Annual Report • Feb 10, 2021
Annual Report
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A.P. Møller - Mærsk A/S Esplanaden 50, DK-1098 Copenhagen K / Registration no. 22756214
A.P. Moller - Maersk's ambition is to have net-zero CO2 emissions from ocean operations by 2050
For more than a century, we have built partnerships with customers, enabling them to prosper by facilitating global trade.
1 Part of Financials 2 Part of the Directors' Report
The Annual Report for 2020 of A.P. Møller - Mærsk A/S (hereinafter referred to as A.P. Moller - Maersk as the consolidated group of companies and A.P. Møller - Mærsk A/S as the parent company) has been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU and further requirements in the Danish Financial Statements Act.
From Q1 2020, as part of the refinement of A.P. Moller - Maersk's segment structure to align with the internal management structure and demarcation between the reportable segment activities, a number of changes have been made, see note 23 Significant accounting policies. Comparison figures have been restated.
Unless otherwise stated, all figures in parenthesis refer to the corresponding figures for the same period prior year.
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.
In Alaska, sisters Claire and Emma (pictured) launched a clothing brand, Salmon Sisters, based on their upbringing and work as fishermen. Container shipping helps bring their catch (and clothing) to customers around the world and sustain the unique lifestyle of their remote community.
At a glance
Highlights
Key activities in 2020
Message from the Chairman and the CEO
The progress towards becoming the global integrator of container logistics accelerated in 2020
A.P. Moller - Maersk is an integrated container logistics company, connecting and simplifying trade to help customers grow and succeed. With a dedicated team of over 80,000 employees, operating in 130 countries, we go all the way to enable global trade for a growing world. A.P. Moller - Maersk comprises four business segments with the consolidated key results presented below.
EBITDA increased by USD 2.5bn, with improvements across all segments and with Ocean improving the most by USD 2,1bn.
Revenue increased by USD 850m, despite lower volumes in Ocean and gateway terminals due to the negative impacts from COVID-19.
Free cash flow increased by USD 2.3bn, reflecting a continued capital discipline and higher cash flow from operating activities, lower gross CAPEX and a continued high cash conversion.
Note: 2018 presented as if IFRS 16 had been implemented in 2018, for comparison purposes. For 2016 and 2017, lease liabilities are not included in net interest-bearing debt. Consequently, comparatives for EBITDA and net Interest-bearing debt for the period 2016-2017 are not comparable with the period 2018-2020.
Net interest-bearing debt decreased by USD 2.4bn, mainly driven by increased free cash flow, partly offset by share buy-back, dividends and acquisitions.
Relative CO2 efficiency improved 2.5% (year-over-year) compared to 2019 driven by both technical and operational improvement initiatives.
1 Percentage improvement in Energy Efficiency Operational Indicator (EEOI) relative to 2008 baseline. A more exact calculation was implemented in 2020, and comparison figures have been restated.
Progressing on the strategy
The transformation towards becoming the global integrator of container logistics accelerated in 2020 and all transformation metrics improved further. The metrics relate to growing the A.P. Moller - Maersk logistics business and improve earnings in infrastructure and logistics, while generating free cash flow to ensure a strong balance sheet and to create value for the shareholders of A.P. Moller - Maersk.
A.P. Moller - Maersk significantly improved the free cash flow and generated a cash return on invested capital of 16.6% (10.0%), based on stronger cash flow from operations, lower gross CAPEX and slightly lower invested capital.
Infrastructure and logistics revenue (excl. freight forwarding) increased to USD 9.4bn (USD 9.2bn), mainly due to increased revenue in logistics from warehousing and distribution, due to acquisitions, and supply chain management despite headwinds from gateway terminals, given impacts from COVID-19.
A.P. Moller - Maersk's
9.4bn Infrastructure and
Logistics revenue, USD (excl. freight forwarding)
Logistics & Services EBITDA (excl. freight forwarding and restructuring costs) improved to USD 470m (USD 221m) as a result of margin optimisation in intermodal and warehousing and distribution, supported by the acquisition of Performance Team, a US-based warehousing and distribution company, as well as KGH Customs Services, a leading specialist in trade and customs services management in Europe.
Return on invested capital (ROIC), last twelve months, increased significantly to 9.4% (3.1%), as earnings were strong and invested capital decreased slightly. The underlying return on invested capital increased to 9.6% (3.2%).
New acquisitions Performance Team KGH Customs Services
470m Logistics & Services EBITDA, USD (excl. freight forwarding)
Revenue increased to USD 39.7bn (USD 38.9bn) and the continued focus on a tight cost control, profitability and stronger rates led to a 44% increase in EBITDA to USD 8.2bn and a margin of 20.7% (14.7%). The strong improvement was mainly driven by strong cost savings in Ocean focusing on agile capacity deployment, lower bunker costs and an increase in short-term freight rates. Logistics & Services improved EBITDA 110%, supported by margin optimisation in intermodal and increased profitability in warehousing and distribution facilities in North America, mainly driven by acquisitions. Gateway terminals reported an 8.3% improvement in EBITDA despite of a 3.6% decline in volume, as a result of lower costs.
EBIT improved to USD 4.2bn (USD 1.7bn) reflecting an improvement in the margin to 10.5% (4.4%), while underlying profit was USD 3.0bn (USD 546m).
A.P. Moller - Maersk expects earnings before interest, tax, depreciation and amortisation (EBITDA) in the range of USD 8.5-10.5bn, before restructuring and integration costs and free cash flow above USD 3.5bn.
The outlook for 2021 is subject to uncertainties related to COVID-19, bunker fuel prices and freight rates given the uncertain macroeconomic conditions.
Following the strong earnings development and a cash conversion ratio of 95% (104%), cash flow from operating activities was USD 7.8bn (USD 5.9bn). CAPEX was USD 1.3bn (USD 2.0m), and free cash flow was USD 4.6bn (USD 2.3bn).
CAPEX discipline remains a key focus area, reflected in the accumulated CAPEX guidance of USD 4.5-5.5bn for 2021-2022.
2020 has been a year that has reinforced the customer interest for A.P. Moller - Maersk's digital offerings. Maersk Spot continued to gain significant traction during the year and the use of the Maersk App increased by 300%. Twill has increased weekly volumes which was 13 times larger compared to the same period the previous year and new digital solutions such as Maersk Flow, NeoNav and the Transformation Management System platform in the logistics business were launched to further enhance customer experience and engagement.
acquisition of the US-based warehousing and distribution company, making it one of North America's leading providers.
The terminal has 16 meters of draught and can handle 23 TEU wide vessels. Once fully ramped up, the terminal will have a throughput capacity of 3.5m TEU.
A.P. Moller - Maersk completes the acquisition of the European customs services specialist to further enhance its logistics and services offering.
Digital solutions in demand
300%* increase in usage of the Maersk app *Year-over-year growth
A.P. Moller - Maersk launches Maersk Flow, a digital supply chain management platform to support small and
medium-sized businesses.
Maersk Flow
Launch of Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping by the A.P. Møller Foundation and a group of leading industry players to develop new net-zero fuel types and technologies.
The reorganisation of Ocean and Logistics & Services is complete, and the integration of the Safmarine brand, Damco air freight and LCL will improve customer experience and endto-end service delivery.
The transformation of A.P. Moller - Maersk from a diversified conglomerate to a focused and integrated global logistics company is well under way.
A.P. Moller - Maersk today offers a broad and global portfolio of logistics products from ocean and air transport to inland transportation, warehousing and distribution – including cold storage, customs services and lead logistics products, such as supply chain management services and e-com fulfilment, as well as container port services and towage.
Our strategy is built on three core elements: Firstly, we offer our customers end-to-end digitally enabled transport and logistics services that help them manage their supply chains, sell their products globally, and source from the most competitive suppliers worldwide. For us to deliver superior value to our customers, we have built our land-based logistics and service offerings in a way that seamlessly integrates with our strong, leading and sustainable Ocean business. This enables us to leverage the commercial synergies inherent in selling land-based logistics services to our 70,000 customers in our Ocean business.
Jim Hagemann Snabe Chairman of A.P. Møller - Mærsk A/S
Søren Skou CEO of A.P. Møller - Mærsk A/S
Secondly, we are leveraging the financial and operational synergies between our Ocean business and our Terminals business for lower cost as well as higher productivity and asset utilisation. Owning and operating container ports enables us to control our global transhipment hubs that are crucial for the reliability and cost effectiveness of our Ocean network.
And thirdly, we are building competitive advantage through technology. We are digitising the interaction with our customers while offering unique digital products and leveraging Maersk.com, which is one of the biggest B2B transaction platforms in the world. We are standardising, automating and digitising our core processes as well as our assets, such as ships, containers, warehouses and ports, to manage fuel cost and improve visibility in supply chains, while lowering the overall cost base.
"We have improved our financial performance while we transformed our business."
Since we embarked on our transformation to become the global integrator of container logistics, we have executed the strategy consistently and with discipline. Despite a backdrop of weak trade growth, ongoing trade tensions, geopolitical uncertainty and a pandemic in 2020, we have improved our financial performance while we transformed our business.
We achieved good results in a year with extraordinary demand fluctuations due to COVID-19, which led from a sharp oversupply of capacity in Q1 to a shortage of vessels and equipment in the second half as demand rebounded, leading to a significant increase in short-term freight rates. We leave 2020 with a strong balance sheet which enable us to both increase payouts to our shareholders and fund the transformation that will enable the longterm growth of the company.
The work we have done over the past five years to improve the performance of our Ocean business delivered solid results in 2020. Our acquisition of Hamburg Süd in 2017, our focus on cost, and our disciplined approach to CAPEX were all contributing factors to the delivery of excellent results and strong cash flow in 2020. In parallel, we developed new, unique products such as Maersk Spot, which offers loading guarantee, easy online booking and a fixed price for our short-term customers.
Our Logistics & Services business delivered excellent margin growth in 2020 and good revenue growth, mainly through acquisitions. We restructured further to reduce cost and develop endto-end products. We began the implementation of new technology platforms and recruited new leadership and logistics experts globally. Our
"Since we embarked on our transformation to become the global integrator of container logistics, we have executed the strategy consistently and with discipline."
Logistics & Services business grew revenue to almost USD 7bn with competitive margins and a sound foundation to accelerate growth in the coming years.
In Terminals, we have executed a turnaround since 2016 and the business has shifted its focus from developing new terminals to becoming a worldclass terminal operator. Results and cash generation have steadily improved, also in 2020, despite lower volumes. Due to strong cost performance across all segments, we now have an infrastructure business with resilient returns.
At the Annual General Meeting in 2020, we announced three metrics to track progress on our strategic transformation. During 2020, we progressed well despite challenging market conditions:
• Cash return on invested capital (CROIC), last twelve months, increased to 16.6% (10.0%), due to stronger cash flow from operations, lower gross CAPEX, and lower invested capital.
ROIC, which is the overall return ambition of A.P. Moller - Maersk increased to 9.4% compared to 3.1%, driven by significantly improved earnings.
In 2020, we finished the restructuring of our Ocean and Logistics & Services businesses into one, integrated and simplified organisation to enable further improvements in the customer experience and end-to-end service delivery.
The Safmarine brand and Damco's Air and LCL (Less than Container Load) offerings were integrated into the Maersk brand to enhance customer access to the global offering, while Damco's ocean freight forwarding business has closed from 1 January 2021.
In April 2020, we acquired Performance Team, and in September, we closed the deal on KGH Customs Services, a leading specialist in trade and customs services management in Europe. Both companies are logistics experts within their fields, customer feedback is positive, and we have added important capabilities and immensely strengthened our logistics offering and geographical footprint.
On the digital side, we have benefited from our early investments in digitisation and seen a huge uptake on Maersk.com and the Maersk App, as customers have embraced the digital space even more this year on the back of the pandemic.
Our customers also appreciate the predictability, reliability and ease that Maersk Spot offers. The online booking solution has grown exponentially from 20% of short-term volume in the last four weeks of 2019 to 51% in the same period of 2020 under the Maersk brand. Twill, an online service for small and medium-sized businesses, has also experienced immense growth this year. In 2020, more than 2,500 new customers booked on Twill with volumes exceeding 100,000 FFE, representing a 13 fold year-over-year growth.
In the terminal space, our Pier 400 terminal in Los Angeles is progressing on a multi-year automation programme and has carried out the first commercial, fully automated moves in the third quarter. Digitising our assets enables speed, operational ease, safer operations and lower cost.
Technology and digitisation of our industry are key to the transformation at A.P. Moller - Maersk. Through technology, we are offering new products, connecting and simplifying the customer experience and enabling more efficient operations and utilisation of assets. We want to build sustainable, competitive advantage through the following focus areas:
Firstly, we are building new digital platforms, which enable integrated offerings, standardisation and automation. In particular, TradeLens, which is an open and neutral supply chain platform jointly developed with IBM, continues to gain momentum as new customers, partners, and suppliers onboard. The tenants of this platform are already benefiting from increased visibility of events in their supply chains and reduced costs from having access to a digital bill of lading.
Secondly, we are strengthening our investment in Internet of Things (IoT) and automation of our terminals to drive better management of our physical assets and efficiencies in our operations. In particular, we are building a roadmap to harness near real-time data from devices in our vessels, containers and terminals and drive intelligent decision making in our operations and for our customers.
Thirdly, we are committed to leveraging data as a discrete and differentiating asset that will offer data products, such as visibility, and democratise access to data to serve our customers better.
Our technology roadmap is enabled through a common and scalable enterprise architecture, a cloud-first strategy, and continued investment
in digital cyber security. This is made possible through focused efforts to insource high-value IT-capabilities to develop one of the leading IT organisations in the industry.
The COVID-19 pandemic continues to impact the world. As a global company and industry leader, we have remained focused on protecting our employees, supporting our customers and contributing to the societies we are part of by keeping goods flowing throughout the pandemic – ensuring essential food, protective equipment and medical supplies.
Our colleagues at sea, in our ports and at our warehouses have been in the eye of the storm. They have kept the world's goods moving by showing up to work every day. In particular, our colleagues at sea have contributed by taking longer shifts on board than anyone would have imagined. Our single biggest challenge has been to relieve our seafarers after their tour has ended,
"Technology and digitisation of our industry are key to the transformation at A.P. Moller - Maersk."
due to travel restrictions, closed borders and the constant change of local regulations and requirements. By the end of the year, we had succeeded in relieving due crew members from our vessels and bringing them home to their families and friends.
On shore, we have taken extraordinary measures to protect our workers at ports, warehouses and other frontline locations. Our office-based colleagues have shown their resilience by adapting to working from home to the extent possible, and we have done our outmost to support this change, mentally and physically.
Amid a pandemic that has large impacts on supply chains, customers need flexible and robust solutions. With our integrated approach, we are supporting their end-to-end logistics needs, while controlling the most central assets and offering alternative solutions as borders close, air traffic stops and roads are blocked.
Sustainability continues to be at the top of our agenda, and we are fully committed to our ambition of reducing CO2 emissions as we continue to work towards carbon neutrality in 2050. Our customers are supporting the ambition and demanding responsible transportation of their goods so they can limit their own footprint, and this expectation is also reflected among our investors.
In 2020, we updated our sustainability priorities. Our key focus areas reached a level of maturity where they are now fully integrated into our business practices.
Decarbonising logistics is the one commitment where we can make the greatest contribution to climate action. In June 2020, the A.P. Møller Foundation established the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping to take the next step to develop new fuel types and technologies together with a group of likeminded global industry leaders.
The centre is a non-profit, independent research centre that will work across the entire shipping sector with industry, academia and authorities to find real-life solutions.
We would like to thank the A.P. Møller Foundation for making this possible thereby demonstrating the essence of our shared values and strong leadership in the efforts towards reducing the industry's carbon emissions to zero by 2050.
In addition, we remain committed to our broader sustainability agenda, including our role in multiplying the benefits of trade, contributing to halving food loss and improving the ship recycling industry.
We are proud of the progress made so far and remain committed to all our stakeholders to be an innovative and responsible global integrator of container logistics.
In 2021, we will continue to focus on growing our landside logistics, expanding our product portfolio to all relevant markets and increasing cross-selling and upselling to our customers to deliver profitable, organic growth. In addition, we expect to continue to acquire capabilities and growth platforms, particularly within warehousing and distribution, air freight as well as customs services to further strengthen our integrated product offerings.
In Ocean, our focus will be on developing our existing products further as well as adding new and unique products to our portfolio. We will remain focused on optimising our network and cost structure to ensure we stabilise earnings and deliver good, sustainable returns in our largest business.
"We are fully committed to our ambition of reducing CO2 emissions as we continue to work towards carbon neutrality in 2050."
In Terminals, our focus continues to be on improving the operating performance of our portfolio of ports, financially and operationally. We will drive further synergies with our Ocean business, complete our automation project in Los Angeles and our construction project for a new terminal in Abidjan, Ivory Coast, and mature plans for future growth in our portfolio, including automation.
On May 1, we welcomed our new CFO and member of the Executive Board, Patrick Jany. Patrick brings solid financial experience and a proven record of managing cost discipline and profitable growth through M&As and innovation. We are also happy to welcome Blythe S. J. Masters to the Board of Directors. Blythe has added critical capabilities to the Board with her international outlook and experience within financial services and technology, having extensive knowledge in start-ups, platforms and blockchain.
We would like to thank our 80,000 colleagues deeply for their truly extraordinary efforts to keep trade moving under such challenging conditions.
In times of increased uncertainty, open supply chains and free global trade is more relevant than ever. We remain optimistic about society's ability to recover and committed to building on the strong business momentum and foundation that has now been established as we enter another transformative year for A.P. Moller - Maersk.
Chairman
Søren Skou CEO
A.P. Moller - Maersk reported an EBITDA of USD 8.2bn, and USD 8.3bn excluding restructuring and integration costs, compared to the original guidance of around USD 5.5bn given in February 2020, and in line with the upgraded EBITDA expectations announced in November 2020. The increase in EBITDA of USD 2.5bn was mainly driven by improved earnings in Ocean, led by lower cost from agile capacity deployment and lower bunker cost, as well as increased freight rates. Logistics & Services more than doubled its EBITDA, while Terminals & Towage proved their resilience by maintaining profitability despite a strong impact from the pandemic. Free cash flow increased significantly supported by strong cash flow from operations and continued capital discipline, and as a result, net interest-bearing debt has been significantly reduced and a second share buy-back launched.
A.P. Moller - Maersk reported a revenue of USD 39.7bn (USD 38.9bn) with an increase in Ocean of USD 393m with negative effects from COVID-19 on loaded volumes predominantly in Q2 offset by higher short-term rates and a strong rebound in volumes Q4. In Logistics & Services revenue increased by USD 632m, driven by warehousing and distribution including Performance Team acquired in April 2020, and air freight forwarding. Terminals & Towage and Manufacturing & Others reported a decrease in revenue of USD 141m and USD 122m, respectively, negatively impacted by COVID-19.
