timing. The Group does not expect these to have a material impact on the consolidated financial statements. Tax The Group is subject to a tax audit in Germany concerning allocation of taxation rights to shipping income between Denmark and Germany as well as to a tax investigation in India concerning a deemed supply of services between Indian GST registrations of A.P. Moller - Maersk in India. The Group is also involved in various other tax disputes including indirect tax disputes, some of which involve significant amounts. Management continuously assesses the risks associated with tax disputes and their likely outcome and considers the risk related to these disputes remote and therefore does not expect these to have a material impact on the consolidated financial statements. Through participation in a joint taxation scheme with A.P. Møller Holding A/S, the Danish companies are jointly and severally liable for taxes payable, etc., in Denmark. Other Custom bonds of USD 830m (USD 472m) have been provided to various port authorities in India. Maersk Line and APM Terminals have entered into a number of agreements with terminals and port authorities etc., comprising volume commitments including an extra payment in case minimum volumes are not met. Except for customary agreements within the Group’s activities, no material agreements have been entered into that will take effect, change, or expire upon changes of the control over the company. Note 5.5 Cash flow specifications 2023 2022Change in working capitalTrade receivables 1,870 -1,018Other working capital movements -1,441 -731Exchange rate adjustment of working capital -12 -59Total 417 -1,808Purchase of intangible assets and property, plant and equipment1Additions-6,024 -8,205Of which is right-of-use assets, etc. 2,164 4,210Of which is borrowing costs capitalised on assets 133 49Adjustments of additions for cash flow presentation 63 194Change in payables to suppliers regarding purchase of assets 18 -411Total -3,646 -4,163 1 Additions to intangible assets of USD 204m (USD 349m), property, plant and equipment of USD 3.7bn (USD 3.6bn), right-of-use assets of USD 2.2bn (USD 4.2bn) and assets held for sale of USD 0m (USD 5m). SIGNIFICANT ACCOUNTING JUDGEMENTS Operations in countries with limited access to repatriating surplus cash A.P. Moller - Maersk operates worldwide and, in this respect, has operations in countries where the ability to repatriate surplus cash is complicated and time consuming. In these countries, Management makes judgements as to whether these cash positions can be recognised as cash and cash equivalents. ACCOUNTING POLICY Cash flow from operating activities includes all cash transactions other than cash flows arising from investing and financing activities such as investments and divest- ments, received dividends, principal payments of loans, instalments on lease liabilities, paid and received financial items and equity transactions. Capitalisation of borrowing costs is considered as a non-cash item, and the actual payments of these borrowing costs are included in cash flow from financing. Cash and cash equivalents comprise cash and bank balances net of bank overdrafts where overdraft facilities form an integral part of A.P. Moller - Maersk’s cash management. Consolidated financial statements Parent company financial statements 103 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials OTHER DISCLOSURES Amounts in USD million Note 5.6 Related parties Management 2 4 5 1 Controlling Associated Joint ventures partiescompanies2023 2022 2023 2022 2023 2022 2023 2022Income statementRevenue 3 4 65 52 69 186 - - 214Operating costs 47 38 570 550 566 593 13Remuneration to Management - - - - - - 10 34Financial income 95 45 - - - - - - 3Other 15 - - - 2 2 - - AssetsOther receivables, non-current 6 - - - 30 27 - - Trade receivables 3 1 6 35 10 11 - - Other receivables, current 681 380 8 9 9 16 - - Cash and bank balances 277 730 - - - - - - LiabilitiesBank and other credit institutions, etc., current - - - - 67 44 - - Trade payables - - 79 62 89 82 1 2Other 45 1 - - 3 - - 41,332Shares bought back 1,569- - - - - - Capital increase - - - 31 17 1 - - Dividends earned - - 219 191 95 137 - - 53,613Dividends distributed 5,974- - - - - - 1 The Board of Directors and the Executive Board of A.P. Møller - Mærsk A/S, A.P. Møller Holding A/S, A.P. Møller og Hustru Chastine Mc-Kinney Møllers Fond til almene Formaal and their close relatives (including undertakings under their control). Trade receivables and payables include customary business-related accounts regarding shipping activities. 2 Includes commission and commercial receivables to Maersk Broker K/S from chartering as well as the purchase and sale of vessels. 3 Includes the gain on sale of Maersk Supply Service to A.P. Møller Holding A/S. 4 Includes shares bought back from A.P. Møller Holding A/S and A.P. Møller og Hustru Chastine Mc-Kinney Møllers Familie fond (the Foundation). 5 Includes dividends paid to A.P. Møller Holding A/S, A.P. Møller og Hustru Chastine Mc-Kinney Møllers Familiefond (the Foundation) and Den A.P. Møllerske Støttefond. Joint usage agreement with A.P. Møller Holding A/S With the objective of further strengthening the value of the brands, A.P. Møller - Mærsk A/S in 2018 entered into a joint usage agreement with A.P. Møller Holding A/S regarding the use of commonly used trademarks which historically have benefited both A.P. Møller - Mærsk A/S and A.P. Møller Holding A/S. A.P. Møller Holding A/S is the controlling shareholder of A.P. Møller - Mærsk A/S and is wholly owned by A.P. Møller og Hustru Chastine Mc-Kinney Møllers Fond til almene Formaal. The joint usage agreement establishes a framework and a branding strategy for the commonly used trade- marks and a joint brand board, where the parties can cooperate regarding the use of these trademarks. A.P. Møller Holding A/S, Copenhagen, Denmark has control over the company and prepares consolidated financial statements. A.P. Møller og Hustru Chastine Mc-Kinney Møllers Fond til almene Formaal is the ultimate owner. Share buy-back programme According to a separate agreement, A.P. Møller Holding A/S and A.P. Møller og Hustru Chastine Mc-Kinney Møllers Familiefond (the Foundation) participated on a pro rata basis to the shares purchased in the company’s share buy-back programme. A.P. Møller Holding A/S participated in selling A and B shares and A.P. Møller og Hustru Chastine Mc-Kinney Møllers Familiefond (the Foundation) participated in selling B shares. Consolidated financial statements Parent company financial statements 104 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials OTHER DISCLOSURES Company overview A.P. Moller - Maersk comprises more than 750 companies of which the largest are listed below. The Danish Financial Statements Act section 97a, par. 4 has been applied in the company overview. A more comprehensive list of companies is available at: investor.maersk.com/financial-reports Subsidiaries Company Country of incorporation Owned shareA.P. Moller Singapore Pte. Ltd. Singapore 100%Aliança Navegação e Logística Ltda. Brazil 100%APM Terminals - Aarhus A/S Denmark 100%APM Terminals Algeciras S.A. Spain 100%APM Terminals Apapa Ltd. Nigeria 94%APM Terminals B.V. Netherlands 100%APM Terminals Barcelona S.L.U. Spain 100%APM Terminals Callao S.A. Peru 64%APM Terminals China Co. Ltd. Hong Kong 100%APM Terminals Elizabeth, LLC United States 100%APM Terminals Espagna Holding SL Spain 100%APM Terminals Gothenburg AB Sweden 100%APM Terminals Lazaro Cardenas S.A. de C.V. Mexico 100%APM Terminals Maasvlakte II B.V. Netherlands 100%APM Terminals Management S.L. Spain 100%APM Terminals Management B.V. Netherlands 100%APM Terminals MedPort Tangier S.A. Morocco 80%APM Terminals Mobile, LLC United States 100%APM Terminals Moin S.A. Costa Rica 100%APM Terminals North America Inc. United States 100% Subsidiaries Company Country of incorporation Owned shareAPM Terminals Pacific LLC United States 90%APM Terminals Valencia S.A. Spain 75%Aqaba Container Terminal Company Ltd Jordan 50%Damco China Ltd. China 100%Damco Denmark A/S Denmark 100%Damco Distribution Canada Inc. Canada 100%Damco Germany GmbH Germany 100%Damco India Pvt. Ltd. India 100%Damco Logistics Mexico S.A. de C.V. Mexico 100%Damco Netherlands B.V. Netherlands 100%Damco Poland Sp. z o.o. Poland 100%Damco Spain S.L. Spain 100%Frey P/S Denmark 100%Gateway Terminals India Pvt. Ltd. India 74%Grindrod Logistics (PTY) LTD South Africa 51%Gujarat Pipavav Port Ltd. India 44%1 Hamburg Süd A/S & Co KG Germany 100%2 Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft A/S & Co KG Germany 100%Maersk A/S Denmark 100%Maersk Agency U.S.A. Inc. United States 100%Maersk Air Cargo A/S Denmark 100%Maersk Aviation Holding A/S Denmark 100%Maersk Container Industry A/S Denmark 100%Maersk Container Industry Qingdao Ltd. China 100%Maersk Contract Logistics Co., Ltd. China 100%Maersk Contract Logistics Limited Hong Kong 100%Maersk Contract Logistics Co., Ltd. China 100%Maersk Contract Logistics Holdings Limited Bermuda 100%Maersk Contract Logistics Management Limited Hong Kong 100%Maersk Denizcilik A.S. Turkey 100%3 Maersk Deutschland A/S & Co. KG Germany 100%Maersk Eastern Europe ApS Denmark 100%Maersk Global Service Centres Pvt. Ltd. India 100%Maersk Holding B.V. Netherlands 100%Maersk Insurance A/S Denmark 100%Maersk Line Agency Holding A/S Denmark 100%Maersk Line, Limited United States 100% 1 In accordance with section 264b HGB (German commercial code), Hamburg Süd A/S & Co KG, Hamburg is exempt from preparing, auditing and disclosing statutory financial statements and a management review. 2 In accordance with section 264b HGB (German commercial code), Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft A/S and Co KG, Hamburg is exempt from preparing, auditing and disclosing statutory financial statements and a management review. 3 In accordance with section 264b HGB (German commercial code), Maersk Deutschland A/S & Co. KG, Hamburg is exempt from preparing, auditing and disclosing statutory financial statements and a management review. 105 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Subsidiaries Company Country of incorporation Owned share4 Maersk Line Crewing Hamburg ApS & Co KG Germany 100%Maersk Logistics & Services Australia Pty Ltd Australia 100%Maersk Logistics & Services Chile S.p.A Chile 100%Maersk Logistics & Services International A/S Denmark 100%Maersk Logistics & Services Japan K.K. Japan 100%Maersk Logistics & Services Peru S.A. Peru 100%Maersk Logistics & Services USA Inc United States 100%Maersk Logistics & Services Vietnam Company Limited Vietnam 100%Maersk Logistics and Services UK LTD United Kingdom 100%Maersk Logistics Warehousing China Company Ltd. Hong Kong 100%Maersk Oil Trading and Investments A/S Denmark 100%Maersk Oil Trading Inc. United States 100%Maersk Oil Trading Panama S.A. Panama 100%Maersk Oil Trading Singapore Pte. Ltd. Singapore 100%Maersk Oil Trading Spain, S.L Spain 100%Maersk Shipping Hong Kong Ltd. Hong Kong 100%Maersk Warehousing & Distribution Services USA LLC United States 100%New Times International Transport Service Co. Ltd. China 100%Pilot Air Freight, LLC United States 100%Sealand Maersk Asia Pte. Ltd. Singapore 100%Senator International Freight Forwarding LLC Florida United States 100%5Senator International Spedition GmbH Germany 100%6St. Petri Shipping ApS & Co KG Germany 100%Suez Canal Container Terminal SAE Egypt 55%Svitzer A/S Denmark 100%Svitzer Australia Pty Ltd Australia 100%Svitzer Europe Holding B.V. Netherlands 100%Svitzer Marine Ltd. United Kingdom 100%Terminal 4 S.A. Argentina 100%Visible Supply Chain Management LLC United States 100% Associated companies Company Country of incorporation Owned shareAbidjan Terminal SA Côte d’Ivoire 49%Brigantine Services Ltd. Hong Kong 30%Conakry Terminal S.A. Guinea 25%Congo Terminal SA Congo 15%Guangzhou South China Oceangate Container Terminal Co. Ltd. China 20%Itapoa Terminais Portuarios S.A. Brazil 30%Kanoo Terminal Services Ltd. Saudi Arabia 50%Meridian Port Services Ltd Ghana 35%Pelabuhan Tanjung Pelepas Sdn. Bhd. Malaysia 30%Qingdao Qianwan United Container Terminal Co. Ltd. China 10%Salalah Port Services Company SAOG Oman 30%South Asia Gateway Terminals Pvt Ltd Sri Lanka 33%Tianjin Port Alliance International Container Terminal Co. Ltd. China 20% Joint ventures Company Country of incorporation Owned shareBlue Dragon Logistics Co. Ltd. China 50%Brasil Terminal Portuario S.A. Brazil 50%Cai Mep International Terminal Co. Ltd. Vietnam 49%Caucedo Marine Service S.A. (DR Branch) Dominican Republic 50%Cote D’Ivoire Terminal SA Côte d’Ivoire 49%LCB Container Terminal 1 Ltd. Thailand 35%LCMT Company Ltd. Thailand 32%Nakilat Svitzerwijsmuller Company W.L.L. Qatar 30%North Sea Terminal Bremerhaven Gmbh and Co KG Germany 50%Qingdao New Qianwan Container Terminal Co. Ltd. China 19%Qingdao Qianwan Container Terminal Co. Ltd. China 20%Shanghai East Container Terminal Co. Ltd. China 49%Smart International Logistics Company Ltd. China 49%South Florida Container Terminal LLC United States 49%Svitzer Caribbean Dominicana, S.A.S Dominican Republic 50%Xiamen Songyu Container Terminal Co. Ltd. China 25% 4 In accordance with section 264b HGB (German commercial code), Maersk Line Crewing Hamburg ApS & Co. KG, Hamburg is exempt from pre paring, auditing and disclosing statutory financial statements and a management review. 5 In accordance with section 264 Abs.3 HGB (German commercial code), Senator International Spedition GmbH, Hamburg is exempt from pre paring, auditing and disclosing statutory financial statements and a management review. 6 In accordance with section 264b HGB (German commercial code), St. Petri Shipping ApS & Co KG, Hamburg is exempt from preparing, auditing and disclosing statutory financial statements and a management review. COMPANY OVERVIEW 106 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Parent company financial statements Income statement Statement of comprehensive income Balance sheet at 31 December Cash flow statement Statement of changes in equity Notes to the parent company financial statements 107 A.P. Møller - Mærsk A/S Annual Report 2023 Executive summary The global integrator Performance Governance Financials Consolidated financial statements Parent company financial statements Amounts in USD million Income statement Note 2023 2022 Revenue 43 26 2.1 Operating costs 307 322 Other income - 85 Profit/loss before depreciation, amortisation and impairment losses, etc. -264 -211 Depreciation, amortisation and impairment losses, net 1 3 Gain/loss on sale of companies, non-current assets and liquidation, etc., net 54 23 3.1 Share of profit/loss in joint ventures and associated companies - 200 Profit before financial items -211 9 4.3 Dividends 44,029 29 4.3 Financial income 1,787 891 4.3 Financial expenses 1,561 1,073 Profit/loss before tax 44,044 -144 5.1 Tax 17 -72 Profit/loss for the year 44,027 -72 Statement of comprehensive income Note 2023 2022 Profit for the year 44,027 -72 4.4 Cash flow hedges: Value adjustment of hedges for the year 2 -29 Reclassified to income statement 26 25 5.1 Tax on other comprehensive income -6 1 Total items that have been or may be reclassified subsequently to the income statement 22 -3 4.5 Other equity investments (FVOCI), fair value adjustments for the year -1 2 Total items that will not be reclassified to the income statement -1 2 Other comprehensive income/loss, net of tax 21 -1 Total comprehensive income/loss for the year 44,048 -73 108 A.P. Møller - Mærsk A/S Annual Report 2023 Executive summary The global integrator Performance Governance Financials Consolidated financial statements Parent company financial statements Amounts in USD million Balance sheet at 31 December Note Assets 2023 2022 Intangible assets 3 3 Tangible assets 24 - 3.1 Investments in subsidiaries 24,121 25,774 3.1 Investments in associated companies 11 332 Other equity investments 4 4 4.5 Interest-bearing receivables from subsidiaries, etc. 1,338 2,818 4.4 Derivatives 10 18 Financial non-current assets, etc. 25,484 28,946 5.2 Deferred tax 8 13 Total non-current assets 25,519 28,962 Trade receivables 4 8 4.5 Interest-bearing receivables from subsidiaries, etc. 7,471 1,814 4.4 Derivatives 131 198 3.2 Loan receivables 12,693 17,615 Current tax receivables 36 - Other receivables 360 273 Other receivables from subsidiaries, etc. 156 208 Prepayments 45 - Receivables, etc. 20,896 20,116 4.5 Securities - 942 Cash and bank balances 5,123 8,082 3.3 Assets held for sale 1,376 - Total current assets 27,395 29,140 Total assets 52,914 58,102 Note Equity and liabilities 2023 2022 4.1 Share capital 3,186 3,392 Reserves 39,542 9,150 Total equity 42,728 12,542 4.2 Borrowings, non-current 4,044 3,635 4.2 Interest-bearing debt to subsidiaries, etc. 95 - Provisions 80 53 4.4 Derivatives 323 495 Other non-current liabilities 403 548 Total non-current liabilities 4,542 4,183 4.2 Borrowings, current 37 116 4.2 Interest-bearing debt to subsidiaries, etc. 4,938 40,692 Trade payables 46 64 Tax payables - 54 4.4 Derivatives 134 171 Provisions 33 - Other payables 443 244 Deferred income 13 36 Other current liabilities 669 569 Total current liabilities 5,644 41,377 Total liabilities 10,186 45,560 Total equity and liabilities 52,914 58,102 109 A.P. Møller - Mærsk A/S Annual Report 2023 Executive summary The global integrator Performance Governance Financials Consolidated financial statements Parent company financial statements Amounts in USD million Cash flow statement Note 2023 2022 Profit/loss before financial items -211 9 3.1 Depreciation, amortisation and impairment losses, net 1 -197 Gain/loss on sale of companies and non-current assets, etc., net -52 -23 5.5 Change in working capital 115 39 Change in provisions, etc. 27 20 Other non-cash items 34 12 Cash flow from operating activities before tax -86 -140 Taxes paid -30 -50 Cash flow from operating activities -116 -190 Purchase/sale of intangible assets and property, plant and equipment, internal -24 -3 Capital increases in subsidiaries and activities - -3,579 Sale of subsidiaries and associates 1,125 - Dividends received 43 9 Other financial investments, paid -21,822 -27,425 Other financial investments, received 27,703 13,882 Movements in interest-bearing loans to/from subsidiaries, etc., net 3,513 25,628 Cash flow from investing activities 10,538 8,512 4.2 Repayment of borrowings -559 -98 4.2 Proceeds from borrowings 742 - Purchase of treasury shares -3,120 -2,738 Financial income received 1,488 565 Financial expenses paid -1,028 -1,028 Sale of treasury shares 24 31 Dividends distributed -10,876 -6,847 Cash flow from financing activities -13,329 -10,115 Net cash flow for the year -2,907 -1,793 Cash and cash equivalents 1 January 8,082 9,889 Currency translation effect on cash and cash equivalents -55 -14 Cash and cash equivalents 31 December 5,120 8,082 Cash and cash equivalents Cash and bank balances 5,123 8,082 Overdrafts 3 - Cash and cash equivalents 31 December 5,120 8,082 Statement of changes in equity Note Share capital Reserve for other equity investments Reserve for hedges Retained earnings Total equity Equity 1 January 2022 3,513 - -69 18,758 22,202 Other comprehensive income, net of tax - 2 -3 - -1 Profit for the year - - - -72 -72 Total comprehensive income for the year - 2 -3 -72 -73 Dividends to shareholders - - - -6,845 -6,845 5.3 Value of share-based payments - - - 12 12 4.1 Purchase of treasury shares - - - -2,785 -2,785 4.1 Sale of treasury shares - - - 31 31 4.1 Capital increases and decreases -121 - - 121 - Total transactions with shareholders -121 - - -9,466 -9,587 Equity 31 December 2022 3,392 2 -72 9,220 12,542 2023 Other comprehensive income, net of tax - -1 22 - 21 Profit for the year - - - 44,027 44,027 Total comprehensive income for the year - -1 22 44,027 44,048 Dividends to shareholders - - - -10,822 -10,822 5.3 Value of share-based payments - - - 8 8 4.1 Purchase of treasury shares - - - -3,072 -3,072 4.1 Sale of treasury shares - - - 24 24 4.1 Capital increases and decreases -206 - - 206 - Total transactions with shareholders -206 - - -13,656 -13,862 Equity 31 December 2023 3,186 1 -50 39,591 42,728 110 A.P. Møller - Mærsk A/S Annual Report 2023 Executive summary The global integrator Performance Governance Financials Consolidated financial statements Parent company financial statements Amounts in USD million Notes 1. Basis of preparation 1.1 General accounting policies ..... 111 1.2 Significant accounting estimates and judgements ........................... 111 2. Operating profit 2.1 Operating costs ............................. 112 3. Invested capital 3.1 Investments in subsidiaries and associated companies ......... 112 3.2 Term deposits ............................... 113 3.3 Assets held for sale ..................... 113 4. Capital and financing 4.1 Share capital ................................. 113 4.2 Borrowings and net debt reconciliation ................................. 114 4.3 Financial income and expenses ........................................ 114 4.4 Financial instruments and risks ......................................... 115 4.5 Financial instruments by category .................................... 118 5. Other disclosures 5.1 Tax ................................................... 119 5.2 Deferred tax .................................. 119 5.3 Share-based payments ............... 119 5.4 Contingent liabilities .................... 119 5.5 Cash flow specifications ............. 119 5.6 Related parties ............................. 120 5.7 Pledges ........................................... 