EBITDA increased by 44% to USD 8.2bn (USD 5.7bn) with increases in all segments, primarily in Ocean by USD 2.1bn, driven by higher revenue and a lower cost base mainly due to agile capacity deployment combined with a lower bunker price and consumption. This was also supported by the exceptional situation with demand surge leading to bottlenecks in the supply chain and equipment shortage experienced in the second half of 2020. Logistics & Services delivered a strong increase of 110% or USD 238m, driven by acquisitions and profitability increases in intermodal, air freight and warehousing and distribution. The impact from foreign exchange rates was negligible.
EBIT was USD 4.2bn (USD 1.7bn), positively impacted by the improved EBITDA, and the net result from the sale of containers, vessels and facilities, partly offset by impairments du to the market environment in 2020.
Return on invested capital (ROIC), last twelve months, increased to 9.4% (3.1%), as earnings improved significantly and invested capital was slightly reduced.
Financial expenses, net, amounted to USD 879m (USD 758m), positively impacted by lower gross debt, more than offset by negative foreign
| USD million | Revenue | EBITDA | CAPEX 1 | 1 See definition | |||
|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | on page 148. | |
| Ocean | 29,175 | 28,782 | 6,545 | 4,436 | 653 | 1,172 | |
| Logistics & Services | 6,963 | 6,331 | 454 | 216 | 109 | 126 | |
| Terminals & Towage | 3,807 | 3,948 | 1,205 | 1,118 | 457 | 532 | |
| Manufacturing & Others | 1,254 | 1,376 | 165 | 136 | 33 | 204 | |
| Unallocated activities, eliminations, etc. | -1,459 | -1,547 | -143 | -194 | 70 | 1 | |
| A.P. Moller - Maersk consolidated – continuing operations |
39,740 | 38,890 | 8,226 | 5,712 | 1,322 | 2,035 |
exchange rate impacts and costs relating to prepayment of borrowings.
Tax decreased to USD 407m (USD 458m). The effective tax rate decreased as a larger proportion of profit before tax was earned in the Ocean segment, subject to tonnage taxation.
Net profit was USD 2.9bn (loss of USD 44m) due to significant improvement in operating earnings, while the result for discontinued operations in 2019 negatively impacted the net loss of USD 553m due to a fair value adjustment with Maersk Drilling being demerged on 2 April 2019.
The underlying net profit after financial items and tax was USD 3.0bn (USD 546m), due to the improved operational performance.
Cash flow from operating activities was USD 7.8bn (USD 5.9bn), positively impacted by an increase in EBITDA of USD 2.5bn, a decrease in tax paid of USD 77m, offset by negative change in net working capital of USD 239m (positive USD 476m), leading to a cash conversion of 95% (104%).
Gross capital expenditure (CAPEX) was USD 1.3bn (USD 2.0bn), and lower than guidance of USD 1.5bn due to lower investments in all segments.
Free cash flow was USD 4.6bn (USD 2.3bn), positively impacted by higher cash flow from operating activities and lower gross CAPEX, but partly offset by higher increased lease payments.
Cash flow from borrowings was negative USD 1.9bn (negative USD 1.5bn), due to repayments of USD 3.2bn, partly offset by USD 1.3bn of new funding, which was driven by precautions taken due to COVID-19 in Q2.
Contractual capital commitments totalled USD 1.7bn (USD 1.7bn), of which USD 1.3bn is related to commitments towards terminal concession grantors. Strong commitment to capital discipline and free cash flow generation continue to be a key strategic focus.
Net interest-bearing debt decreased to USD 9.2bn (USD 11.7bn), as free cash flow of USD 4.6bn was partly offset by share buy-back of USD 806m, dividends of USD 520m including dividend to non-controlling interest, acquisitions of USD 425m, and a net increase in lease liabilities of USD 170m. Net interest-bearing debt excluding lease liabilities decreased to USD 485m (USD 3.1bn).
A.P. Moller - Maersk remains investment grade-rated and holds a Baa3 (positive) rating from Moody's and a BBB (positive) rating from Standard & Poor's.
Total equity was USD 30.9bn (USD 28.8bn), mainly due to a net profit of USD 2.9bn and addition of non-controlling interest of USD 288m partly offset by dividends of USD 520m and share buy-back of USD 806m, resulting in an equity ratio of 55.0% (52.1%).
The liquidity reserve of USD 11.0bn (USD 10.5bn), composed of liquid funds of USD 4.8bn excluding restricted cash (USD 3.8bn) and undrawn revolving credit facilities of USD 6.2bn (USD 6.6bn).
The ordinary dividend of DKK 150 per A.P. Møller - Mærsk A/S share of nominally DKK 1,000 (in total equal to USD 430m) declared at the Annual General Meeting on 23 March 2020 was paid on 26 March 2020. Of the DKK 150, DKK 75 was related to the underlying profit of the financial year 2019, and DKK 75 was related to gain from the sale of Total S.A. shares.
We have a strong balance sheet and are committed to remaining investment grade-rated.
The Board of Directors proposes an ordinary dividend to the shareholders of DKK 330 per share of DKK 1,000 (DKK 150 per share of DKK 1,000) corresponding to 35% of underlying net result as per the company's dividend policy of distributing between 30-50% of the underlying net result to
The proposed dividend payment represents an ordinary dividend yield of 2.4% (1.6%), based on the Maersk B share's closing price of DKK 13,595 as of 30 December 2020. Payment is expected to take place on 26 March 2021.
shareholders in dividend.
The share buy-back programme initiated in Q2 2019 was concluded on 24 July 2020 and A.P. Moller - Maersk has repurchased USD 1.5bn worth of shares.
On 1 June 2020, the cancellation of 156,977 A shares and 627,938 B shares was completed corresponding to 3.77% of the total share capital in A.P. Moller - Maersk.
In November 2020, the Board of Directors decided to initiate a new share buy-back programme of DKK 10bn (around USD 1.6bn) and the programme will run from December 2020 over a period of up to 15 months.
This will conclude the distribution associated with the sale of Maersk Oil and any further distribution to shareholders will come from the continuing business activities.
During Q4, A.P. Moller - Maersk bought back 10,306 A shares and 41,232 B shares worth DKK 673m (around USD 110m).
At 31 December 2020, A.P. Moller - Maersk owns a total of 119,176 A-shares and 505,281 B-shares as treasury shares, corresponding to 3.47% of the share capital.
Given the current outlook and high degree of uncertainty related to the continued impact from COVID-19 on the economic growth and global demand patterns, A.P. Moller - Maersk expects for the full-year 2021:
As part of the full-year guidance for 2021, A.P. Moller - Maersk expects the current exceptional situation with the demand surge leading to bottlenecks in the supply chain and equipment shortage, which contributed by approximately USD 1.5bn to EBIT in 2020, to continue in Q1 and normalise thereafter. Consequently, A.P. Moller - Maersk expects profitability in Q1 2021 to be above Q4 2020.
Ocean is expected to grow in line with the global container demand at an expected 3-5% in 2021, with the highest growth seen in the first half-year.
For the years 2021-2022, the accumulated CAPEX is still expected to be USD 4.5-5.5bn.
Underlying EBITDA is earnings before interest, taxes, depreciation and amortisation adjusted for restructuring and integration costs.
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.
Financial performance for A.P. Moller - Maersk for the full year 2021 depends on several factors and is subject to uncertainties related to COVID-19, bunker fuel prices and freight rates given the uncertain macroeconomic conditions.
All else being equal, the sensitivities for the full year 2021 for four key assumptions are listed in the table below:
| Factors | Change | Effect on EBIT (midpoint of guidance) (Full year 2021) |
|---|---|---|
| Container freight rate | +/- 100 USD/FFE | +/- USD 1.3bn |
| Container freight volume | +/- 100,000 FFE | +/- USD 0.1bn |
| Bunker price (net of expected BAF coverage) | +/- 100 USD/tonne | +/- USD 0.4bn |
| Rate of exchange (net of hedges) | +/- 10% change in USD | +/- USD 0.2bn |
| Income statement | 2020 | 2019 | 20181 | 20175 | 20165 | 1 Following the classification of Maersk Oil, Maersk |
|---|---|---|---|---|---|---|
| Revenue | 39,740 | 38,890 | 39,257 | 31,189 | 27,646 | Tankers, Maersk Drilling and Maersk Supply Service as discontinued operations in 2017, the businesses are pre |
| Profit before depreciation, amortisation and impairment losses, etc. (EBITDA) | 8,226 | 5,712 | 4,998 | 3,546 | 2,579 | sented separately on an aggregated level in the income |
| Depreciation, amortisation and impairment losses, net | 4,541 | 4,287 | 4,756 | 3,263 | 3,851 | statement, balance sheet and cash flow statements. In |
| Gain on sale of non-current assets, etc., net | 202 | 71 | 166 | 153 | 189 | accordance with IFRS, the income statement and cash |
| Share of profit/loss in joint ventures and associated companies | 299 | 229 | 1 | -30 | 75 | flow statement have both been restated in previous |
| Profit/loss before financial items (EBIT) | 4,186 | 1,725 | 409 | 406 | -1,008 | periods, while the balance sheet has not been restated |
| Financial items, net | -879 | -758 | -766 | -620 | -549 | in previous periods. The Maersk Tankers transaction was closed 10 October 2017, the Maersk Oil transaction |
| Profit/loss before tax | 3,307 | 967 | -357 | -214 | -1,557 | 8 March 2018 and Maersk Drilling was demerged on |
| Tax | 407 | 458 | 398 | 232 | 146 | 2 April 2019. 2018 is presented as if IFRS 16 had been |
| Profit/loss for the year – continuing operations | 2,900 | 509 | -755 | -446 | -1,703 | implemented in 2018. |
| Profit/loss for the year – discontinued operations1 | - | -553 | 3,787 | -719 | -194 | 2 Underlying profit/loss is profit/loss for the period from |
| Profit/loss for the year | 2,900 | -44 | 3,032 | -1,165 | -1,897 | continuing operations adjusted for net gains/losses from |
| A.P. Møller - Mærsk A/S' share | 2,850 | -84 | 2,985 | -1,205 | -1,939 | sale of non-current assets, etc. and net impairment losses as well as transaction, restructuring and integration |
| Underlying profit/loss – continuing operations2 Balance sheet |
2,960 | 546 | -61 | 286 | -547 | costs related to acquisitions/divestments. The adjust ments are net of tax and include A.P. Moller - Maersk's share of mentioned items in associated companies and joint ventures. |
| Total assets | 56,117 | 55,399 | 62,690 | 63,227 | 61,118 | 3 Compared to prior periods, the definition of net interest bearing debt has been adjusted to include fair value of |
| Total equity | 30,854 | 28,837 | 33,205 | 31,425 | 32,090 | the derivatives hedging the underlying debt. The adjust |
| Invested capital | 40,121 | 40,555 | 49,255 | 46,297 | 43,491 | ment is not reflected in 2016 and 2017. |
| Net interest-bearing debt3 | 9,232 | 11,662 | 14,953 | 14,971 | 11,420 | 4 Excluding Hamburg Süd for comparison purposes end |
| Investments in non-current assets – continuing operations | 4,430 | 9,809 | 10,772 | 9,656 | 4,710 | of December 2017. 5 2016 and 2017 are presented without impact of IFRS 16. |
| Cash flow statement | ||||||
| Cash flow from operating activities4 | 7,828 | 5,919 | 4,442 | 3,115 | 1,675 | |
| Gross capital expenditure, excl. acquisitions and divestments (CAPEX) | 1,322 | 2,035 | 3,219 | 4,050 | 2,105 | |
| Cash flow from financing activities | 5,618 | 4,800 | 8,080 | 532 | 725 | |
| Free cash flow | 4,648 | 2,340 | -295 | -1,273 | -696 | |
| Net cash flow from discontinued operations | - | -372 | 3,968 | 1,824 | 822 |
| Financial ratios2 | 2020 | 2019 | 2018 1 | 20175 | 20165 | 1 Following the classification of Maersk Oil, Maersk |
|---|---|---|---|---|---|---|
| Revenue growth | 2.2% | -0.9% | 25.9% | 12.8% | -10.1% | Tankers, Maersk Drilling and Maersk Supply Service as discontinued operations in 2017, the businesses are pre |
| EBITDA margin | 20.7% | 14.7% | 12.7% | 11.4% | 9.3% | sented separately on an aggregated level in the income |
| Cash conversion | 95% | 104% | 89% | 88% | 65% | statement, balance sheet and cash flow statements. In |
| Return on invested capital after tax – continuing operations (ROIC) | 9.4% | 3.1% | 0.2% | 0.6%3 | -3.4% | accordance with IFRS, the income statement and cash |
| Return on equity after tax | 9.7% | -0.1% | 9.3% | -3.6% | -5.8% | flow statement have both been restated in previous |
| Equity ratio | 55.0% | 52.1% | 53.0% | 49.7% | 52.5% | periods, while the balance sheet has not been restated |
| in previous periods. The Maersk Tankers transaction was closed 10 October 2017, the Maersk Oil transaction |
||||||
| Stock market ratios | 8 March 2018 and Maersk Drilling was demerged on | |||||
| Earnings per share – continuing operations, USD | 145 | 23 | -37 | -11 | -25 | 2 April 2019. 2018 is presented as if IFRS 16 had been |
| Diluted earnings per share – continuing operations, USD | 145 | 23 | -37 | -11 | -25 | implemented in 2018. |
| Cash flow from operating activities per share, USD | 399 | 288 | 214 | 150 | 61 | 2 Underlying profit/loss is profit/loss for the period from |
| Ordinary dividend per share, DKK | 330 | 150 | 150 | 150 | 150 | continuing operations adjusted for net gains/losses from sale of non-current assets, etc. and net impairment losses |
| Ordinary dividend per share, USD | 55 | 22 | 23 | 24 | 21 | as well as transaction, restructuring and integration |
| Share price (B share), end of year, DKK | 13,595 | 9,608 | 8,184 | 10,840 | 11,270 | costs related to acquisitions/divestments. The adjust |
| Share price (B share), end of year, USD | 2,246 | 1,439 | 1,255 | 1,746 | 1,597 | ments are net of tax and include A.P. Moller - Maersk's |
| Total market capitalisation, end of year, USD million | 41,957 | 28,000 | 25,256 | 35,419 | 32,215 | share of mentioned items in associated companies and |
| joint ventures. | ||||||
| Environmental and social data | 3 Excluding Hamburg Süd for comparison purposes end of December 2017. |
|||||
| Relative CO2 reduction (percentage vs 2008 baseline)4 | 46.3% | 44.9% | 42.1% | 39.6% | 40% | 4 Relative CO2 reduction is measured using EEOI (Energy |
| Fatalities | 1 | 5 | 7 | 7 | 2 | Efficiency Operational Indicator) as defined by IMO in |
| Lost-time injury frequency (LTIf) | 1.27 | 1.16 | 1.29 | 0.89 | N/A | MEPC.1/Circ.684 and calculated as g CO2/(tonne x NM). |
| Women in leadership (% based on headcount) | 28% | 27% | 25% | 23% | N/A | In 2020, improvement of the underlying methodology |
| resulted in a more exact calculation of historical per |
Tankers, Maersk Drilling and Maersk Supply Service as discontinued operations in 2017, the businesses are presented separately on an aggregated level in the income statement, balance sheet and cash flow statements. In accordance with IFRS, the income statement and cash flow statement have both been restated in previous periods, while the balance sheet has not been restated in previous periods. The Maersk Tankers transaction was closed 10 October 2017, the Maersk Oil transaction 8 March 2018 and Maersk Drilling was demerged on 2 April 2019. 2018 is presented as if IFRS 16 had been implemented in 2018.
2 Underlying profit/loss is profit/loss for the period from continuing operations adjusted for net gains/losses from sale of non-current assets, etc. and net impairment losses as well as transaction, restructuring and integration costs related to acquisitions/divestments. The adjustments are net of tax and include A.P. Moller - Maersk's share of mentioned items in associated companies and joint ventures.
3 Excluding Hamburg Süd for comparison purposes end of December 2017.
4 Relative CO2 reduction is measured using EEOI (Energy Efficiency Operational Indicator) as defined by IMO in MEPC.1/Circ.684 and calculated as g CO2/(tonne x NM). In 2020, improvement of the underlying methodology resulted in a more exact calculation of historical performance. Data for previous years are restated to align with the updated methodology.
5 2016 and 2017 are presented without impact of IFRS 16.
The global economy sharply deteriorated in the spring and early summer of 2020 as a direct consequence of the COVID-19 led country lockdowns. Since then, a moderate recovery occurred as countries partially reopened and households and businesses were supported by fiscal transfers. However, the pandemic entered a second wave towards the end of 2020, which adds to the downside risk in early 2021. Social distancing and country lockdowns weighed more heavily on consumptions of services than on goods consumption, which supported a faster recovery of container trade compared to the broader economy, and at the end of 2020, global container volumes were higher than at the end of 2019. Dynamics in economic activity, trade and demand patterns will be highly dependent on the further development of the COVID-19 pandemic also in 2021 with the roll-out of a vaccine during the year.
This development was most noticeable in the US. Despite the ongoing partial lockdown, US personal disposable income rose by 6.3% in 2020, due to fiscal support through the CARES Act to tackle economic implications of COVID-19. The act included recovery rebates and extra unemployment insurance benefits. However, a good part of the higher incomes was set aside as extra savings, and total US consumption decreased by around 4.6% in 2020. The consumption decline was entirely driven by services down by 7.3%, while goods consumption increased by 3.8%. The increase in US goods consumption drove up container demand in H2. In fact, North American container imports were 24% higher at the end of 2020, compared to the end of 2019. A similar division of growth between goods and services consumption
was recorded in Europe, although European COVID-19 restrictions were tougher and the increase in goods demand was more muted.
Going forward, it is highly uncertain if goods consumption will continue to drive up container demand. The support from higher household income may diminish as unemployment has remained high and consumer confidence is well below pre-COVID-19 levels. Moreover, a continuation of the massive fiscal support is uncertain in the near-term, particularly in the US, if political gridlock prolongs decision making. Finally, households' appetite for services, such as travelling, could initially take up a larger share of the wallet than usual if a vaccine becomes widely available and countries reopen later in 2021.
As a direct consequence of the COVID-19 pandemic, household salary income declined in 2020. While a substantial part of the income loss was compensated by extensive supporting fiscal programmes and monetary policy in many countries, total consumption demand suffered, some parts of consumption more than others (chart 1). The country lockdowns in H1 and the subsequent social distancing and travel restrictions led to a collapse in services consumption. At the same time, consumers spent a larger part of their income on physical goods such as electronics and furniture on the back of the protected disposable income and pent-up demand. This pattern coincided with a surge in e-commerce. Consequently, the fall in goods demand became much less pronounced than in services demand.