120 Note 1.1 General accounting policies Basis of preparation The financial statements of A.P. Møller - Mærsk A/S have been prepared on a going concern basis and in accordance with IFRS Accounting Standards as adopted by the EU and additional Danish disclosure requirements for listed companies. The accounting policies are consistent with those applied in the consolidated financial statements for 2023, except for the changes to accounting standards that were effective from 1 January 2023 and were endorsed by the EU. These changes have not had a material impact on the financial statements. The accounting policies are furthermore consistent with the accounting policies for the Group’s financial statements with the following exceptions: • Shares in subsidiaries and associated companies are measured at cost or a lower recoverable amount • Dividends from subsidiaries and associated companies are recognised as income at the time of declaration unless considered a return of capital in subsidiary • No segment information is disclosed • Value of granted share options, restricted shares, and performance shares to employees in subsidiaries is expensed directly in the relevant subsidiary. At the time of the grant, the subsidiary settles the amount with A.P. Møller - Mærsk A/S and the counter posting is made in equity. At the time of exercising, the proceeds are included in the company’s equity. New financial reporting requirements A.P. Møller - Mærsk A/S has not yet adopted new or amended accounting standards and requirements that have not yet become effective and any changes. The changes to IFRS Accounting Standards are not expected to have any significant impact on recognition and measurement. Amendments to IAS 12 Income Taxes - In May 2023, the IASB issued amendments to IAS 12 Income Taxes, which provides temporary relief from the requirement to recognise and disclose deferred taxes arising from en- acted or substantively enacted tax law that implements the Pillar Two Model Rules published by the OECD, includ- ing tax law that implements qualified domestic minimum top-up taxes. The amendments have been adopted by the EU and the company has applied this relief. Deferred tax related to assets and liabilities arising from a single transaction - The amendments narrow the scope of the initial recognition exception so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences such as leases and decommissioning liabilities. The amendments had no material impact on the company’s financial statements. Note 1.2 Significant accounting estimates and judgements The preparation of the parent company financial state- ments requires management to make estimates and judgements on an ongoing basis, and to form assump- tions that affect the reported amounts. Management forms its estimates and judgements based on historical experience, independent advice, external data points, as well as on in-house specialists and on other factors believed to be reasonable under the circumstances. Estimates that are material to the company’s financial reporting are made on the determination of impairment of financial non-current assets, including subsidiaries and associated companies. Reference is made to notes 3.1 and 4.3. Management assesses impairment indicators for investments in subsidiaries and associated com panies and in general determines the recoverable amounts consistent with the assumptions described in note 3.1 of the consolidated financial statements. 111 A.P. Møller - Mærsk A/S Annual Report 2023 Executive summary The global integrator Performance Governance Financials Consolidated financial statements Parent company financial statements Amounts in USD million Note 2.1 Operating costs 2023 2022 Rent and lease costs 26 19 Staff costs reimbursed to Rederiet A.P. Møller A/S 1 213 192 Other, including recharging of operating costs, net 68 111 Total operating costs 307 322 Average number of employees directly employed by the company 2 5 1 Wages and salaries USD 177m (USD 163m) and pension plan contributions USD 36m (USD 29m). Staff cost includes integration and restructuring cost amounting to USD 3m (USD 1m). For information about share-based payments, reference is made to note 5.3. The company’s share of fees and remuneration to the Executive Board 2023 2022 Fixed pay 3 7 Short-term cash incentive 2 6 Long-term share-based incentive plans 1 2 7 Remuneration in connection with redundancy, resignation and release from duty to work -1 8 Total remuneration to the Executive Board 2 6 28 1 During 2022, it was announced that Morten Engelstoft would leave the company effective end June 2022 and Søren Skou effective end December 2022. In accordance with the terms and conditions of the restricted share plan and the stock option plan, any remaining expenses related to previous years’ plans were accelerated and recognised in 2022 for plans that were kept, and previously recognised expenses are reversed for cancelled plans. This resulted in an increase in the long-term share-based incentives remuneration in 2022. 2 In 2023, the Executive Board was reduced from five to two members. Contract of employment for the Executive Board contains terms customary in Danish listed companies, including termination notice and non-competition clauses. In connection with a possible takeover offer, neither the Executive Board nor the Board of Directors will receive special remuneration. Fees and remuneration do not include pension. The Board of Directors has received fees of USD 2m (USD 2m). Fees to the statutory auditors 2023 2022 Statutory audit 2 2 Other services 1 1 Total fees 3 3 Fees for other services other than statutory audit of the financial statements provided by PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab to A.P. Moller - Maersk mainly consist of transaction advice, accounting and tax-related services. Note 3.1 Investments in subsidiaries and associated companies Investments in subsidiaries Investments in associated companies Cost 1 January 2023 29,720 810 Additions 1 646 11 Disposals 3 2,932 810 Transfer to assets held for sale 4 1,376 - 31 December 2023 26,058 11 Impairment losses 1 January 2023 3,946 478 Impairment losses 5 200 - Disposal 2,209 478 31 December 2023 1,937 - Carrying amount: 31 December 2023 24,121 11 Cost 1 January 2022 23,235 815 Additions 2 6,204 - Disposals 72 5 Transfer from assets held for sale 353 - 31 December 2022 29,720 810 Impairment losses 1 January 2022 3,995 682 Disposals 49 - Reversal of impairment losses 6 - 204 31 December 2022 3,946 478 Carrying amount: 31 December 2022 25,774 332 1 Capital increases are mainly in Maersk Logistics & Services International A/S USD 0.5bn and additions of Maersk GTD of USD 0.1bn. 2 Capital increases were mainly in Maersk Logistics & Services International A/S USD 5.5bn, Maersk Aviation Holding A/S USD, 0.3bn, Maersk Supply Service A/S USD 0.2bn and Maersk A/S USD 0.1bn. 3 Disposals are mainly related to Maersk Supply Service, Maersk GTD and Höegh Autoliners Holdings AS (associated company). 4 Transfer to assets held for sale is related to Svitzer A/S. 5 Impairment losses are recognised when the carrying amount exceeds the recoverable amount as explained in notes 1.1, 1.2 and 4.3, mainly related to impairment of Maersk Container Industry A/S. 6 Reversal of impairment losses mainly relates to Höegh Autoliners Holdings AS, which is listed on Euronext Growth Oslo. The reversal is included in the line share of profit/loss in joint ventures and associated companies in the income statement. Reference is made to pages 105-106 for a list of significant subsidiaries and associated companies. 112 A.P. Møller - Mærsk A/S Annual Report 2023 Executive summary The global integrator Performance Governance Financials Consolidated financial statements Parent company financial statements OPERATING PROFIT INVESTED CAPITAL Amounts in USD million Note 3.2 Term deposits Loan receivables, current, amount to USD 12.7bn (USD 17.6bn) and consist primarily of term deposits with a maturity of more than three months. For details on the assessment of the loss allowance on term deposits, reference is made to note 4.4 Financial instruments and risks. Note 3.3 Assets held for sale Assets held for sale of USD 1.4bn in 2023 relate to Svitzer (Towage). Reference is made to note 3.6 in the consolidated financial statements for more details. Note 4.1 Share capital Shareholder disclosure subject to section 104 of the Danish Financial Statements Act: Share capital Votes A.P. Møller Holding A/S, Copenhagen, Denmark 1 41.5% 51.5% A.P. Møller og Hustru Chastine Mc-Kinney Møllers Familiefond, Copenhagen, Denmark 2 9.8% 14.0% Den A.P. Møllerske Støttefond, Copenhagen, Denmark 3.7% 6.4% A.P. Møller Mærsk A/S (treasury shares), Copenhagen, Denmark 9.0% 1.5% 1 A.P. Møller Holding A/S has committed to participate in the company’s share buy-back programme by selling both A and B shares relative to their total ownership and voting rights in the company. Before cancellation of the company’s treasury shares (subject to approval at the Annual General Meeting and intended to take place in May 2024), A.P. Møller Holding A/S holds 37.9% of the share capital and 49.9% of the votes of the company. 2 A.P. Møller og Hustru Chastine Mc-Kinney Møllers Familiefond has committed to participate in the company’s share buy-back programme by selling B shares relative to their total ownership in the company. Before cancellation of the company’s treasury shares (which is subject to approval at the Annual General Meeting and intended to take place in May 2024), A.P. Møller og Hustru Chastine Mc-Kinney Møllers Familiefond holds 9.0% of the share capital of the company. Note 4.1 in the consolidated financial statements includes all additional share capital disclosures including the development in the number of shares and in the holding of treasury shares. Dividends The dividend of DKK 4,300 per share of DKK 1,000 was paid on 31 March 2023 – a total of DKK 74.4bn equivalent to USD 10.9bn, excluding treasury shares (dividend of DKK 2,500 per share of DKK 1,000 paid – total of DKK 46.8bn, equivalent to USD 6.9bn). The Board of Directors proposes a dividend to the shareholders of DKK 515 per share of DKK 1,000 – a total of DKK 8.1bn, equivalent to USD 1.2bn (DKK 4,300 per share of DKK 1,000 – total of DKK 74.4bn equivalent to USD 10.9bn). Payment of dividends is expected to take place on 19 March 2024. Payment of dividends to shareholders does not trigger taxes to A.P. Moller - Maersk. 113 A.P. Møller - Mærsk A/S Annual Report 2023 Executive summary The global integrator Performance Governance Financials Consolidated financial statements Parent company financial statements INVESTED CAPITAL CAPITAL AND FINANCING Amounts in USD million Note 4.2 Borrowings and net debt reconciliation Net debt 31 December Cash flows Other changes Net debt 31 December 2022 From financing activities Other Foreign exchange move- ments Other 1 2023 Bank and other credit institutions 775 -90 3 - - 688 Issued bonds 2,976 308 - 53 56 3,393 Subsidiaries, etc., net 36,060 - 3,513 -12 -43,337 -3,776 Total borrowings, net 39,811 218 2 3,516 41 -43,281 305 Derivatives hedge of borrowings, net 532 -54 - -53 -72 353 Borrowings classification: Classified as non-current 3,635 4,139 Classified as current 40,808 4,975 1 Non-cash dividends, capital increases, fair value adjustments, etc. 2 Cash flows from financing activities of USD 218m are made up of repayments of borrowings of negative USD 559m (negative USD 98m), adjusted for cash flow hedges of USD 35m (USD 0m), and proceeds from borrowings of USD 742m (USD 0m). Net debt 31 December Cash flows Other changes Net debt 31 December 2021 From financing activities Other Foreign exchange move- ments Other 2022 Bank and other credit institutions 1,137 -98 -264 - - 775 Issued bonds 3,341 - - -177 -188 2,976 Subsidiaries, etc., net 7,889 - 25,628 -63 2,606 36,060 Total borrowings, net 12,367 -98 25,364 -240 2,418 39,811 Derivatives hedge of borrowings, net 154 - - 178 200 532 Borrowings classification: Classified as non-current 4,165 3,635 Classified as current 13,052 40,808 Note 4.3 Financial income and expenses 2023 2022 Interest expenses on liabilities 1 1,174 698 Interest income on loans and receivables 1,596 615 Fair value adjustment transferred from equity hedge reserve (loss) 25 25 Net interest income 397 -108 Exchange rate gains on bank balances, borrowings and working capital 30 240 Exchange rate losses on bank balances, borrowings and working capital 162 51 Net foreign exchange gains/losses -132 189 Fair value gains from derivatives 161 36 Fair value losses from derivatives - 243 Net fair value gains/losses 161 -207 Dividends received from subsidiaries, associated companies and joint ventures, net 2 44,029 29 Total dividend income 44,029 29 Impairment losses, investments in subsidiaries and associated companies 3 200 - Write-down of loan receivables from subsidiaries - 56 Financial income/expenses, net 44,255 -153 Of which: Dividends 44,029 29 Financial income 1,787 891 Financial expenses 1,561 1,073 1 Of which USD 10m (USD 0m) relates to expense of prepayment of issued bonds. 2 Mainly relates to dividends from Maersk A/S and Svitzer A/S (in 2022 A.P. Moller Finance S.A. and Höegh Autoliners Holdings AS). 3 Impairment losses in investments in subsidiaries is related to Maersk Container Industry A/S. Reference is made to note 4.4 for an analysis of gains and losses from derivatives. 114 A.P. Møller - Mærsk A/S Annual Report 2023 Executive summary The global integrator Performance Governance Financials Consolidated financial statements Parent company financial statements CAPITAL AND FINANCING Amounts in USD million Note 4.4 Financial instruments and risks 2023 2022 Non-current receivables 10 18 Current receivables 131 198 Non-current liabilities 323 495 Current liabilities 134 171 Liabilities, net 316 450 The company’s activities expose it to a variety of financial risks: • Market risks, i.e. currency risk and interest rate risk • Credit risk • Liquidity risk. The company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise the potential adverse effects on the company’s financial performance. The company uses derivative financial instruments to hedge certain risk exposures. Risk management is carried out by a central finance department under policies approved by the Board of Directors. The finance department identifies, evaluates and hedges financial risks in close cooperation with the company’s entities. Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the company’s profit or the value of its holdings of financial instruments. The sensitivity analyses in the currency risk and interest rate risk sections relate to the position of financial instruments at 31 December 2023. The sensitivity analyses for currency risk and interest rate risk have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and the proportion of financial instruments in foreign currencies remain unchanged from hedge designations in place at 31 December 2023. Furthermore, it is assumed that the exchange rate and interest rate sensitivities have a symmetric impact, i.e. an increase in rates results in the same absolute movement as a decrease in rates. The sensitivity analyses show the effect on profit and equity of a reasonably possible change in exchange rates and interest rates. 2023 2022 Hedging interest rate risk -24 -25 Total effective hedging -24 -25 Ineffectiveness recognised in financial expenses -1 - Total reclassified from equity reserve for hedges -25 -25 Derivatives accounted for as held for trading Currency derivatives recognised directly in financial income/expenses 168 -256 Interest rate derivatives recognised directly in financial income/expenses 45 -142 Net gains/losses recognised directly in the income statement 213 -398 Total 188 -423 Hedges comprise primarily currency derivatives and interest rate derivatives, which are further described in the following sections. Fair value Recognised at fair value through profit and loss 2023 2022 Currency derivatives 37 73 Interest derivatives - 9 Total 37 82 Currency risk The company’s currency risk arises primarily from its treasury activities where financing is obtained and provided in a wide range of currencies other than USD such as EUR, GBP and NOK. The main purpose of hedging the company’s currency risk is to hedge the USD value of the company’s net cash flow and reduce fluctuations in the company’s profit. The company uses various financial derivatives, including forwards, option contracts and cross-currency swaps, to hedge these risks. The key aspects of the currency hedging policy are as follows: • Net cash flows in other significant currencies than USD are hedged using a layered model with a 12-month horizon • Significant capital commitments or divestments in other currencies than USD are hedged • Most non-USD debt is hedged, however, depending on the asset-liability match and the currency of the generated cash flow. The company enters into derivatives to hedge currency exposures that do not qualify for hedge accounting. These deriva- tives are classified as fair value through profit or loss. An increase in the USD exchange rate of 10% against all other significant currencies to which the company is exposed is presented in the table. The sensitivities are based only on the impact of financial instruments that are outstanding at the balance sheet date and are thus not an expression of the company’s total currency risk. Profit before tax Equity before tax 2023 2022 2023 2022 DKK -30 -233 -30 -233 EUR 1 13 228 13 228 Other currencies -16 18 -16 18 Total -33 13 -33 13 1 EUR sensitivity has been restated for 2022 from USD 91m/USD 91m to USD 228m/USD 228m for profit before tax and equity before tax, respectively. 115 A.P. Møller - Mærsk A/S Annual Report 2023 Executive summary The global integrator Performance Governance Financials Consolidated financial statements Parent company financial statements CAPITAL AND FINANCING Amounts in USD million Note 4.4 Financial instruments and risks – continued Maturity Fair value, asset Fair value, liability Nominal amount of derivative 0-1 years 2-5 years 5- years Gain/loss on hedged item Gain/loss on hedging instru- ment Average hedge rate 2023 Combined fair value hedge, hedge of borrowings EUR - 90 503 - 415 88 15 -32 7.3% GBP - 24 89 - 89 - 2 -6 7.9% JPY - 17 88 - 88 - - -2 7.2% NOK - 68 216 - 216 - 12 -18 7.9% Fair value hedge, hedge of borrowings USD 11 44 850 - 200 650 32 -33 7.7% Cash flow hedge, hedge of borrowings EUR - 88 967 - 414 553 - -29 3.2% GBP - 33 162 - 162 - - -1 4.6% Total 11 364 2,875 - 1,584 1,291 61 -121 2022 Combined fair value hedge, hedge of borrowings EUR - 127 486 - 401 85 35 -54 6.2% GBP - 29 84 - 84 - 4 -7 6.8% JPY - 12 95 - 95 - - -3 6.1% NOK - 64 223 - 223 - 17 -22 6.8% Fair value hedge, hedge of borrowings USD - 73 900 - 500 400 75 -73 6.7% Cash flow hedge, hedge of borrowings EUR - 145 934 - 400 534 - -56 3.2% GBP - 77 277 - 277 - - -5 4.6% NOK - 5 26 26 - - - - 3.3% Total - 532 3,025 26 1,980 1,019 131 -220 The average FX hedge rates for swaps in combined fair value hedge were EUR/USD 1.24 (1.24), GBP/USD 1.52 (1.52), USD/NOK 8.25 (8.25), and USD/JPY 119.39 (119.39). The average FX hedge rates for swaps in cash flow hedge were EUR/USD 1.18 (1.18) and GBP/USD 1.52 (1.52). The sensitivities are based only on the impact of financial instruments that are outstanding at the balance sheet date and are thus not an expression of the company’s total currency risk. Interest rate risk The company has most of its debt denominated in USD, but part of the debt (e.g. issued bonds) is in other currencies such as EUR, NOK, GBP and JPY. The company strives to maintain a combination of fixed and floating interest rates on its net debt, reflecting expectations and risks. Interest rate risk is managed within a range set for the percentage of gross debt paying fixed interest, net of hedging. The level at 31 December is 41% (43%) excluding IFRS 16 Leases. A general increase in interest rates by one percentage point is estimated, all thing else being equal, to affect profit before tax and equity, excluding tax effect, positively by approx. USD 149m and positively by approx. USD 128m, respec- tively (negatively by approx. USD 163m and negatively by approx. USD 185m, respectively). This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The hedging of the interest rate risk is done by cross-currency swaps and interest rate swaps. The hedging is a mix of fair value hedging, combined fair value hedging and cash flow hedging. Combined fair value hedging is applied when cross- currency swaps are entered into to hedge the risk of debt denominated in other currencies than USD. Each hedge relation- ship is split into a fair value hedge, where value changes from market rates are recognised directly in profit or loss, and a cash flow hedge, where the value changes from the exchange rate exposure of the credit margin are recognised in OCI. The hedges are expected to be highly effective due to the nature of the economic relationship between the exposure and the hedge. The source of ineffectiveness is the credit risk of the hedging instruments. For hedges where the cost of hedging is applied, the change in basis spread is recognised in other comprehensive income and is a time effect during the lifetime of the swap and at maturity amounts to 0. If the hedged transaction is prepaid, the change in basis spread will be recognised in profit or loss as ineffectiveness. The cost of hedging reserve amounts to a gain of USD 7m (USD 15m). Borrowings and interest-bearing debt to subsidiaries by interest rate levels inclusive of interest rate swaps Carrying amount Next interest rate fixing 0-1 year 2-5 years 5- years 2023 0-3% 742 196 - 546 3-6% 5,473 4,303 576 