Global container trade declined in 2020, following the COVID-19 pandemic. Growth improved to around 5% in Q4 2020, but the sharp contraction in Q2 led to a full-year negative growth of 2%, considerably weaker than in 2019. The 2020 slowdown reflected the broad-based crisis across all the main economies, although the H2 2020 recovery was faster than projections made during spring. The second wave of COVID-19 weighs on the early part of 2021, while the roll-out of an effective vaccine could have a positive impact on H2 2021.
Effective supply growth was contained during the year, as the industry adjusted fleet capacity to the deteriorating demand, and market fundamentals were broadly balanced. However, a significant demand rebound in the US and partially in Europe
together with extensive equipment shortages drove up freight rates in H2, and freight rates increased by 18% compared to 2019.
Container trade growth on the East-West trades declined by 2% in 2020 (table 1). European import growth from Asia was heavily impacted by the COVID-19 pandemic in H1 and declined by 13%, first by lockdowns in China and later by lockdowns in Europe. The subsequent recovery in H2 was not strong enough to offset the initial decline. North American container imports from Asia also declined in H1 by 9.5%, but inventory restocking and a significant spike in US goods consumption fuelled by a housing boom and fiscal stimulus lifted full year import growth to around 4% in 2020. Asian imports from the US and Europe (East-West backhaul) showed a moderate decline during most quarters
2019 2020 2019 2020
As a COVID-19 vaccine becomes widely available during 2021, there is reason to believe that container demand will grow, possibly by 3-5% in 2021.
Chart 1
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Particularly Q2 2021 will likely be high compared to Q2 2020 when country lockdowns were at their peak. However, there is substantial uncertainty about the container demand outlook in 2021. The strong goods demand that supported container volumes in 2020 could partially reverse if spending on services makes up for lost ground in 2021. Moreover, the continuation of adequate fiscal transfers in 2021 is uncertain. Finally, labour markets remain under pressure, and unemployment rates are still significantly higher than before the pandemic broke out. Upside potential mainly stems from further inventory restocking and a very fast and effective broadly distributed COVID-19 vaccine that stimulates broad-based recovery in labour markets, incomes, and business investment.
The global container fleet stood at 24m TEU at the end of 2020, 3% higher than at the end of 2019. Deliveries amounted to 856k TEU (135 vessels) and mainly entered the fleet in H2. 205k TEU were scrapped, with most deletions occurring in Q2 when container demand declined sharply. Idling totalled 1% (311 TEU) of the fleet at the end of 2020. The idle fleet had increased extensively in the beginning of the year as the container industry adjusted the active fleet to the very weak demand (chart 2). As demand recovered in Q3, the idle fleet was swiftly reactivated. Effective capacity declined 3% in 2020 (chart 2). 1,148 TEU were ordered in 2020, corresponding to orderbook-to-fleet ratio of 11% at the end of the year. According to Alphaliner, the nominal global container fleet will grow by 4% in 2021.
| Table 1 Market demand growth |
|||||
|---|---|---|---|---|---|
| Growth % (Y/Y) | 2020 | 2019 | |||
| Global market | -2.0 | 1.5 | |||
| East-West | -2.3 | 1.3 | |||
| – Headhaul | -1.7 | 0.6 | |||
| Asia-Europe | -4.2 | 2.9 | |||
| Asia-North America | 4.4 | -2.1 | |||
| – Backhaul | -3.6 | 2.7 | |||
| North-South | -4.1 | 1.2 | |||
| Intra-regional | -0.2 | 2.1 |
-2%
+18%
+3%
The COVID-19 led contraction in Q2 was followed by strong recovery in H2
Consumption pick-up and vessel and equipment shortages pushed freight rates higher
Container fleet supply
While the nominal container fleet increased, adjustments to idling and blanked sailings led to a decline in the effective supply
Freight rates, as measured by the China Composite Freight Index (CCFI), were on average 18% higher in 2020 compared to 2019 (chart 3). While global supply and demand was broadly balanced, the unprecedented demand pick-up on key headhaul trades such as Asia-US in H2 2020 together with vessel and equipment shortages and bottlenecks across the entire supply chain supported freight rates. Asia to US West Coast freight rates increased by 28%, and Asia to US East Coast rose by 18%. Freight rates also increased on the Asia to North Europe trades, albeit at a more moderate pace of 13%, but strengthened by 23% from Asia to Mediterranean Europe. Uncertainties relating to the strength of container demand continue to pose a risk to the developments of freight rates in 2021, including the normalisation of the situation with
vessel and equipment shortages and bottlenecks across the entire supply chain experienced in the last part of 2020.
Towards the end of 2019, the industry's switch to 0.5% sulphur fuel oils amid a tight and nervous market pushed low sulphur fuel oil prices higher. High sulphur fuel oil prices in Singapore and Rotterdam hence declined by 33% and 29% from 2019 to 2020, respectively, as market supply and demand dynamics calmed and the pandemic spread worldwide, averaging USD 273/ tonne and USD 248/tonne in 2020. Similarly, low sulphur fuel oil prices fell by 34% and 37% in Singapore and Rotterdam from 2019 to 2020, averaging USD 371/tonne and USD 329/tonne, respectively. Lower sulphur 0.1%S marine gasoil prices
followed the downwards trend as it dived 35% to USD 390/tonne in Singapore and 35% to USD 367/tonne in Rotterdam in 2020 over 2019. Fuel oil prices have not fallen as drastically as the rest of the refined oil products in light of the demand destruction from the global pandemic and are supported by the strong and robust container shipping industry.
Singapore strengthened its position as the world's largest bunker port, with its total bunker sales increasing by an impressive 5% in 2020 amid a global pandemic and economic downturn. Bunker prices have experienced an extremely volatile period last year at the crux of the COVID-19-induced pandemic. The difference between the low sulphur 0.5% fuel oil and high sulphur 3.5% fuel oil spread, also known as the hi5, plunged drastically since the start of the year, but there are signs that the spread may pick up in 2021 with Singapore continuing to be the more active pricing centre followed by Rotterdam. A.P. Moller - Maersk expects further volatility in the fuel prices in major trading regions through mid-2021 during this uncertain period.
Terminals and Logistics & Services market update
The other transport and logistics markets were in broad terms impacted by the dynamics and market drivers that steered the ocean industry, above all the COVID-19 pandemic. According to Drewry, port throughput volumes decreased by 2.1% in 2020, with ports in most regions recording negative growth rates. In line with projections for ocean trade, global port throughput growth is expected to grow significantly in 2021. The container port industry continues to combat structural
challenges stemming from the cascading of large container vessels, reinforced carrier alliances and capacity increases in many ports.
The large shifts in global trade volumes in 2020 also impacted the broader logistics segment. While the deterioration of trade and country lockdowns in H1 led to a volume decline in most segments, the subsequent recovery, above all in the US, supported volume activity in the freight forwarding market. The air forwarding market additionally gained from increased e-commerce trading during the lockdowns.
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Throughout the year under very difficult circumstances, A.P. Moller - Maersk was never closed for business
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A.P. Moller - Maersk enables our customers to trade and grow by transporting goods anywhere. We work to provide customers with end-to-end products and services, taking the complexity out of global value chains.
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2020 marked the fourth year of A.P. Moller - Maersk's transformation from a conglomerate to the global integrator of container logistics.
Despite the subversive effects of COVID-19 on the lives and business of A.P. Moller - Maersk employees and customers alike, the disciplined and consistent strategy execution continued and delivered tangible results through the year. Financial performance improved markedly, and previous year's efforts to improve customer service in general and digitisation in particular paid off. Through outstanding efforts from its front line personnel, not least from its seafarers, A.P. Moller - Maersk took pride in being able to sustain its global operation and keep global supply chains moving throughout the pandemic.
An important element of the global integrator strategy is to strengthen the logistics product portfolio, notably on the landside by improving and innovating existing products, as well as acquiring capabilities and product offerings through acquisitions. In 2020, A.P. Moller - Maersk strengthened its product offering to customers along the endto-end value chain.
On 1 April, A.P. Moller - Maersk closed the acquisition of Performance Team, a US-based warehousing and distribution company, which, combined with the 2019 acquisition of Vandegrift, a US-based customs services company, has meant a significant strengthening of the land-based logistics services to US customers. On 2 September, A.P. Moller - Maersk closed the acquisition of KGH Customs Services, a Sweden-based pan-European customs services provider, hereby enhancing the end-to-end offering to customers with European imports and exports. These acquisitions were part of a general upgrade and improvement of A.P. Moller - Maersk's Logistics & Services business, which through the year grew EBITDA to USD 470m or more than twice the size of 2019.
The Ocean product offering was also strengthened through 2020 as the Maersk Spot product, launched in Q2 2019, was rolled out globally and with its superior offering of transparent price and equipment guarantee, it saw strong uptake with customers. By the end of 2020, the Spot product made up 51% of the total loaded short-term, volumes under Maersk brand (excl. Sealand and Hamburg Süd), and is well under way to becoming A.P. Moller - Maersk's primary offering in the short-term market.
6,000 FFE Weekly bookings for Ocean customers
2 Seamless customer engagement
Adding more products is fundamental towards becoming the global integrator of container logistics, but equally important is the ability to combine these products into tailored customer value propositions, and more effectively serve the customers' needs, notably through digital solutions. The COVID-19 situation accelerated A.P. Moller - Maersk's customers' need for digital engagement and services, and A.P. Moller - Maersk benefited from previous investments into its technology stack, including maersk.com and other online offerings.
Twill, a solution dedicated for small and mediumsized Ocean customers, ended the year with weekly bookings in excess of 6,000 FFE, which was more than 13 times the weekly volumes compared to the same period the previous year. In July, a new digital offering, Maersk Flow, was introduced for small and medium-sized customers and partners to take control of their supply chain from factory to market. In October, a new cloud-based supply chain management platform was launched, aimed at larger customers with complex supply chains. The new platform will replace A.P. Moller - Maersk's existing offering and provide more integrated services and solutions, high levels of automation, self-service opportunity, as well as improved analytical functionalities.
Another important platform and enabler of digitisation is TradeLens, the open and neutral supply chain platform underpinned by blockchain technology, which A.P. Moller - Maersk is developing jointly with IBM. In October, the world's second and third largest container carriers, MSC and CMA-CGM, announced that they were integrated onto TradeLens. This means that TradeLens now covers more than 50% of the global Ocean market. The other parts of the TradeLens ecosystem also grew in 2020 and now covers more than 120 ports/terminals, 24 customs authorities, and a growing inland presence.
A.P. Moller - Maersk simplified its organisation in Ocean and Logistics further by streamlining the frontline organisation and integrating and closing down the Safmarine and Damco brands. Furthermore, A.P. Moller - Maersk initiated a re-organisation of the headquarter technology and commercial functions into a number of platforms, each delivering dedicated business and customer outcomes. This reorganisation marked a further integration of digital technology into the A.P. Moller - Maersk organisation and enables faster and more agile development of new products and services, as well as a quicker and more effective modernisation of legacy technology.
Customer satisfaction was impacted by the disruptive effects of COVID-19, but is now again increasing and has remained strong with key customers throughout the year.
With the launch of Maersk Flow in Q3 of 2020, A.P. Moller - Maersk is now offering a digital supply chain management tool for mid-size customers to improve their supply chain performance through better visibility and control of their shippers, carriers and shipments. This marked the entry into a customer segment A.P. Moller - Maersk has earlier struggled to serve well and which was extra challenged by the supply chain disruptions caused by the COVID-19 pandemic.
Maersk NeoNav, launched in December 2020, have significantly upgraded A.P. Moller - Maersk's capabilities in the supply chain planning and orchestration areas. With Maersk NeoNav, A.P. Moller - Maersk is among others able to connect customers' demand data with data on inventories and cargo flows and thus optimise these parts of the supply chain in near real time, leading to very significant value realisation. This innovative new product has been well received by customers with large, global supply chains and is currently in the implementation phase with two very large customers.
Of the global Ocean market is covered by TradeLens
The bedrock of the strategy of A.P. Moller - Maersk is a superior delivery network end-to-end, which delivers on fundamental needs for getting goods to the right place, at the right time, at the right price, with minimum environmental impact.
The COVID-19 pandemic stressed the global supply chains to a degree never experienced before. A.P. Moller - Maersk takes pride in being able to continue to serve its customers' global transportation needs and supply chains throughout the year under very difficult circumstances. A.P. Moller - Maersk was never closed for business.
3 Superior delivery network
end-to-end
| A.P. Moller - Maersk cash return on invested capital1 | 16.6% | 10.0% |
|---|---|---|
| Infrastructure and Logistics revenue2, USDm | 9,428 | 9,201 |
| Logistics & Services EBITDA2, USDm | 470 | 221 |
2020 2019 1 Last twelve months 2 Excluding freight forwarding and restructuring costs
| Return on invested capital1 | 9.4% | 3.1% |
|---|---|---|
| Underlying return on invested capital1 | 9.6% | 3.2% |
| Return on invested capital1 | 9.4% | 3.1% |
|---|---|---|
| Underlying return on invested capital1 | 9.6% | 3.2% |
On 1 April 2020, A.P. Moller - Maersk closed the acquisition of Performance Team, which has further strengthened the capabilities of A.P. Moller - Maersk as an integrated container logistics company offering customers end-to-end services.
The integration of Performance Team's engineered solutions and distribution centre capabilities to retail, wholesale and direct to consumer services with Maersk Warehousing & Distribution0s regional network in the US and Canada is progressing according to plan. In a time where transparency and resilience in supply chains have been increasingly important for customers, the extended offering of increased flexibility and value adding services have contributed significantly to the growth of Logistics & Services with
a revenue of USD 398m and an EBITDA of USD 59m. Looking ahead into 2021, our focus will be on driving commercial synergies and cross-selling to Maersk Ocean customers as part of the integrated container logistics strategy.
The many challenges caused by the pandemic and the related volatility in supply and demand emphasised the strength of having operational control over the critical parts of the global logistics supply chains. A.P. Moller - Maersk was able to leverage its operational control of vessels, warehouses, and terminals and co-developed new innovative solutions and products with customers in response to the disruptions. The main customer problems typically related to speed and/or flexibility of the supply chain, and examples of new solutions were storage in transit, dedicated air charters, and seaborne e-commerce solutions.
"Having premium assets in warehousing and distribution in 2020 was vital to meet unprecedented customer demand and keep pace with ecommerce growth."
— Craig Kaplan, CEO Performance Team.
To measure the strategic transformation towards becoming the global integrator of container logistics and the ability of A.P. Moller - Maersk to create shareholder value, three metrics are tracked besides the overall ROIC target (see table).
On the back of the improvement in profitability and positive cash flow generation during 2020, positive developments were seen across all transformation metrics.
Cash return on invested capital (CROIC), last twelve months, increased to 16.6% (10.0%), due to stronger cash flow from operations, lower gross CAPEX and slightly lower invested capital.
Infrastructure and Logistics revenue (excl. freight forwarding) increased to USD 9.4bn (USD 9.2bn), mainly due to the increased revenue in logistics from warehousing and distribution and supply chain management, only partly offset by lower revenue in gateway terminals because of the impacts of COVID-19.
Logistics & Services EBITDA (excl. freight forwarding and restructuring costs) improved to USD 470m (USD 221m) due to margin optimisation in intermodal and warehousing and distribution, supported by the acquisition of Performance Team in April, as well as KGH Customs Services in September.
The reorganisation of Ocean and Logistics & Services is complete and the integration of the Safmarine brand, Damco air freight, and LCL will improve customer experience and end-to-end service delivery
ENABLING GROWTH | Learn how the digital benefits of Twill help SMEs spend less efforts on supply chains and more time growing their business. Interview with Jan Peacock, International Sales Manager at Isaac H. Grainger & Son Ltd.
By Jesper Toft Madsen
Jan Peacock, International Sales Manager at Isaac H. Grainger & Son Ltd.
» Isaac H. Grainger & Son Ltd. is a 150-year-old manufacturing company based outside Birmingham in the UK. We manufacture metal products for Raised Access Flooring, which is the type of floor you're standing on in your office so that you can plug your computers into the floor or install air conditioning rather than cables coming down the wall. We manufacture this product in the UK and in India, and it's used around Europe.
» To manufacture the full flooring system, we need to ship products from the UK to Spain and from India to the UK and Spain. That's where seamless, door-to-door shipping becomes very important.
» We're not a huge customer that ships thousands of containers and has a fixed contract. We order containers as we need them, and the biggest issue for us has been reliability as we operate with a door-to-door policy. This means that if a customer wants a container, we need to tell them the cost of the product, the transportation cost and the arrival date. The biggest problem has been to get a price as this could take as long as two weeks via an agent or freight forwarder. The delivery was also very hard to track and manage when it wasn't on a vessel. Twill solved these problems.
In 2020, more than 2,500 new customers booked on Twill with volumes exceeding 100,000 FFE, representing a 13 fold year-overyear growth.
» For our import business in the UK, they are absolutely critical as we're known for producing products with fairly short notice. The customers don't care if we manufacture in the UK or in India, they just want their product delivered to the construction site on time.
» The platform is very useful. If I log into Twill today, I should be able to, let's say ship a container in ten days' time from India to our factory outside Madrid, Spain, by checking the available ships and the price.
» If our factory manager in India says we're able to ship a bit earlier, I can do this via the platform rather than having to call someone and wait for confirmation. This flexibility is very important to us because we save time and hassle. Shipping should be like Amazon, that's the standard these days. Twill knows who you are, you make your booking, get confirmation and my guys in India can log in and talk to their Twill contact locally – it's a smooth system.
» Our specialty is not logistics. In the past, we spent 10-15% of our time chasing logistics. Our specialty is manufacturing steel products and that's where I want to spend my time. That's why I'm enthusiastic about Twill as there wasn't anything like it when it came. It's like Amazon for shipping.
Sustainability
In an unprecedented year of pandemic, sustainability remained at the top of the agenda of A.P. Moller - Maersk and core to the its values. Efforts on decarbonisation are being intensified while integrating sustainability even further into business strategy.
A.P. Moller - Maersk's sustainability efforts have matured over the last decade with increasing ambitions matching the maturity of the field and the expectations of leading customers. A.P. Moller - Maersk wants to take responsibility in line with the company's values and commitments, and to assume a leadership position on global issues where the competencies and leverage are sufficient to make a real difference.
In 2020, this approach led to a review of the sustainability strategy, customer expectations, climate scenarios and transition pathways. As a result, ambitions on sustainability are being intensified with decarbonisation as the single-most important strategic sustainability imperative, and further integrating sustainability priorities in A.P. Moller - Maersk's global integrator strategy.