594 6%- 2,899 2,899 - - Total 9,114 7,398 576 1,140 Of which: Bearing fixed interest 1,730 Bearing floating interest 7,384 2022 0-3% 2,790 2,264 - 526 3-6% 39,932 39,033 659 240 6%- 1,721 1,721 - - Total 44,443 43,018 659 766 Of which: Bearing fixed interest 1,637 Bearing floating interest 42,806 116 A.P. Møller - Mærsk A/S Annual Report 2023 Executive summary The global integrator Performance Governance Financials Consolidated financial statements Parent company financial statements CAPITAL AND FINANCING Amounts in USD million Note 4.4 Financial instruments and risks – continued Credit risk The company has substantial exposure to financial and commercial counterparties but has no particular concentration of customers or suppliers. To minimise the credit risk, financial vetting is undertaken for all major customers and financial institutions, adequate security is required for commercial counterparties, and credit limits are set for financial institutions and key commercial counterparties. Financial assets at amortised cost Financial assets at amortised cost comprise loan receivables, lease receivables, and other receivables. These are all considered to have low credit risk and thus the impairment provision calculated based on 12 months of expected losses is considered immaterial. The financial assets are considered to be low risk when they have low risk of default, and the issuer has a strong capacity to meet its contractual cash flow obligations in the near term. Other financial assets at amortised cost include loans to subsidiaries. As of 31 December 2023, the loans amount to USD 8.8bn (USD 4.6bn) and are considered to have a low credit risk, thus the impairment provision to be recognised during the period is limited to 12 months of expected losses. The credit risk has not increased significantly since the initial recognition and is considered low based on the investment grade credit rating for the Group and consequently the financial strength of the major subsidiaries within the Group. Financial institutions Deposits and bank balances are primarily held in relationship banks with a credit rating of at least A-. No individual exposure is above 10%. A.P. Moller - Maersk has ISDA agreements for trading of derivatives, under which the Group has a right to net settlement in the event of certain credit events. This results in the credit risk being limited to the net position per counterparty. Liquidity risk It is of great importance for the company to maintain a financial reserve to cover the company’s obligations and investment opportunities and to provide the capital necessary to offset changes in the company’s liquidity due to changes in the cash flow from operating activities. The flexibility of the financial reserve is subject to ongoing prioritisation and optimisation, among other things by focusing on the release of capital and following up on the development in working capital. Net interest-bearing debt and liquidity 2023 2022 Borrowings 9,114 44,443 Net interest-bearing debt -17,159 13,691 Cash and bank balances 5,123 8,082 Term deposits not included in cash and cash balances 12,693 17,615 Securities - 942 Undrawn revolving credit facilities > 12 months 6,050 6,000 Liquidity reserve 1 23,866 32,639 1 Liquidity reserve is defined as undrawn committed revolving facilities with more than one year to expiry, securities, term deposits not included in cash and bank balances and cash and bank balances, excluding securities and balances in countries with exchange control or other restrictions. For information about cash and bank balances in countries with exchange control or other restrictions, please see text to the consolidated cash flow statement. Based on the liquidity reserve, loans for the financing of specific assets, the maturity of outstanding loans, and the current investment profile, the company’s financial resources are deemed satisfactory. The average term to maturity of loan facilities in the company was about five years (about five years) at 31 December 2023. Maturities of liabilities and commitments Carrying amount Cash flows including interest 0-1 year 2-5 years 5- years Total 2023 Bank and other credit institutions 688 84 538 261 883 Issued bonds 3,393 115 1,907 2,105 4,127 Interest-bearing loans from subsidiaries, etc. 5,033 4,954 95 - 5,049 Trade payables 46 46 - - 46 Other payables 443 443 - - 443 Non-derivative financial liabilities 9,603 5,642 2,540 2,366 10,548 Derivatives 457 134 241 82 457 Total recognised in balance sheet 10,060 5,776 2,781 2,448 11,005 2022 Bank and other credit institutions 775 134 328 551 1,013 Issued bonds 2,976 113 2,142 1,130 3,385 Interest-bearing loans from subsidiaries, etc. 40,692 40,710 - - 40,710 Trade payables 64 64 - - 64 Other payables 244 244 - - 244 Non-derivative financial liabilities 44,751 41,265 2,470 1,681 45,416 Derivatives 666 171 356 139 666 Total recognised in balance sheet 45,417 41,436 2,826 1,820 46,082 117 A.P. Møller - Mærsk A/S Annual Report 2023 Executive summary The global integrator Performance Governance Financials Consolidated financial statements Parent company financial statements CAPITAL AND FINANCING Amounts in USD million Note 4.5 Financial instruments by category Carrying amount Fair value 2 2023 2022 2023 2022 Carried at amortised cost Interest-bearing receivables from subsidiaries, etc. 8,809 4,632 8,809 4,633 Lease receivables - - Loan receivables 12,693 17,615 12,708 17,585 Total interest-bearing receivables 21,502 22,247 Trade receivables 4 8 Other receivables (non-interest-bearing) 360 273 Other receivables from subsidiaries, etc. 156 208 Securities - 942 Cash and bank balances 5,123 8,082 Financial assets at amortised cost 27,145 31,760 Carried at fair value Derivatives 141 216 Equity investments (FVOCI) 1 4 4 Other financial assets 145 220 Total financial assets 27,290 31,980 Carried at amortised cost Bank and other credit institutions 3 688 775 688 775 Issued bonds 3,393 2,976 3,339 2,855 Interest-bearing loans from subsidiaries, etc. 5,033 40,692 Total borrowings 9,114 44,443 Trade payables 46 64 Other payables 443 244 Financial liabilities at amortised cost 9,603 44,751 Carried at fair value Derivatives 457 666 Financial liabilities at fair value 457 666 Total financial liabilities 10,060 45,417 1 The company holds only minor equity investments at fair value through other comprehensive income (FVOCI). 2 Where no fair value is stated, the amount equals carrying amount. 3 The fair value has been restated for 2022 from USD 817m to USD 775m. Non-listed shares Total financial assets Movement during the year in level 3 Equity investments (FVOCI) Carrying amount 1 January 2022 4 4 Carrying amount 31 December 2022 4 4 Additions 5 5 Disposals 4 4 Gains/losses recognised in other comprehensive income -1 -1 Carrying amount 31 December 2023 4 4 Financial instruments measured at fair value Financial instruments measured at fair value can be divided into three levels: Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 — Inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) Level 3 — Inputs for the asset or liability that are not based on observable market data. Fair value of listed shares falls within level 1 of the fair value hierarchy. Non-listed shares and other securities fall within level 3 of the fair value hierarchy. Fair value of derivatives falls mainly within level 2 of the fair value hierarchy and is calculated on the basis of observable market data as of the end of the reporting period. Fair value of level 3 assets and liabilities is primarily based on the present value of expected future cash flows. A reason- ably possible change in the discount rate is not estimated to affect the company’s profit or equity significantly. Financial instruments carried at amortised cost Fair value of the short-term financial assets and other financial liabilities carried at amortised cost is not materially different from the carrying amount. In general, fair value is determined primarily based on the present value of expected future cash flows. Where a market price was available, however, this was deemed to be the fair value. Fair value of listed issued bonds is within level 1 of the fair value hierarchy. Fair value of the remaining borrowing items is within level 2 of the fair value hierarchy and is calculated on the basis of discounted interests and instalments. 118 A.P. Møller - Mærsk A/S Annual Report 2023 Executive summary The global integrator Performance Governance Financials Consolidated financial statements Parent company financial statements CAPITAL AND FINANCING Amounts in USD million Note 5.1 Tax 2023 2022 Tax recognised in the income statement Current tax on profit for the year 51 -6 Adjustment for current tax of prior periods -2 -9 Withholding taxes 17 -3 Utilisation of previously unrecognised deferred tax assets -52 - Total current tax 14 -18 Origination and reversal of temporary differences 3 -54 Adjustment for deferred tax of prior periods -52 - Recognition of previous unrecognised deferred tax asset 52 - Total deferred tax 3 -54 Total tax expense (income) 17 -72 Tax reconciliation: Profit/loss before tax 44,044 -144 Tax using the Danish corporation tax rate (22%) 9,690 -32 Tax rate deviations in foreign jurisdictions 11 - Non-deductible expenses -3 -27 Gains/losses related to shares, dividends, etc. -9,654 -1 Adjustment to previous years’ taxes -2 -9 Other differences, net -3 -3 Total income tax 17 -72 Tax recognised in other comprehensive income and equity -6 1 Of which: Current tax -6 1 Note 5.2 Deferred tax Recognised deferred tax assets and liabilities are attributable to the following: Assets Liabilities Net amount 2023 2022 2023 2022 2023 2022 Property, plant and equipment 2 3 - - -2 -3 Provisions, etc. 8 3 - - -8 -3 Liabilities, etc. - 11 - - - -11 Other - - 2 4 2 4 Total 10 17 2 4 -8 -13 Offsets -2 -4 -2 -4 - - Total 8 13 - - -8 -13 Change in deferred tax, net during the year 2023 2022 1 January -13 41 Recognised in the income statement 5 -54 31 December -8 -13 Unrecognised deferred tax asset of USD 100m is related to earlier years interest restrictions. There are no unrecognised tax liabilities on investments in subsidiaries, associated companies and joint ventures. Note 5.3 Share-based payments The recognised remuneration expense related to the performance shares plan is USD 1m (USD 0m). The recognised remuneration expense related to the restricted shares plan is USD 3m (USD 7m). The recognised remuneration expense related to the share options plan is USD 4m (USD 5m). For all other disclosures related to share-based payments, refer to note 5.2 in the consolidated financial statements. Note 5.4 Contingent liabilities The company is involved in a number of legal cases. The company is also involved in tax issues in certain countries. Some of these involve significant amounts and are subject