Continued acceleration of expectations from key stakeholders for companies to manage their impact on sustainability was seen in 2020. The financial community is asking companies to demonstrate credible decarbonisation plans that align with the Paris Agreement's 1.5 target across the full supply chain, considering the physical effects of climate change and securing a viable business for the future.
This is true not only for A.P. Moller - Maersk, but for customers as well, as they convert the financial sector demands on their business, and the opportunities they see for carbon-neutral products in the consumer market, into requirements for A.P. Moller - Maersk to deliver a decarbonised supply chain solution. Today, 90 of the 200 most important customers have set or are in the process of setting ambitious science-based or zero carbon targets covering their supply chain.
Furthermore, lawmakers – particularly the EU – are moving rapidly on legislation related to sustainability, also on issues beyond climate change and decarbonisation. For example, the EU is enacting the taxonomy on sustainable activities, which through demands on the financial community will push requirements for transparency and reliable data on to other sectors, and it is expected to introduce mandatory requirements for companies to conduct social and environmental due diligence in their supply chains.
2050 Net-zero CO2 emissions from ocean operations by 2050
0
1 Relative CO2 reduction is measured using EEOI (Energy Efficiency Operational Indicator) as defined by IMO in MEPC.1/Circ.684 and calculated as g CO2/(tonne x NM). In 2020, improvement of the underlying methodology resulted in a more exact calculation of historical performance. The data for 2019 is restated to align with the updated methodology.
The approach of A.P. Moller - Maersk and this landscape of expectations were driving forces behind the decision to fully integrate sustainability into business activities, which was announced at the end of 2019. To fully deliver on sustainability as a strategic imperative, responsibilities must be embedded in the business and owned by business leaders. Governance and organisational structures that correspond with this decision have been established, including a dedicated decarbonisation function.
2025
We aim to connect 50% of global containerised trade to digital solutions that reduce supply chain barriers.
Sustainability priorities for the global integrator strategy were defined in 2020: Enabling sustainable trade by decarbonising logistics, sustainability in our end-to-end offerings and responsible business practices. Taking leadership on decarbonisation of logistics is the single-most important strategic sustainability priority for A.P. Moller - Maersk, as decarbonisation of the fleet is the area beyond comparison with the greatest potential for impact. Furthermore, A.P. Moller - Maersk aims to increase focus on sustainability in end-to-end offerings in response to the increased responsibility and opportunity to manage supply chain risks for customers as part of its global integrator business strategy. Commitments on inclusive trade, food loss and ship recycling are now fully owned and driven in the line of business. Responsible business practices continue to form the strong foundation including solid governance structures, accountability and transparency on policies, commitments and performance across sustainability issues.
A.P. Moller - Maersk's business activities enable open, inclusive and sustainable global trade, and the company continues to actively engage in the global debate through advocacy, projects and partnerships. Even more importantly still more elements are being added to the products and services offered that can ease the access of SMEs to participate in and benefit from global trade. A.P. Moller - Maersk's work on helping to halve food loss during transportation is run as an integrated part of the Cold Chain Logistics business of A.P. Moller - Maersk, focusing on developing and scaling solutions to connect and integrate customers' cold chains. This area now covers several hundred customers across nearly 50 countries. Investments made by the company's venture arm, Maersk Growth, also contribute to the overall sustainable development goal of reducing food loss.
Sustainability priorities for the global integrator
As an industry leader and with the resources available at hand, A.P. Moller - Maersk has an obligation to do what it can to get to a carbon-neutral fleet as fast as possible, and to help customers decarbonise global supply chains end-to-end.
Vessel decarbonisation is beyond comparison the area with the greatest direct impact. The majority of efforts and investments in the near future will be on decarbonising ocean activities, as this holds the potential for the greatest impact and market leadership that enables setting the direction for an entire industry. However, expanding customer offerings in line with being the global integrator also makes it necessary to identify how the endto-end supply chain can be decarbonised.
The decarbonisation strategy spans across three complementary pathways:
Building on customers' increasing momentum, integration of a new commercial strategy on sustainability began, aiming to respond to and aid customers on their decarbonisation journey.
One key feature in this is the Maersk ECO Delivery product. Launched in 2019, it remains one of only a few options for carbon-neutral shipping on the global market so far. Read more about the product on page 40.
| Fuel | Key advantages | Key limitations/risks | |
|---|---|---|---|
| Biodiesel | Can be used as drop-in fuel in existing vessels and engines |
Limited availability of biomass feedstock a challenge to scalability |
|
| Price pressure due to high demand from competing industries |
|||
| Methanol (bio-methanol and e-methanol) |
Already in operation as marine fuel |
Bio-methanol: Production at scale is challenged by uncertainty over availability of biomass |
|
| Engine is available Liquid at normal conditions, well-known handling |
E-methanol: Availability of biogenic CO2 source at production site, cost and maturity of electrolyser technology |
||
| Lignin fuels A new biofuel based on biomass residue |
Lignin fuel has the potential of being the most price competitive carbon-neutral |
In the development stage, production needs to be scaled up to create a new value chain and infrastructure for supply |
|
| (lignin) and alcohols (methanol or ethanol) |
fuel with the lowest price estimates almost on par with fossil fuels |
Engine requirements would be the same as for methanol, but additional handling of contaminants may be required |
|
| Ammonia | Fully zero emissions fuel | Safety and toxicity challenges | |
| (green ammonia) | Can be produced at scale | Infrastructure challenges at ports | |
| from renewable electricity alone |
Future cost depends on cost of renewable electricity and cost/maturity of electro lyser technology |
Importantly, this product demonstrates that the commoditised freight market is open for price differentiation. Driven by the end-consumers' increased willingness to pay for sustainability, and growing climate urgency, this represents a solid contribution to the development of a business model for decarbonised logistics and transport. A multi-tier value proposition has been developed, as a way to respond to relevant customer needs aligned with their maturity and ambition level for carbon reductions, and building stronger ties and partnerships with the group of customers who also have ambitious decarbonisation strategies.
In the past two years extensive analyses of the available technology and fuel options for netzero operations have been conducted. Based on this work, four primary pathways are being pursued, as seen in the table.
In response to the increased urgency of delivering on decarbonisation, A.P. Moller - Maersk's position is that the right thing to do is to leapfrog to pure net-zero vessel technology without any transitional technologies.
Fuel transformation involves the entire supply chain, and part of the work consists of overcoming barriers to progress, including scaling fuel production and associated technology, lack of fuel infrastructure and safety related issues, while managing the impact on company profitability.
The final piece of the decarbonisation strategy relates to the policy frameworks established to further this process. Policies must not only secure that lowest performers are held accountable, but also that first movers are rewarded for the risks taken on behalf of the whole industry.
With very few exceptions the political and thus legislative debate is currently not moving fast enough to fulfil its role. A.P. Moller - Maersk advocate for more ambitious targets in the International Maritime Organization (IMO) and for lawmakers to build incentive structures that reward first movers and remove a share of the financial risk related to decarbonisation. There is a risk that regulators are out of sync with the progress and development pushed by industry, which would be to no one's benefit.
At regional level, there is no doubt that shipping will be part of the EU Emissions Trading System within a few years. However, this needs to be done with the objective of actually lowering shipping emissions and with a view to supporting an international greenhouse gas (GHG) reduction agreement, while still supporting modal shift of cargo to sea, which will remain the most sustainable way of transporting large quantities of cargo.
Enabling global trade has been A.P. Moller - Maersk's finest task for decades. In extraordinary circumstances, due to the COVID-19 pandemic, A.P. Moller - Maersk employees across the world have gone to extraordinary lengths during 2020 to keep goods moving freely from the start of the pandemic.
A.P. Moller - Maersk's executive leadership established that the company's focus during the COVID-19 crisis would be on three priorities: Protecting our people, supporting our customers, and helping society get through the crisis.
Everyone's safety was sought to be ensured by enabling employees to work from home wherever possible, providing personal protection equipment, and changing procedures to allow for adequate disinfection of equipment in for example port terminals. The greatest challenge has been for seafarers.
Normally, a crew member stays on a vessel from two to six months. The Maritime Labour Convention states that crews can spend a maximum of 11 months on board. These norms were broken in 2020, as crew changes were made impossible by restrictions on entry to countries and travel restrictions. At its highest point, more than 2,500 out of 6,000 colleagues could not be relieved of their duties.
The challenge was brought to the highest levels at the UN and IMO as well as to legislators and NGOs, and agreements with governments, airlines, airport operators, hotels and port authorities were established to enable crews to have essential worker status and safely travel to and from major port hubs with major international airports, including special A.P. Moller - Maersk charter flights. Company quarantine safe centres were created in strategic locations as well as hubs for local quarantine in high volume areas. These measures helped seafarers reach their destination and by the end of the year overdue crew members were relieved.
To help society in the fight against the pandemic, the capabilities and partnerships of A.P. Moller - Maersk, including the Logistics Emergency Team, were put to use to support communities, countries and regions. The company also endorsed a World Economic Forum charter in support of safe and sustainable distribution of COVID-19 vaccines globally. A.P. Moller - Maersk is heavily involved in developing a global plan for distribution of vaccines, with planning for large-scale distribution beginning in the summer of 2020, including the establishment of a global logistics partnership with COVAXX to distribute up to a billion doses of the COVAXX vaccine worldwide in 2021.
Integrating the updated approach to safety across the company continued with positive examples of progress and true mitigation of risks to human health through new processes of collaboration and deliberation.
In 2020, the safety organisation was reorganised to reinforce that A.P. Moller - Maersk has one and only one safety strategy, which is implemented and enforced equally across the company. The new central Safety and Resilience team creates a strong pool of resources and tools, including
implementation support available at all levels across the company. In this way, the integrated company that A.P. Moller - Maersk is becoming is being matched and mirrored, assuring customers that when they leave their supply chain obligations in the hands of A.P. Moller - Maersk, the capacity for safe operations is in place.
Deeply regrettable, one person lost his life while performing tasks under A.P. Moller - Maersk management, when a roofer working for a contractor fell as scaffolding collapsed after being hit by a crane that tipped. This tragic event reinforces the company's commitment to working more with suppliers on safety and sustainability issues.
A.P. Moller - Maersk worked towards
get through the crisis.
three key priorities during the COVID-19 crisis: Protecting our people, supporting our customers, and helping society to
Four years after the first A.P. Moller - Maersk vessel landed in a ship recycling yard in Alang, India, an impact study clearly demonstrated very significant improvements in safety, environment, workers' conditions and access to health in the wider community. The ambition is to create responsible ship recycling opportunities that are also commercially viable for the ship owners and changing the ship recycling industry at the same time.
The prospect of broad, sustained change is, however, challenged. No yards from the Alang area – despite collaboration with the EU Commission and investments over the past two years – have yet been included in the EU List of yards outside the OECD that can be legally used for recycling of ships registered in EU countries. In addition, a new legislative barrier has arisen, because legislation has come into force that prohibits exporting of hazardous waste from a list of OECD countries to developing (non-OECD) countries, which some, including the EU Commission, are applying to vessels for recycling. This has currently stalled the Alang yard applications and now awaits an internationally negotiated resolution of this regulatory challenge.
This situation is highly detrimental to the developments in Alang, as well as to ship owners. A.P. Moller - Maersk's position, based on thorough legislative analysis, is that there are legal options available to the EU, and the company is engaging with a multitude of stakeholders to find both a short and long-term solution to this gridlock.
A further challenge is that within the next few years, even larger vessels than today will be nearing end of life and ready for recycling, but these vessels will be too large for many of the yards offering financially viable solutions.
Because the work in Alang documents that responsible ship recycling is possible outside yards in OECD countries, A.P. Moller - Maersk's ambition for the work on ship recycling has changed from radically changing the industry, starting in Alang, to creating opportunities for responsible ship recycling globally.
From January 2020, the IMO's 0.5% global cap on the content of sulphur in fuels came into effect. The enforcement mechanism for this legislation is a ban on carrying non-compliant fuels on vessels, except for vessels where scrubbers are installed to clean exhaust gasses.
The main concern in the years leading up to the cap taking effect was uneven enforcement. While the level of control is not as stringent as A.P. Moller - Maersk would prefer, there is no indication that compliance is lacking. Oil market shares are a useful proxy for this, and it appears that the low-sulphur fuel uptake is at the expected level.
A.P. Moller - Maersk has installed open-loop scrubbers on a share of the vessels as a risk management measure, as the price gap between heavy fuel oil and low-sulphur fuel was expected to be significant. The use of scrubbers remains a discussion point and no independent, global survey of the effects of scrubbers has yet been produced to support global legislation. Increasingly, legislation is being implemented regionally, for example in the EU and in some US states and Australia, requiring vessels to shut off the scrubber system when entering near-coastal waters and switch to low-sulphur fuel.
The A.P. Moller - Maersk 2020 Sustainability Report provides more information about the work and progress on sustainability priorities. For 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, please see the 2020 ESG data overview on A.P. Moller - Maersk's investor relations website.
Risk management at A.P. Moller - Maersk is strategically focused and designed to contribute to the achievement of the company's business objectives in the medium-term and to ensure the longevity of the company in the long-term.
A.P. Moller - Maersk is accelerating its transformation to become the global integrator of container logistics. The transformation success hinges on the ability to perform and transform at the same time through deployment of critical change levers such as technology, processes and people. It is essential that risks inherent to the business activities and risks associated with the transformation are managed well to keep the potential financial and reputational impact of such risks within acceptable levels.
With a defined roadmap in place for the transformation, the risks associated with the
transformation at its current stage are largely execution risks relating to, e.g., customer service levels, technology roadmap, market risks for the Ocean segment, growth capabilities for the Logistics & Services segment, and people capabilities. These risks require active management and monitoring as described in the 2021 Key risk analysis described below.
A.P. Moller - Maersk is exposed to a variety of risks in the conduct of its business and execution of its strategy. A.P. Moller - Maersk has a well-established Enterprise Risk Management (ERM) process to
The Coronavirus (COVID-19)
The COVID-19 pandemic continues to impact the global economy and the world's supply chains. The global demand growth for containers contracted by around 2% in 2020, albeit with large fluctuations in demand during the year. Overall, A.P. Moller - Maersk was able to manage the impact on demand through tight cost and agile capacity deployment.
After the initial steep disruption of demand in the first quarter, a strong and unexpected recovery in the demand for containerised goods during a period where services remained curtailed, implied an extreme challenge to cope with in terms of cost and capacity management.
As A.P. Moller - Maersk manages its way through the pandemic, three objectives continue to guide its decisions: protecting its employees, serving its customers by keeping its global network and ports operating, and helping societies fight the virus.
Proactive risk management, deployment of effective crisis and business continuity management, and a strong resolve from employees ensure that so far, the operational impact of COVID-19 has been minimised.
One of the biggest COVID-19 challenges for A.P. Moller - Maersk has been performance of crew changes for the vessels, mainly due to prevailing restrictions. A.P. Moller - Maersk proactively addressed this serious issue through collaboration with governments, airlines, airport operators, hotels, and port authorities, and use of special A.P. Moller - Maersk charter flights.
The pandemic continues to impact the transportation and logistics industry operationally and financially. It is difficult to predict the business impact in 2021, which will depend wholly on the duration of the pandemic and the resulting lockdowns of countries and economies globally, as well as on the associated changes in demand patterns.
into strategy review, business planning and per-
formance management.
Each year, risks are identified and assessed following a comprehensive process covering the enterprise and the individual brands. The enterprise risks identified are validated for relevance and significance by senior business leaders. Finally, the Executive Leadership Team reviews the risks and decides the key risks to the strategy and the business plan.
The Executive Leadership Team appoints a risk owner for each key risk to oversee the management of the risk, including the preparation and execution of mitigation action plans. Once the plans for the management of the risks are finalised, the progress and effect of such plans are monitored by the Executive Leadership Team and the Audit Committee in designated and regular sessions. Where the progress of mitigating actions is falling behind schedule, or where mitigating actions are not achieving the effect they were designed to have, corrective actions are taken.
The ERM process for 2021 was carried out in the second half of 2020. It identified ten key risks that may have a significant impact on the business plan, including on earnings, financial position and achievement of other strategic objectives.
The key risks to achieving the A.P. Moller - Maersk 2021-2025 business plan, the assessment of each risk, and the mitigation strategies deployed are described in the following.
All positions are residual risk after current mitigation.
During 2020, A.P. Moller - Maersk has worked systematically on mitigating key risks shown in the Annual Report 2019 to further reduce residual risk levels. Among other things, the risk reductions achieved in 2020 imply that risks relating to IMO 2020 low sulphur fuel, cost excellence in Ocean,
and the APM Terminals transformation are not perceived to be among key risks into 2021. Also, the risk relating to standardisation of core processes is now included in the technology roadmap risk. Residual risk levels of continuing risks and new risks by December 2020 are depicted on the heatmap above.
withstand operational disruptions.
nology and business platform owners to drive greater cross functional collaboration and accountability.
| 1 Customer | 2 Technology | 3 | 4 Ocean industry | 5 People safety | |
|---|---|---|---|---|---|
| service level | roadmap | Cyber-attack | collapse | and security | |
| Risk description | A.P. Moller - Maersk's strategy to become a global integrator of con tainer logistics hinges on the ability to deliver a superior service level to cus tomers. A.P. Moller - Maersk needs to deliver operationally on the service level promised to customers in order to build long-term trust and brand reliability. |
A.P. Moller - Maersk's growth strategy is dependent on its ability to trans form its digital foundation. If there is serious delay or failure to modern ise technology, execute the Technology roadmap, and standardise core busi ness processes, there is a risk that Maersk is unable to orchestrate value and stable revenue streams via its technology platforms. |
As A.P. Moller - Maersk becomes increasingly digitalised, more devices and control systems are connected online resulting in a wider technology surface across the Information Tech nology and Operational Technology infrastructure, which could be compro mised. Should a successful cyberattack materialise, operational disruption and/ or data breaches may occur. |
Although there have been signs of structural improvements in the Ocean segment, there is still a non-negligible risk that the Ocean industry could again become financially challenged in another downturn cycle. |
The business of A.P. Moller - Maersk requires many of the employees and other external contractors to work in high-risk locations both in terms of frontline operations as well as in terms of working in geographical areas with elevated risk. |
| 2021 Risk assessment | The delivery promise introduced as part of the integrator strategy is key to building customer trust and thereby retaining strong brand reputation of A.P. Moller - Maersk. Not being able to deliver operationally can weaken the foundation of the A.P. Moller - Maersk global integrator strategy. |
A.P. Moller - Maersk has made pro gress on its technology roadmap and standardisation of its core busi ness processes. However, since A.P. Moller - Maersk is expanding into new business areas, the busi ness processes and workflows are complex, and the current IT land scape is fragmented, it is likely that A.P. Moller - Maersk will see some delays, as it progresses the road map. |
Following the cyberattack in 2017 sev eral measures to improve cyber security have been implemented. However, as the external threat continues to develop, a cyberattack could still occur leading to financial losses, loss of customer confidence, reputational damage, regulatory sanctions for data breaches, and/or operational accidents. |
Another downturn of the Ocean indus try over the coming years could become a distraction to A.P. Moller - Maersk's strategy execution and hamper its ability to invest. If the risk materialises, A.P. Moller - Maersk may be forced to focus on improving its short-term financial performance. |
A.P. Moller - Maersk has over the years continued to have accidents, some of which have unfortunately had very serious and even fatal outcomes. This not only causes business disruption and affects A.P. Moller - Maersk's name and reputation, but more importantly brings into focus the duty of care towards people. |
| Mitigation strategies | A.P. Moller - Maersk is permanently | A.P. Moller - Maersk has prioritised | Current mitigation includes a cyber | A.P. Moller - Maersk has limited levers | A new Safety & Resilience function |
| improving its business processes and | technology modernisation, stand | security programme, business continuity | to impact the overall demand for | has been established to combine | |
| systems to deliver on the new delivery | ardisation of core business processes | plans, and cyber-risk insurance. The | container shipping. However, multiple | knowledge and expertise in this area, | |
| promises. In addition, the service levels | and development of data as a differ | initial three-year cyber security program | mitigation strategies exist, such as | have a unified strategy around the | |
| are continuously monitored for swift | entiating asset. To achieve the right | was completed in 2020. The next phase | closely monitoring supply and demand, | topic, embed the strategy through | |
| actions to mitigate adverse develop | customer and business outcomes, | to further mitigate the threat associated | de-commoditising products and ser | a leader-led approach across the | |
| ments, and business continuity strat | A.P. Moller - Maersk is transforming | with the enhanced digital interface with | vices, focus on cost leadership, and | organisation and through manage | |
| egies are designed and rolled out to | the engagement model between Tech | customers is already underway. | growing Logistics & Services to reduce | ment of critical risks. |
the exposure to Ocean volatility.
with clear accountabilities and busi-
ness ownership.
isation agenda, including coordinating the efforts to reduce the climate impact of operations and developing relevant customer offerings.
| 6 Mergers & Acquisitions |
7 Decarbonisation |
8 Organisational capabilities |
9 Compliance |
10 Company culture and engagement |
|
|---|---|---|---|---|---|
| Risk description | A key driver to long-term Logistics & Services growth is the expansion of product and people capabilities through successful Mergers & Acquisi tions (M&A). Acquiring new capabilities is a prerequisite to serve customers end to-end, and A.P. Moller - Maersk will need to make acquisitions in the com ing years. |
Decarbonisation is becoming a business necessity and a license to operate. It is critical for A.P. Moller - Maersk to decar bonise the end-to-end supply chain at a speed that meets customers' and inves tors' expectations. Primary focus is the decarbonisation of own emissions. |
Delivering a digitally trans formed business model as part of A.P. Moller - Maersk's global integrator strategy requires right balance of capabilities and skills at all levels in the organisation. |
It is imperative for A.P. Moller - Maersk to conduct its business in compli ance with legislation and regulatory standards. The regulatory landscape is becoming increasingly complex, and A.P. Moller - Maersk could be hit by a major compliance case in respect of violations of anti-corruption laws, anti trust regulations, and/or international sanctions. |
The A.P. Moller - Maersk culture is strong with many elements that must be retained. These strong cultural ele ments were critical in getting through the cyberattack in 2017 and most recently in the COVID-19 pandemic, but there is a need to change and adapt parts of this culture and to further enhance employee engagement to sup port the transformed business model. |
| 2021 Risk assessment | Some of the acquisitions may be sub stantial, and if A.P. Moller - Maersk fails to integrate one or more of these, it will create a risk to successfully execut ing the A.P. Moller - Maersk integrator strategy. |
A.P. Moller - Maersk has made a com mitment of carbon neutrality by 2050. With increasing demand from custom ers and investors, A.P. Moller - Maersk needs to further innovate sustainable supply chain solutions and accelerate its decarbonisation initiatives. |
A.P. Moller - Maersk made good pro gress in acquiring new and diverse capabilities and skills, especially for Logistics & Services and Technology. Still, the strategy execution could be hampered if the right balance of capabilities and skills are not main tained at all levels of the organisation. |
In respect of corruption, A.P. Moller - Maersk operates in high risk geographies and high-risk sectors (e.g. the terminals and logistics ser vices sectors). A.P. Moller - Maersk is the largest container carrier and in an industry with many industry coopera tion agreements. A.P. Moller - Maersk thereby naturally has the attention of competition authorities globally. |
Most notably, customer centricity is a cultural attribute, which must be honed to a different level than today. Another element that must be further cultivated is the ability to work across functions with shared ownership and accountability for outcomes. |
| Mitigation strategies | A post-merger integration office has been established to develop and man age integration processes and embed learnings. Integration capabilities have been upskilled through external sourc ing. Further actions are planned to develop seamless transition between acquisition and integration activities, |
In 2020, a strategic review of climate scenarios and transition pathways was conducted with the conclusion that climate action is a strategic imperative for A.P. Moller - Maersk. Consequently, a new Decarbonisation function has been launched in 2021 to further embed and accelerate the decarbon |
A.P. Moller - Maersk Capability Frame work was established to define key organisational capabilities to support strategic goals. Further actions are in progress to build/buy competencies through functional and leadership pro grammes and targeted recruitment campaigns. |
A.P. Moller - Maersk has a robust com pliance programme for anti-corruption, competition law and economic sanc tions, and export controls designed to fulfil the global requirements and many initiatives are in place to improve focus and emphasis on compliance awareness and training. |
Actions were launched to assess and address employee engagement levels on a more frequent basis. Further ini tiatives will be launched to further strengthen the A.P. Moller - Maersk behaviours and elevate the company culture. |
EBITDA increased by 44% to USD 8.2bn with increases in all segments
Revenue EBITDA
Ocean has actively deployed capacity to accommodate the significant demand fluctuations by withdrawing in H1 and increasing in H2, which helped mitigate the worsened schedule reliability caused by the global supply chain disruptions to service Ocean customers best possible.
Maersk Spot gained significant momentum in 2020 and, measured on the last four weeks in 2020, accounted for 51% (20%) of total loaded short-term volume under the Maersk brand.
Air freight forwarding and less container load (LCL) products was integrated into Maersk logistics and services to complement the end-to-end offering effective as of October. The Damco brand was discontinued.
The combined warehousing and distribution, and customs services presence has increased with the integration of Performance Team in North America and KGH Customs Services in Europe.
All terminals remained operational throughout the COVID-19 pandemic. The new terminal in Vado, Italy, began operations in Q1 and the terminal in Tema, Ghana, ramped up during 2020.
Towage signed new contracts and negotiated extensions to existing contracts. Operations were updated with new locations and planned exit of others.
Maersk Container Industry saw higher Star Cool Unit sales compensating for lost Star Cool Integrated production in Q1 due to COVID-19 and achieved the highest ever third-party unit bookings total.
Maersk Supply Service was awarded several contracts in the North Sea and Africa for its integrated solution service.
2020 2019
At the heart of the integrator strategy, Ocean enables trade through strategic brands and digital channels providing customers the flexibility and stability needed to manage and simplify end-to-end supply chains. Operating the largest container ship fleet in the world, Ocean carries more than 12 million forty-foot-equivalent units per annum, split approximately 45/55 between long-term and shortterm contracts calling over 300 ports around the world.
Revenue was USD 29.2bn (USD 28.8bn), with a decrease in volumes to 12,634k FFE (13,296k FFE) as a result of COVID-19, more than offset by improved freight rates, which increased to 2,000 USD/FFE (1,853 USD/FFE).
Despite restructuring cost from strategic changes announced in Q3, EBITDA increased by 48% to USD 6.5bn (USD 4.4bn), driven by higher revenue and a lower cost base mainly due to agile capacity deployment combined with a lower bunker price and consumption. As a result of this, the EBITDA margin increased by 7.0 percentage points to 22.4%.
| USD million | 2020 | 2019 |
|---|---|---|
| Freight revenue | 24,920 | 24,466 |
| Other revenue, including hubs | 4,255 | 4,316 |
| Revenue | 29,175 | 28,782 |
| Container handling costs | 8,474 | 8,988 |
| Bunker costs | 3,835 | 4,566 |
| Network costs, excluding bunker costs | 6,625 | 7,025 |
| Selling, General & Administration (SG&A) | 2,698 | 2,786 |
| Cost of goods sold and other operational costs | 1,252 | 919 |
| Total operating costs | 22,884 | 24,284 |
| Other income/costs, net | 254 | -62 |
| Profit/loss before depreciation, amortisation and impairment losses, etc. (EBITDA) | 6,545 | 4,436 |
| EBITDA margin | 22.4% | 15.4% |
| Gross capital expenditure, excl. acquisitions and divestments (CAPEX) | 653 | 1,172 |
| Operational and financial metrics | ||
| Loaded volumes (FFE in '000) | 12,634 | 13,296 |
| Loaded freight rate (USD per FFE) | 2,000 | 1,853 |
| Unit cost, fixed bunker (USD per FFE incl. VSA income) | 1,973 | 1,954 |
| Bunker price, average (USD per tonne) | 372 | 412 |
| Bunker consumption (tonne in '000) | 10,322 | 11,092 |
| Average nominal fleet capacity (TEU in '000) | 4,081 | 4,132 |
| Fleet owned (end of year) | 301 | 307 |
| Fleet chartered (end of year) | 405 | 401 |
Volumes were 5.0% lower at 12,634k FFE (13,296k FFE) due to COVID-19, predominantly in Q2, mainly due to decreases in East-West and North-South trades. The decrease in East-West was driven by Europe and Middle East trades, while North America saw higher volumes in H2 2020. The decrease in North-South was driven by the weak demand across Latin America, Africa and Oceania trades. Total headhaul decreased by 4.3%, mainly for Latin America, Europe and Middle East, while total backhaul decreased by 6.3%.
The average loaded freight rate increased by 7.9% to 2,000 USD/FFE (1,853 USD/FFE), driven by an increase of 14.1% on East-West supported by strong demand, vessel and equipment shortages and bottlenecks across the entire supply chain. On North-South the average freight rates increased by 7.8%, driven by headhaul increase in Latin America and Africa combined with higher backhaul rates in Oceania. The rate increases on East-West and North-South trades were partly offset by lower rates on intra-regional trades driven by a 7.0% decrease in intra-Americas rates. The average loaded freight rate was positively impacted by mix effects from relatively higher headhaul volumes especially in North America and negatively affected by developments in foreign exchange rate and the bunker price change. The average loaded freight rate at fixed bunker increased by 9.8%.
Freight revenue was USD 24.9bn (USD 24.5bn), while other revenue was flat at USD 4.3bn (USD 4.3bn). Adjusted for the foreign exchange rate effects, the freight revenue increased by 2.4%.
| Total | 12,634 | 13,296 | -662 | -5.0 |
|---|---|---|---|---|
| Intra-regional | 2,786 | 2,834 | -48 | -1.7 |
| North-South | 3,900 | 4,268 | -368 | -8.6 |
| East-West | 5,948 | 6,194 | -246 | -4.0 |
| FFE ('000) | 2020 | 2019 | Change | Change % |
| Total | 2,000 | 1,853 | 147 | 7.9 |
|---|---|---|---|---|
| Intra-regional | 1,345 | 1,366 | -21 | -1.5 |
| North-South | 2,529 | 2,347 | 182 | 7.8 |
| East-West | 2,008 | 1,760 | 248 | 14.1 |
| USD/FFE | 2020 | 2019 | Change | Change % |
| Average freight rates |
Unit cost at fixed bunker price was 1.0% above 2019, despite a reduction in total operating costs. Unit cost was driven by lower volumes, offset partially by improved bunker efficiency and foreign exchange rate effects. Compared to 2019, the unit cost at fixed bunker increased by 1.6% adjusting for the foreign exchange rate effects.
Total operating costs decreased by 5.8% to USD 22.9bn (USD 24.3bn), impacted by lower volumes, lower fuel costs and agile capacity management, as well as favourable impact from development in foreign exchange rates and lower container-related costs. Network costs excluding bunker costs decreased by 5.7%, mainly due to agile
capacity deployment through the COVID-19, leading to a high utilisation, and lower port costs due to reduced calls. Adjusting for the positive impact from the developments in foreign exchange rates, the operating costs decreased by 5.2%. Based on the lower cost base, container handling cost, bunker cost and SG&A and other cost decreased their
share of total costs, while network costs, excluding bunker increased slightly.
Total unit cost decreased by 0.7% to 1,909 USD/ FFE (1,922 USD/FFE), driven by a decrease in fuel cost caused by a 6.9% lower consumption and a decreased average bunker price of 9.7%, equal
to 40 USD/tonne. The combined effect of lower average prices and lower consumption resulted in a total bunker cost decrease of 16% to USD 3.8bn (USD 4.6bn). Out of the total decrease, USD 0.5bn was due to the lower average bunker price, with the remaining decrease due to lower consumption partly, given a 0.8% improvement in bunker
A core element of the strategy to decarbonise shipping is to develop and commercialise products that reduce the carbon footprint of customer supply chains. In 2019, A.P. Moller - Maersk was the first to launch a carbon-neutral solution for ocean transport, Maersk ECO Delivery, based on sustainable biofuel from waste sources such as used cooking oil. It provides direct carbon savings, not carbon offsets, by ensuring that for any Maersk ECO Delivery container transport, enough sustainable biofuel will be purchased and used in the A.P. Moller - Maersk network to neutralise the carbon emissions that would have occurred using standard fuel. These CO2 savings are allocated to the customer and verified by the Roundtable on Sustainable Biomaterials.
In 2020, customer uptake of Maersk ECO Delivery exceeded expectations. So far, around ten major customers have chosen to purchase this carbon-neutral emissions transport solution, and this number is expected to increase. Conversations with customers on the possibility of converting all their shipments to the Maersk ECO delivery product are ongoing. While this is very promising, it represents a small share of the total amount of containers transported by A.P. Moller - Maersk, and we need much more customer demand to scale net-zero emissions offerings and enable a transition to full decarbonisation.
Customer uptake of Maersk ECO Delivery exceeded expectations in 2020
Our industry is a significant contributor to global greenhouse gas emissions, and through investment and collaboration, we will decarbonise our operations.
Unit cost at fixed bunker increased by 1.0% to 1,973 USD/FFE (1,954 USD/FFE), driven by lower volumes, somewhat offset by improved bunker efficiency and development in foreign exchange rates. Adjusting for the positive impact from the developments in foreign exchange rates, the unit cost at fixed bunker increased by 1.6%.
The average nominal capacity of 4,081k TEU decreased by 1.2% due to agile capacity development executed to meet mid-year global demand downturn, which has since increased with demand surges towards the end of the year. There were no vessels in the newbuilding programme at the end of Q4, and the fleet consisted of 301 owned and 405 chartered vessels, of which 99k TEU or 2.4% of the fleet were idle (12 vessels), mainly due to repairs, scrubbers retrofitting, and capacity adjustments.
| Total fleet | 4,044,915 | 4,124,860 | 706 | 708 |
|---|---|---|---|---|
| Total | 1,845,885 | 1,916,098 | 405 | 401 |
| 11,500 – 14,999 TEU | 214,387 | 293,656 | 21 | 23 |
| 8,000 – 11,499 TEU | 523,677 | 544,568 | 51 | 59 |
| 4,700 – 7,999 TEU | 408,118 | 410,119 | 68 | 69 |
| 3,000 – 4,699 TEU | 311,179 | 286,067 | 77 | 71 |
| 0 – 2,999 TEU | 388,524 | 381,688 | 188 | 179 |
| Chartered container vessels | ||||
| Total | 2,199,030 | 2,208,762 | 301 | 307 |
| > 17,500 TEU | 593,048 | 593,048 | 31 | 31 |
| 15,000 – 17,499 TEU | 292,282 | 292,282 | 19 | 19 |
| 11,500 – 14,999 TEU | 122,123 | 69,018 | 6 | 6 |
| 8,000 – 11,499 TEU | 408,774 | 428,054 | 50 | 48 |
| 4,700 – 7,999 TEU | 311,230 | 344,844 | 50 | 55 |
| 3,000 – 4,699 TEU | 365,351 | 365,351 | 90 | 90 |
| 0 – 2,999 TEU | 106,222 | 116,165 | 53 | 58 |
| Own container vessels | ||||
| 2020 | 2019 | 2020 | 2019 | |
| TEU | Number of vessels | |||
| Fleet overview, year-end |
| Sustained operational resilience |
|---|
| Simplification of the organisation |
| Maersk Spot, a preferred choice |
Ocean continued to deliver on its strategy with a rigorous focus on servicing customers and limit the negative impact from disruptions to their supply chains during the COVID-19 outbreak. Q2 saw a significant decrease in volumes and major changes to the fleet were applied to adjust capacity to the impact of global lockdown of economies. From Q3, unexpected pick-up in demand on some routes resulted in strong pricing dynamics, with bottlenecks and space access combined with vessel and equipment shortages becoming a challenge for most customers. Additional flexibility was provided, focusing on long-term customers to cater for additional demand, despite the strong short-term freight rate market, while adding extra capacity to accommodate volumes.
In H2, strategic changes were announced in order to further enhance the customer experience and end-to-end service delivery. Safmarine will no longer be marketed as a separate brand, as A.P. Moller - Maersk and Safmarine have converged, both focusing on building a customer-centric culture with digital interactions. While continuing to meet customers as two separate brands with a differentiated service model, the front offices of A.P. Moller - Maersk and Hamburg Süd will come closer together into more customer-centric teams.
Maersk Spot, launched in Q2 2019 offering transparent prices and loading guarantee, gained significant momentum in 2020, growing its share of loaded short-term volumes consistently. On a four-week average basis, Maersk Spot volumes at year-end were 51% of the total loaded short-term volumes under A.P. Moller - Maersk brand (excl. Sealand and Hamburg Süd).
2020 2019
Revenue
CAPEX
USD 109m USD 126m
Logistics & Services is the core growth element of A.P. Moller - Maersk's' integrator strategy: Logistics & Services seek to fulfil more of the customers' needs at every step of their supply chain through the integrated logistics offerings. Key offerings, all enabled by digital platforms, include truck and rail landside transportation, consolidation/deconsolidation and fulfilment warehousing with distribution services, depot operations, customs brokerage services, air forwarding services, less than container load services, cargo insurance, supply chain management and 4PL products. The portfolio also includes vertical-specific solutions in cold chain logistics and E-commerce logistics as well as TradeLens, a blockchain platform.