to considerable uncertainty. Through participation in joint taxation scheme with A.P. Møller Holding A/S, the company is jointly and severally liable for taxes payable, etc. in Denmark Note 5.5 Cash flow specifications 2023 2022 Change in working capital Trade receivables 31 -1 Other receivables and prepayments -81 -183 Trade payables and other payables, etc. 148 250 Exchange rate adjustment of working capital 17 -27 Total 115 39 119 A.P. Møller - Mærsk A/S Annual Report 2023 Executive summary The global integrator Performance Governance Financials Consolidated financial statements Parent company financial statements OTHER DISCLOSURES Amounts in USD million Note 5.6 Related parties Controlling parties Subsidiaries Associated companies Joint ventures Management 1 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Continuing operations Income statement Revenue - - 39 29 - - - - - - Operating costs - 1 13 14 - - - - - - Remuneration to management - - - - - - - - 8 30 Dividends - - 43,986 20 43 9 - - - - Financial income 46 62 513 357 - - - - - - Financial expenses 24 - 922 533 - - 3 - - - Assets Interest-bearing receivables, non-current - - 1,338 2,818 - - 1 - - - Derivatives, non-current - - - 11 - - - - - - Trade receivables - - - 161 - - - - - - Interest-bearing receivables, current - - 7,495 1,814 - - - 4 - - Derivatives, current - - 14 35 - - - - - - Other receivables, current 683 380 176 27 - - - 1 - - Cash and bank balances 161 632 - - - - - - - - Liabilities Interest-bearing debt, non-current - - 95 - - - - - - - Interest-bearing debt, current - - 4,892 40,692 - - - 43 - - Trade payables - - - 36 - - - - - - Derivatives, current 42 - 63 98 - - - - - - Other liabilities, current - - 123 19 - - - - - - Sale of companies, property, plant and equipment - - 2,853 72 810 5 - - - - Capital increases and purchase of shares - - 564 6,204 11 - - - - - - Shares bought back 2 1,569 1,332 - - - - - - - - Dividends distributed 3 5,974 3,614 - - - - - - - - 1 The Board of Directors and the Executive Board in A.P. Møller - Mærsk A/S, A.P. Møller Holding A/S, A.P. Møller og Hustru Chastine Mc-Kinney Møllers Fond til almene Formaal and their close relatives (including undertakings under their control). Other receivables and payables include customary business-related accounts regarding shipping activities. 2 Includes shares bought back from A.P. Møller Holding A/S and A.P. Møller og Hustru Chastine Mc-Kinney Møllers Familie fond (the Foundation). 3 Includes dividends paid to A.P. Møller Holding A/S, A.P. Møller og Hustru Chastine Mc-Kinney Møllers Familiefond (the Foundation) and Den A.P. Møllerske Støttefond. Joint usage agreement with A.P. Møller Holding A/S With the objective of further strengthening the value of the brands, A.P. Møller - Mærsk A/S entered into a joint usage agreement with A.P. Møller Holding A/S in 2018 regarding the use of commonly used trademarks which historically have benefited both A.P. Møller - Mærsk A/S and A.P. Møller Holding A/S. A.P. Møller Holding A/S is the controlling shareholder of A.P. Møller - Mærsk A/S and is wholly owned by A.P. Møller og Hustru Chastine Mc-Kinney Møllers Fond til almene Formaal. The joint usage agreement establishes a framework and a branding strategy for the commonly used trademarks and a joint brand board, where the parties can cooperate regarding the use of these trademarks. Share buy-back programme According to separate agreement, A.P. Møller Holding A/S and A.P. Møller og Hustru Chastine Mc-Kinney Møllers Familie fond (the Foundation) participated on a pro rata basis to the shares purchased in the company’s share buy-back programme. A.P. Møller Holding A/S participated in selling A and B shares and A.P. Møller og Hustru Chastine Mc-Kinney Møllers Familiefond participated in selling B shares. Controlling party A.P. Møller Holding A/S, Copenhagen, Denmark, has control over the company and prepares consolidated financial statements. A.P. Møller og Hustru Chastine Mc-Kinney Møllers Fond til almene Formaal is the ultimate owner. Note 5.7 Pledges Vessels owned by subsidiaries with a carrying amount of USD 0.6bn (USD 0.7bn) have been pledged as security for loans of USD 0.3bn (USD 0.3bn). 120 A.P. Møller - Mærsk A/S Annual Report 2023 Executive summary The global integrator Performance Governance Financials Consolidated financial statements Parent company financial statements OTHER DISCLOSURES Management’s statement The Board of Directors and the Executive Board have today discussed and approved the Annual Report of A.P. Møller - Mærsk A/S for 2023. The Annual Report for 2023 of A.P. Møller - Mærsk A/S has been prepared in accordance with IFRS Accounting Standards as adopted by the EU and further re quirements in the Danish Finan cial Statements Act, and in our opinion gives a true and fair view of A.P. Moller - Maersk’s and the company’s assets and liabilities and financial position at 31 December 2023 and of the results of A.P. Moller - Maersk’s and the com pany’s operations and cash flows for the financial year 2023. In our opinion, the Management Review includes a fair review of the development in A.P. Moller - Maersk’s and the company’s operations and financial conditions, the results for the year, cash flows and financial position as well as a description of the most sig nificant risks and uncertainty factors that A.P. Moller - Maersk and the company face. Management’s Review has been prepared in accordance with the Danish Financial Statements Act and Article 8 of Regulation (EU) 2020/852 (EU Taxonomy Regulation). In our opinion, the Annual Report of A.P. Møller - Mærsk A/S for the financial year 1 January to 31 December 2023, identified as with the file name APMM-2023-12-31-en.zip, is prepared, in all material respects, in compliance with the ESEF Regulation. We recommend that the Annual Report be approved at the Annual General Meeting on 14 March 2024. Copenhagen, 8 February 2024 Executive Board Vincent Clerc CEO Patrick Jany CFO Board of Directors Robert Mærsk Uggla Chair Marc Engel Vice Chair Bernard L. Bot Marika Fredriksson Arne Karlsson Thomas Lindegaard Madsen Amparo Moraleda Kasper Rørsted Julija Voitiekute A.P. Møller - Mærsk A/S Annual Report 2023 121 Executive summary The global integrator Performance Governance Financials Independent Auditor’s Reports Report on the audit of the Financial Statements Our opinion In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements (pages 61 to 120) give a true and fair view of the Group’s and the Parent Company’s financial position at 31 December 2023 and of the results of the Group’s and the Parent Company’s opera- tions and cash flows for the financial year 1 January to 31 December 2023 in accordance with IFRS Accounting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act. Our opinion is consistent with our Auditor’s Long-form Report to the Audit Committee and the Board of Directors. What we have audited The Consolidated Financial Statements and Parent Company Financial Statements of A.P. Møller - Mærsk A/S for the financial year 1 January to 31 December 2023 comprise income statement and statement of com- prehensive income, balance sheet, cash flow statement, statement of changes in equity and notes, including material accounting policy infor- mation for the Group as well as for the Parent Company. Collectively referred to as the ‘Financial Statements’. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the Auditor’s responsibilities for the audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. To the shareholders of A.P. Møller - Mærsk A/S Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements applicable in Denmark. We have also fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. To the best of our knowledge and belief, prohibited non-audit ser- vices referred to in Article 5(1) of Regulation (EU) No 537/2014 were not provided. Appointment We were first appointed auditors of A.P. Møller - Mærsk A/S on 12 April 2012 for the financial year 2012. We have been reelected annually by shareholder resolution for a total period of uninterrupted engagement of 12 years including the financial year 2023. We were reappointed, fol- lowing a tendering procedure, at the General Meeting on 15 March 2022. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements for 2023. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Revenue recognition Recognition of revenue is complex due to the volume of transactions and the variety of different revenue streams within the segments. We focused on this area due to the significance of amounts involved and because recognition of revenue involves accounting policy decisions, and judgements made by Management originating from different cus- tomer behaviour, market conditions, terms and nature of services in the various segments. Further, the volume of transactions and extent of different revenue streams involve internal controls, various IT applications and Manage- ment’s monitoring hereof, to ensure correct revenue recognition, which are complex and introduce an inherent risk to the revenue recognition process. Reference is made to note 2.1 in the Consolidated Financial Statements. How our audit addressed the key audit matter Our audit procedures included considering the appropriateness of the revenue recognition accounting policies and assessing compliance with applicable accounting standards. We performed risk assessment procedures with the purpose of achieving an understanding of IT-systems and applications, business procedures and relevant controls regarding revenue recognition. For the relevant key internal controls including IT dependencies supporting revenue recognition, we assessed whether they were designed and imple- mented to address the risk of errors in revenue recognised in the Financial Statements. For selected controls that we planned to rely on, we tested whether they were performed on a consistent basis and Management’s monitoring hereof. We applied data analytics on selected revenue streams in order to identify and test transactions outside the ordinary transaction flow and performed substantive procedures over invoicing and relevant contracts in order to assess the accounting treatment and principles applied, and tested journal entries on revenue. Further, we tested timing to ensure that the revenue is recognised in the correct financial year. Finally, we assessed the adequacy of disclosures provided by Management in the Financial Statements. Recoverability of the carrying amount of intangible assets, property, plant and equipment and right-of-use assets The most significant risks in relation to Management’s assessment of the recoverability of the carrying amount of intangible assets, prop- erty, plant and equipment and right-of-use assets relate to the defini- tion of cash-generating units (CGUs), identification of CGUs with indica- tors