Revenue increased by 10% to USD 7.0bn (USD 6.3bn), driven by increasing revenue in warehousing and distribution, including Performance Team, air freight forwarding and intermodal, offset by decrease in sea freight forwarding. Gross profit grew to USD 1.6bn (USD 1.2bn) with a gross profit margin of 23% (20%), driven by the continued focus on profitable business and margin optimisation in intermodal and increased profitability in warehousing and distribution facilities in North America, specifically driven by Performance Team. Despite restructuring cost of USD 40m from the discontinuation of the Damco brand, EBITDA
increased to USD 454m (USD 216m) with an EBITDA margin of 6.5% (3.4%), driven by the margins optimisation and focus on profitability.
Volumes in supply chain management increased by 7.5% to 77,023 kcbm (71,664 kcbm). Intermodal volumes decreased by 3.9% to 3,640k FFE (3,789k FFE) due to impact from COVID-19 in the first three quarters of the year, while volumes have recovered in Q4. Volumes in air freight forwarding declined by 13% to 138k tonnes (158k tonnes) and declined by 16% in sea freight forwarding to 401k TEU (475k TEU), impacted by COVID-19 and the discontinuation of the Damco brand.
| USD million | 2020 | 2019 |
|---|---|---|
| Revenue | 6,963 | 6,331 |
| Direct cost | 5,328 | 5,091 |
| Gross profit | 1,635 | 1,240 |
| Selling, General & Administration (SG&A) and other costs, etc. | 1,181 | 1,024 |
| Profit/loss before depreciation, amortisation and impairment losses, etc. (EBITDA) | 454 | 216 |
| EBITDA margin | 6.5% | 3.4% |
| Gross capital expenditure, excl. acquisitions and divestments (CAPEX) | 109 | 126 |
| Operational and financial metrics | ||
| EBIT conversion (EBIT/gross profit - %) | 16.1% | 1.5% |
| Supply chain management volumes ('000 cbm) | 77,023 | 71,664 |
| Intermodal volumes (kFFE) | 3,640 | 3,789 |
| Sea freight volumes (TEU) | 401,369 | 475,210 |
| Air freight volumes (tonne) | 138,086 | 158,405 |
The revenue in supply chain management improved by 12% to USD 961m (USD 861m), while revenue in intermodal decreased by 6.7% to USD 2.7bn (USD 2.9bn), mainly due to lower volumes.
In supply chain management gross profit increased by 2.9% to USD 350m (USD 340m), due to a bounce back in kcbm volumes in H2, while H1 saw a decrease in volumes due to COVID-19. Profitability improved in intermodal, driven by the ongoing margin optimisation and better corridor mix with an increase in gross profit of 75% to USD 296m (USD 169m). The operational efficiencies are mainly achieved by focus on higher margin corridors and lower cost from less imbalance between import and export in North America, West Central Asia and Europe.
In air freight forwarding, revenue was up 61% to USD 780m (USD 485m) and gross profit was up 66% to USD 88m (USD 53m). Profitability increased despite a volume decrease, driven by the continued high rates in Asia Pacific, where urgent air freight solutions were developed during the COVID-19 pandemic.
Other services revenue and gross profit increased, driven by positive contribution from warehousing and distribution including the activity from Performance Team in North America with a revenue of USD 398m and an EBITDA of USD 59m. This is a result of a significant turnaround of the US based sites during 2020. While increased handling volume was a positive contributing factor, the combined effect of automation investment in sorters and the deployment of operation excellence expertise acquired via Performance Team heavily contributed to strong profitability in the core US facilities, notably Santa Fe, Southgate, and Sumner. The Customs House Brokerage activity was
Our assets, supplier relationships and expertise in end-to-end delivery networks ensure our customers resilient supply chains.
expanded with the acquisition of KGH Customs Services in Europe with a revenue of USD 33m and an EBITDA of USD 5m.
The combined acquisitions in 2020 contributed with a revenue of USD 431m and an EBITDA of USD 64m.
EBIT conversion improved to 16.1% (1.5%), with positive impact from SG&A savings and optimised cost base. Further, 2019 was impacted by impairment, reducing the EBIT for Logistics & Services in December.
| Revenue | Gross profit | |||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| Intermodal | 2,736 | 2,932 | 296 | 169 |
| Supply chain management | 961 | 861 | 350 | 340 |
| Inland services | 527 | 519 | 201 | 210 |
| Sea freight forwarding | 460 | 546 | 62 | 86 |
| Air freight forwarding | 780 | 485 | 88 | 53 |
| Other services | 1,499 | 988 | 638 | 382 |
Freight forwarding integration
Performance Team and KGH Customs Services
End-to-end offerings
The integration of Damco's air freight and less container load (LCL) products into the Maersk logistics and services products to complement the end-to-end offering was effective as of 1 October. The Damco brand was discontinued.
The agreement to acquire Performance Team, was signed in February with start in April. The acquisition more than doubles the combined warehousing and distribution presence in the North America region, bringing enhanced scale and expertise for the combined customers.
KGH Customs Services was acquired in September. The acquisition increases the combined number of clearances by five times in the Europe region, allowing for a larger footprint and enhanced ability to service customers end-to-end.
The product offering has expanded by adding Maersk Cargo Insurance to the portfolio, a product that protects customers' goods against physical loss or damage. Further, in support of the global integrator vision, a new product called Maersk Flow was launched in July. It is a digital solution which provides small and medium sized customers and their partners with everything they need to take control of their supply chain from factory to market.
Work has progressed on the new supply chain management platform and the new Transportation Management System platform for intermodal, to enhance the scope, quality and efficiency of the services offered to customers, thereby contributing to an end-to-end integrated offering.
Terminals & Towage includes Terminals operating activities in ports fully or partially controlled by the APM Terminals brand, with the main revenue stream being port activities, and Towage operating activities under the Svitzer brand, a provider of offshore towage and salvage services.
Revenue decreased by 3.9% to USD 3.2bn (USD 3.3bn), with lower volumes due to COVID-19. EBITDA increased by 8.3% to USD 989m (USD 913m), reflecting an increase in the EBITDA margin to 31% (28%), driven by higher revenue per move and cost reductions in several terminals. CAPEX was USD 327m (USD 441m). The terminal in Vado, Italy, began operations in Q1, and Pipavav, India, USD 3,807m was fully consolidated as of June.
Significant COVID-19 impact in especially Q2 led to a full year volume decrease of 3.6% (decrease of 6.6% like-for-like, adjusted for new terminal in Vado and Pipavav). The impact varied across regions, and volume volatility was high throughout the year. North America was impacted the most with 8.7% volume reduction, mainly driven by Los Angeles, USA, which handled just 447 moves in the worst week of March as compared to an average of 24k moves per week in Q4.
| USD million | 2020 | 2019 |
|---|---|---|
| Revenue | 3,807 | 3,948 |
| Concession fees | 287 | 249 |
| Labour cost (blue collar) | 1,236 | 1,313 |
| Other operational cost | 520 | 628 |
| Selling, General & Administration (SG&A) and other costs, etc. | 559 | 640 |
| Total operating costs | 2,602 | 2,830 |
| Profit/loss before depreciation, amortisation and impairment losses, etc. (EBITDA) | 1,205 | 1,118 |
| EBITDA margin | 31.7 | 28.3 |
| Gross capital expenditure, excl. acquisitions and divestments (CAPEX) | 457 | 532 |
| Operational and financial metrics | ||
| Terminal volumes – financially consolidated (moves, m) | 11.5 | 11.9 |
| Ocean segment | 4.1 | 4.1 |
| External customers | 7.4 | 7.8 |
| Terminal revenue per move – financially consolidated (USD) | 275 | 272 |
| Terminal cost per move – financially consolidated (USD) | 232 | 233 |
| Result from joint ventures and associated companies (USD m) | 236 | 206 |
| Number of operational tug jobs (harbour towage) ('000) | 138 | 134 |
| Annualised EBITDA per tug (terminal towage) (USD in '000) | 956 | 889 |
Europe was impacted by a 3.8% reduction followed by Africa and Middle East with a 2.2% reduction in volume. In Latin America, volume decreased by 2.1%, while volume in Asia increased by 1.1%.
Volume from the Ocean segment decreased by 1.2% (decreased by 5.4% like-for-like), and volume from external customers decreased by 4.9% (decreased by 7.2% like-for-like). Utilisation decreased to 70% (80%), as volume decreased by 3.6%, while capacity was higher due to Pipavav consolidation, in Vado driven by the ramp-up, and in Port Elizabeth, USA, due to a modernisation project in Q4 2019.
On an equity-weighted basis, volume decreased by 3.2% (decreased by 3.0% like-for-like, adjusted for Vado and the exit from Douala, Cameroon), and utilisation was 78% (85%).
Revenue per move increased by 1.3% to USD 275 (USD 272), positively impacted by terminal mix, and supported by higher storage income in Los Angeles, partially offset by negative rate of exchange impact in the African and Latin American regions. Adjusted for foreign exchange rate, volume mix effects, portfolio changes and one-offs, revenue per move increased by 2.5%.
Cost per move decreased by 0.3% to USD 232 (USD 233), positively impacted by rate of exchange in the African and Latin American regions, partially offset by lower utilisation, terminal mix and higher cost in Apapa, Nigeria. Adjusted for foreign exchange rates, volume mix effects and portfolio changes, cost per move increased by 3.9%.
The EBITDA margin in gateway terminals increased by 3.5 percentage points to 31.4% (27.8%), as higher revenue per move and SG&A cost reductions as well as operational cost reductions
other income, government grants and excludes IFRIC 12 construction revenue. Cost per move includes cost (EBITDA less revenue less other income), depreciation and excludes internal management fees and IFRIC 12 construction cost.
A new automated gate infrastructure was launched in Port Elizabeth, USA, in Q2
New terminal in Vado, Italy, and Tema, Ghana, ramped up during 2020
Several cost management programmes carried out by the terminals
Terminals signed an agreement with the Yokohama-Kawasaki International Port Corporation (YKIP) in Q2 for two additional modern berths, thereby becoming the only terminal in Japan capable of handling 20,000 TEU vessels. The berths were handed over to APM Terminals in July, and operations on the first berth began in July. The second berth is scheduled in 2021 and by then, the terminal capacity will have increased to 2.4m TEU from previously 1.1m TEU annually.
The construction of the second container terminal in Abidjan, Ivory Coast, began following the handover from the Port Authority in March, and the expected go-live is in 2022. Once construction is completed, the new terminal will have an annual throughput capacity of 1.2m TEU and will be capable of handling 14,000 TEU vessels.
APM Terminals Poti, Georgia, and Poti New Terminals Corporation have signed an agreement for the joint development of the dry and bulk cargo facility on the northern side of Poti Port, where an expansion project is being planned with construction expected to begin in 2021.
APM Terminals launches a new facility in Kalundborg, Denmark in 2021.
APM Terminals consumes 73% of the electricity used by A.P. Moller - Maersk. To sustain leadership on decarbonisation and to match customer needs and stakeholder demands, A.P. Moller - Maersk is working to identify ways in which emissions across all scopes – directly from operations, emissions related to the purchase of energy, and emissions in the value chain – can be tackled as part of the company's decarbonisation efforts. Decarbonisation of port terminals will be one of the elements contributing to achieve this goal.
In January 2020, the Green Gateway Gothenburg was launched as a showcase for decarbonisation of existing terminals. Switching to renewable electricity to power the cranes and offices, biogas for heating, and using biodiesel made from recycled waste vegetable oils in mobile equipment, the Gothenburg terminal reduced its CO2 emissions by 88%.
Ways to eliminate the last 12% of emissions are being pursued with terminal customers to provide a fully CO2 neutral container handling service.
Other paths to decarbonisation of the energy supply for ports are being tested as well, with solar projects in Pipavav, India, and Aqaba, Jordan, grid optimisation trial projects in two further sites, and further switches to renewable electricity in the European and US terminals in 2021.
Regional EBITDA margin, Terminals1
| Percentage | 2020 | 2019 |
|---|---|---|
| North America | 24 | 20 |
| Latin America | 42 | 34 |
| Europe, Russia and the Baltics | 28 | 28 |
| Asia | 31 | 19 |
| Africa and Middle East | 33 | 45 |
| Total | 31 | 28 |
1 Financially consolidated.
more than compensated for the lower utilisation. In Asia, the EBITDA margin increased by 11 percentage points mainly due to Pipavav consolidation. In Latin America, the EBITDA margin increased by 8.6 percentage points, due to risks not materialising, and ramp-up in Moin, Costa Rica, followed by North America, where the
EBITDA margin increased by 3.6 percentage points. In Europe, the EBITDA margin increased by 0.6 percentage points, mainly due to ramp-up of Vado. The EBITDA margin decreased in Africa and Middle East by 12 percentage points partly due to operational challenges in Apapa.
The equity-weighted EBITDA increased to USD 1.4bn (USD 1.3bn), mainly driven by ramp-up of Tema, Ghana, and increased EBITDA from consolidated terminals, offset by exit from Douala.
The share of profit in joint ventures and associated companies of USD 216m (USD 185m) was positively impacted by ramp-up of Tema and foreign exchange rate gain. Cash contribution from joint ventures and associated companies through dividends was USD 120m (USD 188m).
APM Terminals Gothenburg switched to renewable energy in 2020.
implementation in Abidjan, Ivory Coast, opening in 2022.
Towage reported a revenue of USD 681m (USD 695m), mainly impacted by lower rate per tug job as well as volume decreases due to negative COVID-19 impact, partly offset by increased activity in Europe with the acquisition of Port Towage Amsterdam, as well as increased activity in Brazil and ramp-up of activities in Tangier Med II, Morocco.
Currency impact was negligible for the full year. EBITDA increased to USD 216m (USD 205m), mainly due to lower costs, partly offset by oneoffs such as restructuring costs in Australia.
Harbour towage activities measured by the number of tug jobs increased by 2.5%, driven by positive impact from the full consolidation of Port Towage Amsterdam from beginning of 2020, partly offset by lower activity in Australia, the UK and Scandinavia, mainly due to COVID-19. The Americas and the Asia, Middle East and Africa regions had increased activities compared to 2019.
For terminal towage, annualised EBITDA per tug increased, primarily impacted by increase in the Bahamas, in the Americas and in Egypt, in the Asia, Middle East and Africa region, partly offset by declines in Australia and in Europe.
The share of profit in joint ventures and associated companies decreased by 6% to USD 20m (USD 22m), impacted by the acquisition of the remaining 50% of Port Towage Amsterdam, which has been consolidated as a 100% owned subsidiary from early January 2020.
Equity-weighted EBITDA increased by 4% to USD 237m (USD 227m), driven by Port Towage Amsterdam now consolidating at 100%, as well as by increase in EBITDA in consolidated entities across all regions except for Australia.
| Fleet overview Towage | |||
|---|---|---|---|
| Number of vessels | 2020 | 2019 | The towage fleet increased |
| Owned | 355 | 344 | by eleven vessels to 377 vessels, with 355 owned |
| Chartered | 22 | 22 | and 22 chartered at the |
| Total | 377 | 366 | end of 2020. A total of 6 |
| Newbuilding | vessels are on order with delivery in 2021. |
||
| Delivery 2021 and onwards | 6 | 1 | |
| Total | 6 | 1 |
| Total | 681 | 695 | -2% |
|---|---|---|---|
| Asia, Middle East and Africa | 100 | 93 | 8% |
| Americas | 106 | 109 | -3% |
| Europe | 240 | 240 | 0% |
| Australia | 235 | 253 | -7% |
| Per region, USD million | 2020 | 2019 Growth % | |
| Revenue Towage |
| Total | 681 | 692 | -2% |
|---|---|---|---|
| Eliminations, etc. | -6 | -3 | - |
| Terminal towage | 228 | 226 | 1% |
| Harbour towage | 459 | 472 | -3% |
During 2020, a five-year harbour towage contract was signed for Nacala Port, Mozambique, which started operations in Q3 2020, and operations in Bremerhaven, Germany, were expanded with mooring services. Furthermore, eight contract extensions were secured across the regions, including a 10-year extension of the marine service contract in Sakhalin, Russia, a five-year extension with Egyptian LNG, a five-year extension in Point Tupper, Canada, a five-year extension of the ship assist contract in St. Eustatius, and various contract extensions in Oman, Australia, Argentina, and Brazil. In Q4, preparations were made to start operations in Emden, Germany, in January 2021, and in Australia, a plan was implemented to exit the port in Geelong and significantly reduce the workforce in Port Jackson.
Also, the strategic growth initiatives launched in 2019 have progressed throughout the year together with projects focusing on crew optimisation and general cost reductions.
2020 2019
& Others
Maersk Container Industry is a manufacturer of reefer containers at the factory in China. 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. Others consists of Maersk Training, a provider of training services to the maritime, oil and gas, offshore wind and crane industries, tanker activity acquired as part of the Hamburg Süd acquisition and other shipping related businesses.
Revenue was USD 1.3bn (USD 1.4bn) with an EBITDA of USD 165m (USD 136m).
Maersk Container Industry experienced the strongest financial year of its core marine reefer business. Revenue remained stable at USD 587m (USD 586m) with the majority of revenue related to third-party customers. Higher Star Cool Unit (SCU) sales offset lost production of the Star Cool Integrated (SCI) product, when the company's factory in Qingdao, China was forced to close for a portion of Q1 due to COVID-19. Additionally, the company achieved its highest ever third-party unit bookings.
EBITDA increased to USD 77m (USD 29m), due to disciplined cost control and 2019 was negatively impacted by restructuring costs.
Maersk Supply Service reported a 17% decrease in revenue to USD 252m (USD 306m), and an EBITDA of USD 21m (USD 28m), reflecting lower activity offset by cost reductions. Cash flow used for capital expenditure was USD 17m (USD 188m), due to zero (two) payments of new buildings.
Maersk Supply Service was awarded several contracts in the North Sea and Africa for its integrated solution service, demonstrating the synergies gained from combining the role of the vessel owner with project contractor.
For Others, revenue was USD 415m (USD 484m), and EBITDA was USD 66m (USD 80m).
| USD million | 2020 | 2019 |
|---|---|---|
| Revenue | 1,254 | 1,376 |
| Profit/loss before depreciation, amortisation and impairment losses, etc. (EBITDA) | 165 | 136 |
| EBITDA margin | 13.2% | 9.9% |
| Gross capital expenditure, excl. acquisitions and divestments (CAPEX) | 33 | 204 |
Corporate governance Board of Directors Executive Board Remuneration
After an extraordinary year with great volatility, the share price ended 41% higher than last year, implying a total shareholder return of 45% for 2020
Corporate governance is an important aspect of A.P. Møller - Mærsk A/S in line with the company values. A.P. Møller - Mærsk A/S is continuously developing its corporate governance in response to the strategic development, goals, and activities, as well as to the external environment and input from stakeholders.