of impairment and, where relevant, the estimate of the fair values less costs to sell and the values in use, including determination of key assumptions. Management identified impairment indicators for the Ocean CGU, for individual terminals and also performed an impairment test related to goodwill in the Logistics & Services CGU. Considering the generally long-lived nature of the assets, the signifi- cant assumptions in estimating the future cash flows are Management’s long-term outlook for freight rates, terminal rates, margins in Logistics & Services, volumes, CAPEX and operating expenses as well as determin- ing the discount rates. A.P. Møller - Mærsk A/S Annual Report 2023 122 Executive summary The global integrator Performance Governance Financials We focused on this area, as the carrying amounts are significant and as Management is required to exercise considerable judgement because of the inherent complexity in estimating the fair value less cost to sell or the value in use. Reference is made to notes 3.1, 3.2 and 3.3 in the Consolidated Financial Statements. How our audit addressed the key audit matter We considered the appropriateness of the defined CGUs within the businesses and examined the methodology used by Management to assess the carrying amount of intangible assets, property, plant and equipment and right-of-use assets assigned to CGUs, as well as the process for identifying CGUs that require impairment testing to deter- mine compliance with IFRS. We performed detailed testing of Management’s impairment tests for goodwill and for the CGUs where indicators of impairment were identified, and challenged the significant assumptions affecting the future cash flows, including internal assumptions related to freight rates, terminal rates, Logistics & Services margins, volumes, CAPEX and operating expenses. We used our internal valuation specialists to independently chal- lenge the discount rates. In calculating the discount rates, the key inputs used were independently sourced from market data, and we assessed the methodology applied. Further, we tested the mathematical accuracy of the impairment models prepared by Management. Finally, we assessed the adequacy of disclosures provided by Management in the Financial Statements. Statement on Management Review Management is responsible for Management Review (pages 4 to 59 and 126). Our opinion on the Financial Statements does not cover Manage- ment Review, and we do not express any form of assurance conclusion thereon. In connection with our audit of the Financial Statements, our responsibility is to read Management Review and, in doing so, consider whether Management Review is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or other- wise appears to be materially misstated. Moreover, we considered whether Management Review includes the disclosures required by the Danish Financial Statements Act and Article 8 of Regulation (EU) 2020/852 (EU Taxonomy Regulation). Based on the work we have performed, in our view, Management Review is in accordance with the Consolidated Financial Statements and the Parent Company Financial Statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act and the disclosure requirements of Article 8 of Regulation (EU) 2020/852 (EU Taxonomy Regulation). We did not identify any material misstatement in the Management Review. Management’s responsibilities for the Financial Statements Management is responsible for the preparation of consolidated finan- cial statements and parent company financial statements that give a true and fair view in accordance with IFRS Accounting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act, and for such internal control as Management deter- mines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the Financial Statements, Management is responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Man- agement either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assur- ance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individu- ally or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements. As part of an audit in accordance with ISAs and the additional require- ments applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, for- gery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circum- stances, but not for the purpose of expressing an opinion on the effec- tiveness of the Group’s and the Parent Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. • Conclude on the appropriateness of Management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern. If we con- clude that a material uncertainty exists, we are required to draw atten- tion in our auditor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or the Parent Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the Finan- cial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that gives a true and fair view. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. A.P. Møller - Mærsk A/S Annual Report 2023 123 Executive summary The global integrator Performance Governance Financials We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our inde- pendence and, where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with govern- ance, we determine those matters that were of most significance in the audit of the Financial Statements of the current period and are there- fore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter. Report on compliance with the ESEF Regulation As part of our audit of the Financial Statements we performed procedures to express an opinion on whether the annual report of A.P. Møller - Mærsk A/S for the financial year 1 January to 31 December 2023 with the filename APMM-2023-12-31-en.zip is prepared, in all mate- rial respects, in compliance with the Commission Delegated Regula tion (EU) 2019/815 on the European Single Electronic Format (ESEF Regu- lation) which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the Consolidated Financial Statements including notes. Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes: • The preparing of the annual report in XHTML format; • The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for all financial information required to be tagged using judgement where necessary; • Ensuring consistency between iXBRL tagged data and the Consolidated Financial Statements presented in human-readable format; and • For such internal control as Management determines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation. Our responsibility is to obtain reasonable assurance on whether the annual report is prepared, in all material respects, in compliance with the ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of procedures selected depend on the auditor’s judgement, including the assessment of the risks of material departures from the require- ments set out in the ESEF Regulation, whether due to fraud or error. The procedures include: • Testing whether the annual report is prepared in XHTML format; • Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process; • Evaluating the completeness of the iXBRL tagging of the Consolidated Financial Statements including notes; • Evaluating the appropriateness of the company’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified; • Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and • Reconciling the iXBRL tagged data with the audited Consolidated Financial Statements including notes. In our opinion, the annual report of A.P. Møller - Mærsk A/S for the financial year 1 January to 31 December 2023 with the file name APMM-2023-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. Hellerup, 8 February 2024 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab CVR no 3377 1231 Lars Baungaard State Authorised Public Accountant mne23331 Søren Ørjan Jensen State Authorised Public Accountant mne33226 A.P. Møller - Mærsk A/S Annual Report 2023 124 Executive summary The global integrator Performance Governance Financials Definition of terms A A.P. Moller - Maersk A.P. Moller - Maersk is referred to as the consolidated group of com- panies and A.P. Møller - Mærsk A/S as the parent company. B Backhaul The direction of the trade route that has the lowest volumes, whereas the opposite direction is referred to as headhaul. C CAPEX Cash payments for intangible assets and property, plant and equipment, excluding acquisitions and divestments. Cash conversion Cash flow from operating activities to EBITDA ratio. Cash flow from operating activities per share A.P. Moller - Maersk’s operating cash flow from continuing oper- ations divided by the number of shares of DKK 1,000 each, exclud- ing A.P. Moller - Maersk’s holding of treasury shares. Cost base EBIT costs including VSA income and hub income and adjustments for restructuring costs, the result from associated companies and gains/losses. D Discontinued operations Discontinued operations are a major line of business (disposal group) that is either held for sale or has been sold in previous periods. The disposal group is reported separately in a single line in the income statement and cash flow statement. Comparison figures are restated. In the balance sheet assets and liabilities are classified and dis- closed separately on an aggregate level as assets held for sale and liabilities associated with assets held for sale. In the balance sheet comparison figures are not restated. E EBIT Earnings Before Interest and Taxes. EBITA Earnings Before Interest, Taxes and Amortisation. EBITDA Earnings Before Interest, Taxes, Depreciation and Amortisation. Equity ratio Calculated as equity divided by total assets. F Fatalities The headcount number of accidents leading to the death of the employee. FFE Forty Foot container Equivalent unit. Free cash flow Cash flow from operating activities, purchase/sale of intangible assets and property, plant and equipment, dividends received, repayments of lease liabilities, financial payments and financial expenses paid on lease liabilities. G Gross profit The sum of revenue, less variable costs and loss on debtors. H Headhaul The direction of the trade route that has the highest volume, whereas the return direction is referred to as backhaul. I Invested capital Segment operating assets less seg ment operating liabilities, in cluding investments and deferred taxes related to the operation. L Loaded volumes Loaded volumes refer to the number of FFEs loaded on a ship ment which is loaded on first load at vessel departure time excluding displaced FFEs. Lost-Time Injury frequency (LTIf) Measures the number of lost-time injuries per million exposure hours. Lost-time injuries are the sum of fatalities, permanent total disability, per manent partial disability and lost workday cases. N Net interest-bearing debt (NIBD) Equals interest-bearing debt, including lease liabilities, fair value of derivatives hedging the under lying debt, less