Constant Care Take care of today, actively prepare for tomorrow
Humbleness Listen, learn, share, give space to others
Uprightness Our word is our bond
The right environment for the right people
Sum of how we live the Values and how we are perceived
The five core values 'Constant Care', 'Humbleness', 'Uprightness', 'Our Employees' and 'Our Name' remain pillars for the way in which A.P. Møller - Mærsk A/S conducts its business. Engrained in the company for more than a century, these corporate values are continuously being promoted throughout the global organisation and serve as guiding principles for employees and leaders.
The governance structure supports close coordination between the Board of Directors (the Board), the Executive Board and leaders throughout the organisation. The structure promotes the objectives of:
The formal basis for the corporate governance of A.P. Møller - Mærsk A/S consists of:
To organise and conduct Board of Directors meetings in the most relevant and efficient manner, the Board of Directors has established an Annual Wheel in cooperation with the Executive Board. The Annual Wheel outlines the main themes and topics for each ordinary Board of Directors meeting and areas on which the Executive Board is expected to report as well as matters for deliberation or approval by the Board of Directors
members. The Annual Wheel ensures that all relevant topics are covered during the year, e.g. strategy, people and capabilities, transparency and compliance and risk.
During September 2020, an externally facilitated Board evaluation process was conducted, among others covering the cooperation between the Board of Directors and the Executive Board, the Chairman's role, the Board's and Board committees' work and an assessment of Board capabilities relative to those best supporting the company's strategy. All members of the Board of Directors participated in the evaluation and provided input via questionnaires, thus forming the basis of a comprehensive evaluation report. The results were discussed in plenary sessions by the Board of Directors, and agreed improvements were implemented.
The Board's work has undergone a positive development in 2018-2020 by improving dynamics, engagement and the level of challenges and sparring offered by and among the Board of Directors and the Executive Board. The Board evaluation confirmed the alignment on the top strategic issues and continued focus on priorities and transparency.
The results and conclusions from the annual Board evaluation, form the basis for the Nomination Committee's considerations and continued search for future candidates to the Board of Directors.
Based on the strategy to move from a conglomerate to a focused transportation and logistics company, the Board initiated a process to define the Board composition of the future. As part of
the Board evaluation 2018, key competencies and areas of experience and expertise required on the Board were identified to be: Shipping, transport and logistics, IT/digital/tech and e-commerce, business transformation, innovation and entrepreneurship, asset heavy industries, finance and accounting, risk management, global leadership and board service in stock listed companies.
Consequently, the Nomination Committee initiated a search for Board candidates with relevant additional competencies to complete the Board's overall, collective capabilities. At the Annual General Meeting in 2019, Bernard L. Bot and Marc Engel were elected members of the Board of Directors bringing competencies within global transport and logistics. At the Annual General Meeting in 2020, Blythe S. J. Masters was elected, bringing competencies within financial services, technology, startups and blockchain.
When assessing the composition of the Board, the Nomination Committee also considers diversity and setting of the target for the underrepresented gender on the Board of Directors in accordance with the Danish Company's Act § 139c. In 2019, the Board of Directors re-adopted the target for the underrepresented gender on the Board of Directors: Three female Board members elected by the general meeting if the Board consists of less than 12 members and four female Board members elected by the general meeting if the Board consists of 12 or more members. The target has to be met by end 2023. As the Board consists of ten members of which three are female the target is currently met. The Board will continuously assess whether the target set in 2019 is still ambitious. The company keeps focus on driving diversity both on managerial levels and on the Board.
Further information on diversity can be found in the company's Sustainability Report.
The EU Takeover Bids Directive, as partially implemented by the Danish Financial Statements Act, requires listed companies to disclose information that may be of interest to the market and potential take-over bidders, in particular in relation to disclosure of change-of-control provisions.
A.P. Møller - Mærsk A/S discloses that the group in the ordinary course of business has agreements with business partners which could be terminated in case of a change of control. However, given the ownership structure of A.P. Moller - Maersk, the risk is considered to be very remote.
As a Danish listed company, 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 2020. This statement includes a description of the company's approach to the recommendations in the 'Recommendations for Corporate Governance'. Reporting on compliance with the Corporate Governance recommendations can be found on http://investor.maersk.com/corporate-governance
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.
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 entire Board of Directors. The responsibility for the everyday maintenance of an efficient control environment in connection with the financial reporting rests with the Executive Board. The management of the brands and business units are responsible for ensuring an efficient control environment for the respective brand or business unit.
Based on the applicable rules and regulations, the Board of Directors and the Executive Board prepare and approve the general policies, procedures, and controls in significant areas in connection with the company's financial reporting.
The starting point is a clear organisational structure, clear chains of command, authorisation and certification procedures, and segregation of duties as well as adequate accounting and consolidation systems, including validation controls.
In addition, the company has set up policies, manuals, and procedures within relevant areas in connection with its financial reporting. The policies, manuals, and procedures are updated on an ongoing basis.
At least once a year, as part of the risk assessment, the Board of Directors, the Audit Committee and the Executive Board undertake a general identification and assessment of risks in connection with the financial reporting, including the risk of fraud, and consider measures to be implemented to reduce or eliminate such risks.
Decisions on measures to reduce or eliminate risks are based on an assessment of materiality and probability of errors and omissions.
Specific control activities have been defined for each significant brand and business unit.
The performance of such control activities is monitored on brand and business unit level as well as on a corporate level. This monitoring includes controller reports with follow-up on findings and recommendations as well as an annual statement of representation from management of the most significant brands and business units.
The Board of Directors is overall responsible for the company having information and reporting systems in place to ensure that its financial reporting is in conformity with rules and regulations. For this purpose, the company has set out detailed requirements in policies, manuals, and procedures and a global consolidation system with related reporting instructions has been implemented. Also, risk and control catalogues have been established and collated for all significant brands and business units as well as for corporate functions.
The monitoring of risk management and control systems in connection with financial reporting takes the form of ongoing assessments and control at different levels within the company.
Any weaknesses, control failures, and violations of the applicable policies, manuals, and procedures or other material deviations are communicated
Board of Directors Chairmanship Audit Committee Nomination Committee Group Internal Audit
Remuneration Committee
Transformation & Innovation Committee
Executive Board
Organisation
upwards in the organisation in accordance with relevant policies and instructions. Any weaknesses, omissions, and violations are reported to the Executive Board. The Board of Directors and the Audit Committee receive reports from the Executive Board and from Group Internal Audit on the compliance with the guidelines, etc., as well as on the weaknesses, omissions, and violations of the policies, procedures, and internal controls found.
The auditors elected by the Annual General Meeting account for any identified significant deficiencies in the internal control systems related to financial reporting in the Auditor's Long-form Report to the Board of Directors. Identified deficiencies in internal control systems are reported in management letters to the Executive Board.
The General Meeting is the supreme governing body of A.P. Møller - Mærsk A/S. The shareholders exercise their rights at the General Meeting, e.g. in relation to electing the Board of Directors members and the auditors of the company, approving the annual reports and dividends, deciding on the articles of association and on proposals submitted by shareholders or the Board of Directors. 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 two-tier management structure consisting of the Board of Directors and the Executive Board as illustrated. There is no overlap between members of the Board of Directors and members of the Executive Board. By inviting business leaders, functional leaders, and
relevant experts to participate in parts of its meetings, the Board of Directors and its committees interact with representatives from various parts of the organisation as well as external specialists.
The Board of Directors lays down the general business and management principles and ensures the proper organisation and governance of the company. Furthermore, the Board of Directors decides the strategy and the risk policies and supervises the execution of the strategy as well as the performance of the company and its management. The Board of Directors appoints members of the Executive Board.
The Board of Directors shall consist of four to 13 members elected by the General Meeting. The Board members are elected for a two-year term. There are Board members up for election every year to ensure continuity in the work of the Board of Directors. Board members are eligible for re-election.
At the Annual General Meeting on 23 March 2020, Niels B. Christiansen stepped down from the Board of Directors, and the Annual General Meeting elected Blythe S. J. Masters as a new member. The Board of Directors consists of 10 members, all elected by the General Meeting. Six of the members of the Board of Directors, including the Chairman, are independent. The Chairman of the Board of Directors and the chairmen of the committees, except the Nomination Committee, are independent.
Further information on the members of the Board of Directors, committees as well as the Board members' participation in Board and committee meetings is available on the company webpage and below.
The Board of Directors plans seven to nine ordinary meetings per year.
The Chairmanship consists of the Chairman and the Vice Chairman, who are elected by and among the members of the Board of Directors. The Chairmanship performs certain preparation and planning in relation to Board meetings and is a forum for the Chairman's and management's reflections. The Chairmanship meets regularly and as required.
The Audit Committee consists of three to four Board members appointed by and among the Board members. The Committee reports to the Board of Directors. The tasks of the Audit Committee include the review of accounting, auditing, risk and control matters, which are dealt with at meetings with the external auditors, the CFO, Head of Group Finance and the heads of the accounting and internal audit functions. Furthermore, the Committee is tasked with reviewing material on related parties' transactions. All members are independent. The Committee plans six to seven ordinary meetings per year.
The Nomination Committee consists of three Board members, one of whom is the Chairman of the Board. The members are elected by and among the Board members, and the Board appoints the chairman of the Committee. The Nomination Committee assists the Board by establishing an overview of the competencies required and represented on the Board, and reviews the structure, size, composition, succession planning, and diversity of the Board of Directors. The Committee also reviews the application of the independence criteria, initiates
recruitment, and evaluates candidates for election to the Board of Directors at the General Meeting. The Committee meets on a regular basis.
The Remuneration Committee consists of three Board members, one of whom is the Chairman of the Board. The Remuneration Committee makes proposals to the Board of Directors for the remuneration of the Board of Directors and members of the Executive Board. Furthermore, the Committee makes proposals to the Board, e.g. with regard to incentive schemes, reporting and disclosure of remuneration, and the remuneration policy. The Remuneration Committee ensures that the remuneration policy
and practices as well as incentive programmes support the strategy of A.P. Møller - Mærsk A/S and create value for the shareholders. The majority of the members are independent. The Committee plans four meetings per year.
The Transformation & Innovation Committee consists of three to four Board members appointed by and among the Board members. The Committee is established with the purpose of supporting the transformation of the company as well as the development of the company's overall strategic direction and innovation agenda. The majority
| Board of Directors |
Chairmanship | Audit Committee |
Nomination Committee |
Remuneration Committee |
Transformation & Innovation Committee |
1 Considered independent cf. Recommendations for Corporate Governance. |
|
|---|---|---|---|---|---|---|---|
| Jim Hagemann Snabe1 | 8/8 (Chairman) |
7/7 | 6/6 | 5/5 | 4/4 (Chairman) |
4/4 | 2 Joined the Board or Committee in March |
| Ane Mærsk Mc-Kinney Uggla | 8/8 (Vice Chairman) |
7/7 | 5/5 (Chairman) |
2020 3 Joined the Committee |
|||
| Dorothee Blessing1 | 8/8 | in March 2020 | |||||
| Bernard L. Bot1 | 8/82 | 6/6 | 4 Stepped down in March 2020 |
||||
| Niels Bjørn Christiansen1 | 1/84 | 1/44 | 1/44 | ||||
| Marc Engel1 | 8/8 | 4/4 | |||||
| Arne Karlsson1 | 8/8 | 6/6 (Chairman) |
3/43 | ||||
| Thomas Lindegaard Madsen | 8/8 | ||||||
| Blythe S. J. Masters1 | 6/72 | 3/42 | |||||
| Jacob Andersen Sterling | 8/8 | ||||||
| Robert Mærsk Uggla | 8/8 | 5/5 | 4/4 | 4/4 | |||
| Overall attendance rate | 98.8% | 100% | 100% | 100% | 100% | 100% |
of the members are independent. The Committee plans four meetings per year.
The Rules of procedure for the Audit Committee, Nomination Committee, Remuneration Committee and Transformation & Innovation Committee are available on the company webpage.
Group Internal Audit was established in 1998 and provides assurance to the Board of Directors and the Audit Committee and acts independently of the Executive Board. Group Internal Audit's main 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 Chairman of the Board of Directors and to the Audit Committee.
The Executive Board is appointed by the Board of Directors to carry out the day-to-day management of the company in accordance with the directions provided by the Board of Directors. The tasks include but are not limited to:
As of 1 January 2020, the Executive Board of A.P. Møller - Mærsk A/S consisted of Søren Skou (CEO), Carolina Dybeck Happe (CFO), Vincent Clerc (CEO of Ocean & Logistics), Morten H. Engelstoft (CEO of APM Terminals) and Henriette Hallberg Thygesen (CEO Fleet & Strategic Brands). After having announced her resignation 25 November 2019, Carolina Dybeck Happe left the company at the end of February 2020. 1 May 2020 Patrick Jany was appointed new CFO and was appointed member of the Executive Board.
Further information about the members of the Executive Board, including photos and occupations can be found on the company webpage.
Like thousands of colleagues around the world, the Board of Directors adopted new habits and conducted virtual meetings throughout the year.
Florida, USA Blythe S. J. Masters
Captain on the ocean Thomas Lindegaard Madsen
England Dorothee Blessing Bernard L. Bot Marc Engel
Arne Karlsson
Jim Hagemann Snabe Ane Mærsk Mc-Kinney Uggla Robert Mærsk Uggla Jacob Andersen Sterling
| Born: | 1965 |
|---|---|
| Gender: | Male |
| Joined the Board: | 2016 |
| Current election period: | 2020-2022 |
Chairman of the Board of Directors, the Remuneration Committee and the Transformation & Innovation Committee. Member of the Audit Committee, the Nomination Committee.
Considered independent.
Board experience from international, listed technology and innovation companies and from the financial sector. Management experience from global, listed IT companies. Digital transformation experience.
| Born: | 1948 |
|---|---|
| Gender: | Female |
| Joined the Board: | 1991 |
| Current election period: | 2020-2022 |
Vice Chairman of the Board of Directors and Chairman of the Nomination Committee.
Not considered independent due to membership of the Board of A.P. Møller og Hustru Chastine Mc-Kinney Møllers Fond til almene Formaal.
• Master of Arts, 1977
Insight into the market fundamentals, values and history of the company. Knowledge of the company's complex accounting matters
during 2020 8 out of 8 Board meetings 7 out of 7 Chairmanship meetings 5 out of 5 Nomination Committee meetings
| Born: | 1967 |
|---|---|
| Gender: | Female |
| Joined the Board: | 2014 |
| Current election period: | 2019-2021 |
Considered independent.
• Member of the Board of Directors of the Association of German Banks
• MSc in Economics (lic.oec.), University of St. Gallen, Switzerland
Financial insight. Leadership experience from international investment banking and financial institutions.
8 out of 8 Board meetings
| Born: | 1966 |
|---|---|
| Gender: | Male |
| Joined the Board: | 2019 |
| Current election period: | 2019-2021 |
Member of the Audit Committee.
Considered independent.
Other management duties, etc. • None
Experience within the transport and logistics sector and listed companies. Technical financial skills and knowledge of global business-to-business technology enterprises.
Attendance in Board and Committee meetings during 2020
8 out of 8 Board meetings 6 out of 6 Audit Committee meetings
| Born: | 1966 |
|---|---|
| Gender: | Male |
| Joined the Board: | 2019 |
| Current election period: | 2019-2021 |
Member of the Transformation & Innovation Committee.
Considered independent.
• MSc, Applied Physics, from University of Groningen, the Netherlands
International experience in general management, sustainability, procurement and supply chain. Insight from a customer's perspective in both shipping and broader logistics space.
| Born: | 1958 |
|---|---|
| Gender: | Male |
| Joined the Board: | 2010 |
| Current election period: | 2019-2021 |
Chairman of the Audit Committee, member of the Remuneration Committee.
Considered independent.
• Bachelor in Business and Economics, Stockholm School of Economics, 1982
Experience as CEO and board member of private equity and industrial companies and with managing and developing a diverse portfolio of businesses operating in different markets.
8 out of 8 Board meetings 6 out of 6 Audit Committee meetings 3 out of 41 Remuneration Committee meetings
1 In 2020, the Remuneration Committee held four meetings; one before Arne Karlsson joined.
| Born: | 1972 |
|---|---|
| Gender: | Male |
| Joined the Board: | 2018 |
| Current election period: | 2020-2022 |
Not considered independent due to employment in A.P. Moller - Maersk.
Other management duties, etc. • None
• Graduated Master, Svendborg Navigations Skole, 1996
Captain in Maersk Line since 2011 and Chief Officer in Maersk Line from 2004-2011. Technical, maritime and operational knowledge relevant to the shipping activities in A.P. Moller - Maersk.
8 out of 8 Board meetings
| Born: | 1969 |
|---|---|
| Gender: | Female |
| Joined the Board: | 2020 |
| Current election period: | 2020-2022 |
Member of the Transformation & Innovation Committee
Considered independent
Industry Partner at the private equity firm Motive Partners and CEO of the special purpose acquisition corporation, Motive Capital Corp, sponsored by Motive's funds
• Bachelor of Arts: Economics, Trinity College, Cambridge
Experienced financial services and technology executive with extensive knowledge in start-ups and blockchain and extensive corporate governance and advisory experience.
6 out of 82 Board meetings 3 out of 43 Transformation & Innovation Committee meetings
1 Listed company
| Born: | 1975 |
|---|---|
| Gender: | Male |
| Joined the Board: | 2018 |
| Current election period: | 2020-2022 |
Not considered independent due to employment in A.P. Moller - Maersk.
• Member of the Board of Directors, NEPCon • Member of the Board of Trustees, Sustainable Shipping Initiative
• MSc in Biology, University of Copenhagen, 2002
Relevant knowledge within product management, technical innovation and sustainability, through employment in Maersk Line since 2009.
8 out of 8 Board meetings
| Born: | 1978 |
|---|---|
| Gender: | Male |
| Joined the Board: | 2014 |
| Current election period: | 2020-2022 |
Member of the Nomination Committee, the Remuneration Committee and the Transformation & Innovation Committee.
Not considered independent due to the position as CEO of A.P. Møller Holding A/S.
1 Listed company
Leadership experience within investments, incubation, transportation & infrastructure activities.
4 out of 4 Transformation & Innovation Committee meetings
| Chief Executive Officer (CEO) of A.P. Møller - Mærsk A/S |
||||
|---|---|---|---|---|
| Born: | 1964 | |||
| Gender: | Male | |||
| Joined the Executive Board: 2007 |
Søren Skou has been CEO of A.P. Møller - Mærsk A/S since June 2016.