cash and bank balances as well as other interest- bearing assets. Normalisation The company’s business returning to a more stable and expected level of activity driven by GDP/industry growth following a period of abnormal fluctuations and disruptions during the COVID-19 pandemic. O Ocean, loaded freight rate (USD per FFE) Average freight rate per FFE for all the A.P. Moller - Maersk containers loaded in the period in either Maersk Line or Hamburg Süd vessels or third parties (excluding intermodal). Hamburg Süd is not excluding intermodal. Ocean, reduction in carbon intensity (EEOI) Ocean: Reduction in carbon intensity (EEOI) by 2030 (2020 baseline) covers container vessels under A.P. Moller - Maersk’s operation. Carbon intensity reduction is reported on using the EEOI (Energy Efficiency Operational Indicator) method- ology. EEOI is defined by the Inter national Maritime Organ- ization in MEPC.1/Circ.684 and is calculated as CO₂ emission per cargo tonne nautical mile (gCO₂/(tonne cargo X nm). Ocean, unit cost, fixed bunker (USD per FFE incl. VSA income) Cost per FFE assuming a bunker price at USD 550/tonne excluding intermodal but including hubs and time charter income. Hamburg Süd is not excluding intermodal. R Return on equity after tax Calculated as the profit/loss for the year divided by the average equity. Return on invested capital after tax (ROIC) Profit/loss before financial items for the year (EBIT) less tax on EBIT divided by the average invested capital, last twelve months. T Towage, number of operational tug jobs (harbour towage) (’000) Tug jobs on which Svitzer performs the physical job, including jobs where Svitzer has the commercial contract with the customer as well as jobs that Svitzer receives from the competitor through over- flow or other agreements. TEU Twenty-foot container Equivalent Unit. Time charter Hire of a vessel for a specified period. Total market capitalisation Total number of shares – excluding A.P. Møller - Mærsk A/S’ holding of treasury shares – multiplied by the end-of-year price quoted by Nasdaq Copenhagen. U Underlying EBITDA Underlying EBITDA is earnings before interest, taxes, depreciation and amortisation adjusted for re - structuring and inte gration costs. Underlying EBIT Underlying EBIT is operating profit before interest and taxes adjusted for restructuring and integration costs, net gains/losses from sale of non-current – assets and net impairment losses. Underlying profit/loss Underlying profit/loss is profit/loss for the year from con tinuing operations adjusted for net gains/losses from sale of non-current assets, etc., and net impairment losses as well as transaction, restructuring and inte gration costs related to major trans actions. The adjust- ments are net of tax and include A.P. Moller - Maersk’s share of mentioned items in joint ventures and associated companies. V VSA A vessel sharing agreement is usually reached between various partners within a shipping consor- tium who agree to operate a liner service along a specified route using a specified number of vessels. W Women in leadership The percentage of women referenced as Senior Managers, Leaders, Senior Leaders, and Executives, compared to total headcount of the same levels. 123 4PL A 4PL is a fourth-party logistics provider managing resources, technology, infrastructure as well as external 3PLs to design, build and provide supply chain solutions for businesses. 125 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials Annual Report The Annual Report has been prepared in accordance with IFRS Accounting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act and provides a detailed disclosure of the company’s performance, strategy, corporate governance and financial results. Sustainability Report The independently assured Sustainability Report represents A.P. Moller - Maersk’s sta tutory state- ment on corporate social responsibility, data ethics and diversity in accordance with sections 99a, 99d and 107d of the Danish Financial Statements Act, and A.P. Moller - Maersk’s compliance with the EU Taxonomy disclosure requirements. The Sustainability Report and additional information on how A.P. Moller - Maersk manages sustainability and ESG issues including progress and relevant commitments and frameworks can be found on the Sustainability website at: maersk.com/sustainability An overview of Environmental, Social and Governance (ESG) performance data, including Sustainability Accounting Standards Board (SASB) and Task force on Climate- Related Financial Disclosures (TCFD) indices, is provided in the ESG Factbook, available at: investor.maersk.com Remuneration report and policy The remuneration report provides a full overview of the remuneration outcome of the Board of Directors and the Executive Board of A.P. Møller - Mærsk A/S. The remuneration policy outlines the principles of remuneration design, the total remuner- ation by components and how each component supports the achievement of the strategy, long- term interest and sustainability of the company. Both the report and the policy are available at: investor.maersk.com/financials/financial-reports Corporate governance statement The statutory corporate governance statement for A.P. Møller - Mærsk A/S forms part of the Management review of the Annual Report and includes the status of compliance with the ‘Recommendations for Corporate Governance’ issued by the Danish Committee on Corporate Governance December 2020 and implemented by Nasdaq Copenhagen. A.P. Moller - Maersk provides a suite of additional reports and supplementary information for 2023 to provide a comprehensive and transparent information to all stakeholders, which can be downloaded here: PART OF MANAGEMENT REVIEW Reporting universe Download Find and follow The website contains links to a PDF of the Annual Report for A.P. Moller - Maersk as well as the XHTML version submitted to the Danish Financial Supervisory Authority investor.maersk.com/financial-reports 126 A.P. Moller - Maersk Annual Report 2023 Executive summary The global integrator Performance Governance Financials A.P. Møller - Mærsk A/S Esplanaden 50, DK-1263 Copenhagen K Registration no. 22756214 www.maersk.com IR@maersk.com +45 33 63 33 63 ESEF DATA Domicile of entity Denmark Description of nature of entity’s operations and principal activities Shipping company Country of incorporation Denmark Principal place of business Global Legal form of entity A/S (Danish limited liability company) Name of reporting entity or other means of identification A.P. Møller - Mærsk A/S Address of entity’s registered office Esplanaden 50, DK-1263 Copenhagen K Design and layout e-Types Cover photo Laura Mærsk for the name-giving event in Copenhagen, Denmark Produced in Denmark 2024 Annual reportAuditor's report on audited financial statementsParsePort XBRL Converter2023-01-012023-12-312022-01-012022-12-31549300D2K6PKKKXVNN73Reporting class D22756214OpinionBasis for Opinion549300D2K6PKKKXVNN732023-01-012023-12-31cmn:ConsolidatedMember549300D2K6PKKKXVNN732023-01-012023-12-31549300D2K6PKKKXVNN732022-01-012022-12-31549300D2K6PKKKXVNN732023-12-31549300D2K6PKKKXVNN732022-12-31549300D2K6PKKKXVNN732021-12-31549300D2K6PKKKXVNN732021-12-31ifrs-full:IssuedCapitalMember549300D2K6PKKKXVNN732022-01-012022-12-31ifrs-full:IssuedCapitalMember549300D2K6PKKKXVNN732022-12-31ifrs-full:IssuedCapitalMember549300D2K6PKKKXVNN732021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300D2K6PKKKXVNN732022-01-012022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300D2K6PKKKXVNN732022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300D2K6PKKKXVNN732021-12-31ifrs-full:ReserveOfGainsAndLossesFromInvestmentsInEquityInstrumentsMember549300D2K6PKKKXVNN732022-01-012022-12-31ifrs-full:ReserveOfGainsAndLossesFromInvestmentsInEquityInstrumentsMember549300D2K6PKKKXVNN732022-12-31ifrs-full:ReserveOfGainsAndLossesFromInvestmentsInEquityInstrumentsMember549300D2K6PKKKXVNN732021-12-31ifrs-full:ReserveOfCashFlowHedgesMember549300D2K6PKKKXVNN732022-01-012022-12-31ifrs-full:ReserveOfCashFlowHedgesMember549300D2K6PKKKXVNN732022-12-31ifrs-full:ReserveOfCashFlowHedgesMember549300D2K6PKKKXVNN732021-12-31ifrs-full:RetainedEarningsMember549300D2K6PKKKXVNN732022-01-012022-12-31ifrs-full:RetainedEarningsMember549300D2K6PKKKXVNN732022-12-31ifrs-full:RetainedEarningsMember549300D2K6PKKKXVNN732021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300D2K6PKKKXVNN732022-01-012022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300D2K6PKKKXVNN732022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300D2K6PKKKXVNN732021-12-31ifrs-full:NoncontrollingInterestsMember549300D2K6PKKKXVNN732022-01-012022-12-31ifrs-full:NoncontrollingInterestsMember549300D2K6PKKKXVNN732022-12-31ifrs-full:NoncontrollingInterestsMember549300D2K6PKKKXVNN732023-01-012023-12-31ifrs-full:IssuedCapitalMember549300D2K6PKKKXVNN732023-12-31ifrs-full:IssuedCapitalMember549300D2K6PKKKXVNN732023-01-012023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300D2K6PKKKXVNN732023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300D2K6PKKKXVNN732023-01-012023-12-31ifrs-full:ReserveOfGainsAndLossesFromInvestmentsInEquityInstrumentsMember549300D2K6PKKKXVNN732023-12-31ifrs-full:ReserveOfGainsAndLossesFromInvestmentsInEquityInstrumentsMember549300D2K6PKKKXVNN732023-01-012023-12-31ifrs-full:ReserveOfCashFlowHedgesMember549300D2K6PKKKXVNN732023-12-31ifrs-full:ReserveOfCashFlowHedgesMember549300D2K6PKKKXVNN732023-01-012023-12-31ifrs-full:RetainedEarningsMember549300D2K6PKKKXVNN732023-12-31ifrs-full:RetainedEarningsMember549300D2K6PKKKXVNN732023-01-012023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300D2K6PKKKXVNN732023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300D2K6PKKKXVNN732023-01-012023-12-31ifrs-full:NoncontrollingInterestsMember549300D2K6PKKKXVNN732023-12-31ifrs-full:NoncontrollingInterestsMember549300D2K6PKKKXVNN732023-12-31cmn:ConsolidatedMember549300D2K6PKKKXVNN732023-01-012023-12-31cmn:ConsolidatedMember1549300D2K6PKKKXVNN732023-01-012023-12-31cmn:ConsolidatedMember2549300D2K6PKKKXVNN732023-01-012023-12-31cmn:ConsolidatedMember1549300D2K6PKKKXVNN732023-01-012023-12-31cmn:ConsolidatedMember2549300D2K6PKKKXVNN732023-01-012023-12-31cmn:ConsolidatedMember3549300D2K6PKKKXVNN732023-01-012023-12-31cmn:ConsolidatedMember4549300D2K6PKKKXVNN732023-01-012023-12-31cmn:ConsolidatedMember5549300D2K6PKKKXVNN732023-01-012023-12-31cmn:ConsolidatedMember6549300D2K6PKKKXVNN732023-01-012023-12-31cmn:ConsolidatedMember7549300D2K6PKKKXVNN732023-01-012023-12-31cmn:ConsolidatedMember8549300D2K6PKKKXVNN732023-01-012023-12-31cmn:ConsolidatedMember9549300D2K6PKKKXVNN732023-01-012023-12-31cmn:ConsolidatedMember1549300D2K6PKKKXVNN732023-01-012023-12-31cmn:ConsolidatedMember2549300D2K6PKKKXVNN732022-01-012022-12-31cmn:ConsolidatedMemberiso4217:USDiso4217:USDxbrli:sharesxbrli:pureiso4217:DKKxbrli:sharesiso4217:DKK