Søren Skou joined A.P. Moller - Maersk in 1983. Over the next 15 years, he held various positions in A.P. Moller - Maersk with roles in Copenhagen, New York and Beijing. In 1998 he joined Maersk Tankers, where he was CEO from 2001 to 2011.
Chief Financial Officer (CFO) of A.P. Møller - Mærsk A/S Born: 1968 Gender: Male Joined the Executive Board: 2020
Patrick Jany has been CFO of A.P. Møller - Mærsk A/S since May 2020.
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 Jany held several leadership positions within finance, general management and corporate development in Clariant in Germany, Mexico, Singapore, Indonesia and Spain.
Other management duties, etc.
• Comet AG, Switzerland (Board member)
• Master in Business Administration, Finance, ESCP (Ecole Supérieure de Commerce de Paris)
| Chief Executive Officer (CEO), Ocean & Logistics |
||
|---|---|---|
| Born: | 1972 | |
| Gender: | Male | |
| Joined the Executive Board: 2017 |
Vincent Clerc has been with A.P. Møller - Mærsk A/S since 1997.
Vincent Clerc has held various roles in North America and Copenhagen. In December 2015, Vincent Clerc was appointed Chief Commercial Officer in Maersk Line.
• None
• Bachelor in Political Science, Lausanne, Switzerland • MBA from Columbia Business School, New York, and London Business School
| Chief Executive Officer (CEO), | ||
|---|---|---|
| APM Terminals | ||
| Born: | 1967 | |
| Gender: | Male | |
| Joined the Executive Board: 2017 |
Morten H. Engelstoft has been with A.P. Møller - Mærsk A/S since 1986.
Morten H. Engelstoft has had a long tenure with A.P. Moller - Maersk and other brands, including postings in the the US, Vietnam, Taiwan, Singapore and Italy.
Morten H. Engelstoft has been CEO of APM Terminals since 2016.
• TT Club Mutual Insurance Ltd. (Board member)
• Executive MBA, IMD, Lausanne, Switzerland • Maersk International Shipping Education
| Chief Executive Officer (CEO), Fleet & Strategic Brands |
|
|---|---|
| Born: | 1971 |
| Born: | 1971 |
|---|---|
| Gender: | Female |
| Joined the Executive Board: 2020 |
Henriette Hallberg Thygesen has been with A.P. Møller - Mærsk A/S since 1994.
Henriette Hallberg Thygesen has held various positions in Spain, China, Hong Kong, the USA and Copenhagen for Maersk Tankers, Maersk Oil, Maersk Logistics/ Damco and as CEO of Svitzer A/S.
• Cowi Holding A/S (Board member)
2020 has been a strong year for A.P. Moller - Maersk despite the ongoing impacts of the COVID-19 pandemic. The remuneration of the Executive Board members for the financial year 2020 reflects a solid year with strong financial results and a satisfying progress towards the strategic transformation, whilst the remuneration to the members of the Board of Directors remains unchanged from the previous year.
The following sections set out key elements of the Remuneration Policy ('Policy'), and the total remuneration awarded to the members of Board of Directors and the Executive Board for 2020.
The Policy supports the business needs by enabling an appropriate total remuneration package that has a clear link to business strategy and aligns with shareholder interests.
The objectives of the Policy are to:
| Remuneration awarded (USD million) | 2020 | 2019 | 2018 | 2017 | 2016 |
|---|---|---|---|---|---|
| Board of Directors | |||||
| Fixed annual fee | 3 | 3 | 3 | 3 | 3 |
| Total | 3 | 3 | 3 | 3 | 3 |
| Executive Board | |||||
| Fixed base salary | 8 | 10 | 10 | 8 | 13 |
| Short-term cash incentive | 6 | 5 | 5 | 2 | 2 |
| Long-term share-based incentives | 2 | 1 | 1 | 1 | -2 |
| Remuneration in connection with redundancy, resignations and release from duty to work |
- | 6 | 4 | - | 22 |
| Lump sum retirement payment | - | - | - | - | -1 |
| Total | 16 | 22 | 20 | 11 | 34 |
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 2020.
The members of the Board of Directors receive a fixed annual fee which is differentiated based on the role:
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 Chairman where the fixed annual fee is all inclusive.
The remuneration of the Executive Board members consists of a fixed base salary, which is inclusive of company pension contribution and car, short-term incentive as well as the long-term incentive components.
The remuneration structure is intended to drive a 'reward for performance' culture by aligning individual reward to company performance and shareholder value creation. The individual remuneration level is set and reviewed based on peer companies of similar size and complexity to ensure they remain comparable and fit for the business.
The table shows the total remuneration awarded to members of the Board of Directors and the Executive Board in aggregate from 2016 to 2020, as set out in note 2 of the consolidated financial statements.
Further information regarding the share-based payments is detailed in note 11 of the consolidated financial statements as calculated under IFRS2. This is different in both reporting and methodology in the company's Remuneration Report 2020 which is available at the company's website on: https://investor.maersk.com/remuneration.
The Maersk B share price increased by 41% to DKK 13,595 from its closing price at the end of 2019 of DKK 9,608. By comparison, the benchmark indices MSCI World Transportation and OMXC25 increased by 5% and 34%, respectively. The Maersk B share price reached its highest price of DKK 14,115 on 18 December 2020, and its lowest price of DKK 5,034 on 19 March 2020. The total market value of A.P. Møller - Mærsk A/S was USD 43bn at the end of 2020. The positive development of the share price was driven by a very strong financial performance in the second half of the year, as demand picked up faster than anticipated after the first lockdown related to the pandemic outbreak in the early days of 2020. The sudden uptick in demand led to a significant increase in freight rates during the third quarter. The continued focus on the cost base and agile capacity deployment, coupled with the higher freight rates lead to improved financial performance and a total of three earnings upgrades after having suspended the guidance in March 2020.
A.P. Moller - Maersk 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.
The A.P. Møller - Mærsk A/S share capital amounts to nominally DKK 20,031,947,000, divided between 10,599,401 A shares of nominally DKK 1,000 and 9,432,546 B shares of nominally DKK 1,000.
The total number of registered shareholders increased by 3,000 to around 76,000 during 2020. Shareholders with more than 5% of share capital or votes held 53% of the share capital, while the 20 largest institutional shareholders together owned around 16% of the total share capital and 37% adjusted for the free-float. Danish retail investors decreased their ownership slightly from 11% to 10% of the total share capital since the end of 2019.
A.P. Moller - Maersk holding of own shares comprised 3.12% of the share capital at the end of 2020, cf. note 11 in the consolidated financial statements.
The dividend policy is an annual pay-out ratio of 30-50% of underlying net result, adjusted for gains, impairments and restructurings, to be implemented from the financial year 2020.
In the medium-term and during the strategic phase of transforming the company to become a global integrator of container logistics, the annual pay-out ratio should be expected at the low to midpoint of the range.
Distribution to shareholders will take place through dividends potentially combined with share buy-backs, and the annual pay-out ratio and distribution will be decided from an evaluation
23 March Annual General Meeting
5 May Interim Report Q1 2021
6 August Interim Report Q2 2021
2 November Interim Report Q3 2021 of the outlook, cash flow, capital expenditures for organic use and merger and acquisition transactions and investment grade rating.
The Board of Directors proposes an ordinary dividend to the shareholders of DKK 330 per share of DKK 1,000 (DKK 150 per share of DKK 1,000). The proposed dividend payment represents an ordinary dividend yield of 2.4% (1.6%) and 35% of the net underlying profit, based on the Maersk B share's closing price of DKK 13,595 as of 30 December 2020. Payment is expected to take place on 26 March 2021.
The capital structure ensures that A.P. Møller - Mærsk A/S at all time has sufficient financial flexibility to meet the strategic and growth objectives and to maximise the return to our shareholders.
In terms of capital allocation, a strict CAPEX discipline is applied with an accumulated CAPEX guidance for 2021-2022 of USD 4.5-5.5bn.
Driving our long-term value creative strategy, we apply the following principles for capital allocation.
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. Similarly, the aim is to avoid high concentrations of debt maturing within the same year. We aim at having a diversified debt portfolio, based on funding from debt capital markets, commercial bank debt, export credit agencies, ship financing institutions, and from multilateral agencies.
The target is to have an average maturity of the debt portfolio, excluding the impact of leases, of at least four years, and that the total amount of debt maturities within a calendar year should not exceed USD 3bn, within the next three full calendar years.
In Q2 2019, the Board of Directors decided to exercise its authority to buy back shares of up to DKK 10bn (around USD 1.5bn) over a period of up to 15 months.
The share buy-back programme was concluded on 24 July 2020 and A.P. Moller - Maersk has repurchased USD 1.5bn worth of shares, of which USD 98m was repurchased in Q3 2020. On 1 June 2020, the cancellation of 156,977 A-shares and 627,938 B-shares was completed corresponding to 3.77% of the total share capital in A.P. Moller - Maersk.
In November 2020, the Board of Directors decided to initiate a new share buy-back programme of up to DKK 10bn (around USD 1.6bn) and a maximum of 1.79 million shares to be acquired over a period of up to 15 months.
The share buy-back will be carried out in several phases. The first phase of the share buy-back programme of DKK 3.3bn (around USD 500m) is expected to run from 1 December 2020 until April 2021. The remaining part of the programme will be initiated after approval by the Annual General Meeting in March 2021 of the proposed prolongation of the authority to acquire own shares.
By the end of 2020, a total of 119,176 A shares and 505,281 B shares was owned by the company, corresponding to 3.12% of the share capital.
| Key figures | 2020 | 2019 | 2018 | 2017 | 2016 | 1 For 2015-2018 data |
|---|---|---|---|---|---|---|
| Year-end share price (DKK, B share)1 | 13,595 | 9,608 | 8,184 | 10,840 | 11,270 | has not been adjusted for the demerger of |
| Share price range (DKK, B share)1 | 9,081 | 3,410 | 4,005 | 3,990 | 4,140 | Maersk Drilling 2 Ordinary dividend in 32.2 proposed year -93 3 Actual payments on a cash basis 150 1.3% |
| Market capitalisation at year-end (USD bn, A and B share)1 | 42 | 28.0 | 25.3 | 35.4 | ||
| Earnings per share (USD) | 145 | -4 | 152 | -58 | ||
| Dividend per share (DKK, A and B share)2 | 330 | 150 | 150 | 150 | ||
| Dividend yield (B share) | 2.4% | 1.6% | 1.8% | 1.4% | ||
| Total dividends (USD m) | 1,092 | 468 | 479 | 503 | 443 | |
| Share buy-back programme (DKK bn)3 | 5.4 | 5.3 | - | - | 3.2 | |
| Share buy-back programme (USD m) | 806 | 791 | - | - | 475 |
The decision to initiate a new share buy-back programme is supported by the strong earnings and free cash flow generation seen in 2020, which has led to further deleveraging of the company and improved credit metrics in line with investment grade rating.
The new programme is in alignment with previously announced intention to distribute a material part of the value of shares received in Total S.A. (value USD 4.5bn) as part of the sale of Maersk Oil, subject to maintaining investment grade rating. With the announced new share buy-back programme the total distribution from the sale of the shares in Total S.A. will be around USD 3.4bn or around 75% of the initial value of the shares received.
The share buy-back is carried out with the purpose to adjust the capital structure of A.P. Moller - Maersk. Shares which are not used for hedging purposes for the long-term incentive programmes will be proposed cancelled at the Annual General Meetings in 2021 and 2022.
No shares may be bought back at a price exceeding the higher of i) share price of latest independent 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 7th trading day the purchases made under the share buy-back programme.
A.P. Møller Holding A/S has committed to participating in the share buy-back programme by selling shares relative to its voting rights and relative to its total ownership in the company. A.P. Møller Holding A/S intends to maintain its ownership of 51.45% of A shares and 41.51% of the total share capital in the company.
The company is entitled to suspend or stop the programme at any time subject to an announcement to Nasdaq Copenhagen.
The Annual General Meeting will be held on 23 March 2021 in Copenhagen, Denmark.
In our transformation to become the global integrator of container logistics, we continue to innovate and grow shareholder value.
| Shareholders according to section 55 of the Danish Companies Act are | Share capital | Votes |
|---|---|---|
| A.P. Møller Holding A/S, Copenhagen, Denmark | 40.29% | 50.88% |
| A.P. Møller og Hustru Chastine Mc-Kinney Møllers Familiefond, Copenhagen, Denmark |
9.18% | 13.31% |
| Den A.P. Møllerske Støttefond, Copenhagen, Denmark | 3.23% | 6.07% |
To keep investors and analysts updated on the company's strategic development, market outlook and financial performance, A.P. Moller - Maersk arranges road-shows and participates in investor and industry conferences. Investor Relations, besides meeting domestic investors, also travels extensively to ensure that international investors are kept updated on the latest developments. In the vast majority of 2020, these meetings have been online due to restrictions following the pandemic. In 2020, the Executive Board and the Investor Relations team had more than 500 meetings with the participation of more than 1,200 investors and analysts across Europe, Asia and North America.
A.P. Moller - Maersk is covered by around 30 sellside analysts, predominantly from international investment banks, who regularly publish research reports and sector reports. A list of the analysts and other relevant information, including financial reports, investor presentations, share and bond information, is available at http://investor. maersk.com.
Consolidated financial statements 2020
Parent company financial statements 2020
Statement of the Board of Directors and the Executive Board
(In parenthesis, the corresponding figures for 2019)
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
| Note | 2020 | 2019 | |
|---|---|---|---|
| 1 | Revenue | 39,740 | 38,890 |
| 2 | Operating costs | 31,804 | 33,130 |
| 16 | Other income | 290 | 12 |
| Other costs | - | 60 | |
| 1 | Profit before depreciation, amortisation and impairment losses, etc. (EBITDA) | 8,226 | 5,712 |
| 6,7,8,10 Depreciation, amortisation and impairment losses, net | 4,541 | 4,287 | |
| 3 | Gain on sale of non-current assets, etc., net | 202 | 71 |
| Share of profit/loss in joint ventures | 122 | 93 | |
| Share of profit/loss in associated companies | 177 | 136 | |
| Profit/loss before financial items (EBIT) | 4,186 | 1,725 | |
| 4 | Financial income | 895 | 511 |
| 4 | Financial expenses | 1,774 | 1,269 |
| Profit/loss before tax | 3,307 | 967 | |
| 5 | Tax | 407 | 458 |
| Profit/loss for the year– continuing operations | 2,900 | 509 | |
| 10 | Profit/loss for the year– discontinued operations | - | -553 |
| Profit/loss for the year | 2,900 | -44 | |
| Of which: | |||
| Non-controlling interests | 50 | 40 | |
| A.P. Møller - Mærsk A/S' share | 2,850 | -84 | |
| 11 | Earnings per share – continuing operations, USD | 145 | 23 |
| 11 | Diluted earnings per share – continuing operations, USD | 145 | 23 |
| 11 | Earnings per share, USD | 145 | -4 |
| 11 | Diluted earnings per share, USD | 145 | -4 |
Maersk Drilling was classified as discontinued operations in 2019, and the business is presented separately on an aggregated level in the income statement, balance sheet and cash flow statement.
| Note | 2020 | 2019 | |
|---|---|---|---|
| Profit/loss for the year | 2,900 | -44 | |
| Translation from functional currency to presentation currency: | |||
| Translation impact arising during the year | 195 | -81 | |
| Reclassified to income statement, gain on sale of non-current assets, etc., net | 64 | 6 | |
| 16 | Cash flow hedges: | ||
| Value adjustment of hedges for the year | 30 | -141 | |
| Reclassified to income statement | |||
| – revenue | -5 | 5 | |
| – operating costs | -16 | 78 | |
| – financial expenses | 49 | 32 | |
| – discontinued operations | - | 1 | |
| Reclassified to non-current assets | -15 | 2 | |
| 5 | Tax on other comprehensive income | 10 | 16 |
| Share of other comprehensive income of joint ventures and associated companies, net of tax |
5 | -1 | |
| Total items that have been or may be reclassified subsequently to the income statement |
317 | -83 | |
| 17 | Other equity investments (FVOCI), fair value adjustments for the year | 2 | 165 |
| 14 | Actuarial gains/losses on defined benefit plans, etc. | -207 | 91 |
| 5 | Tax on other comprehensive income Total items that will not be reclassified to the income statement |
-4 -209 |
10 266 |
| Other comprehensive income, net of tax | 108 | 183 | |
| Total comprehensive income for the year | 3,008 | 139 | |
| Of which: | |||
| Non-controlling interests | 47 | 29 | |
| A.P. Møller - Mærsk A/S' share | 2,961 | 110 |
| Note | Assets | ||
|---|---|---|---|
| 2020 | 2019 | ||
| 6 | Intangible assets | 5,145 | 4,219 |
| 7 | Property, plant and equipment | 26,481 | 27,516 |
| 8 | Right-of-use-assets | 8,323 | 8,460 |
| Investments in joint ventures | 1,260 | 1,204 | |
| Investments in associated companies | 951 | 937 | |
| 17 | Other equity investments | 107 | 78 |
| 16 | Derivatives | 269 | 161 |
| 14 | Pensions, net assets | 225 | 409 |
| Loan receivables | 136 | 160 | |
| Other receivables | 235 | 318 | |
| Financial non-current assets, etc. | 3,183 | 3,267 | |
| 9 | Deferred tax | 249 | 237 |
| Total non-current assets | 43,381 | 43,699 | |
| Inventories | 1,049 | 1,430 | |
| 16 | Trade receivables | 3,634 | 3,531 |
| Tax receivables | 238 | 161 | |
| 16 | Derivatives | 307 | 43 |
| Loan receivables | 91 | 239 | |
| Other receivables | 869 | 857 | |
| Prepayments | 464 | 520 | |
| Receivables, etc. | 5,603 | 5,351 | |
| Equity investments, etc. | 1 | 2 | |
| Cash and bank balances | 5,865 | 4,768 | |
| 10 | Assets held for sale or distribution | 218 | 149 |
| Total current assets | 12,736 | 11,700 | |
| Total assets | 56,117 | 55,399 |
| Note | Equity and liabilities | ||
|---|---|---|---|
| 2020 | 2019 | ||
| 11 | Share capital | 3,632 | 3,774 |
| Reserves | 26,218 | 24,324 | |
| Equity attributable to A.P. Møller - Mærsk A/S | 29,850 | 28,098 | |
| Non-controlling interests | 1,004 | 739 | |
| Total equity | 30,854 | 28,837 | |
| 13 | Lease liabilities, non-current | 7,356 | 7,295 |
| 13 | Borrowings, non-current | 5,868 | 7,455 |
| 14 | Pensions and similar obligations | 297 | 272 |
| 15 | Provisions | 556 | 636 |
| 16 | Derivatives | 289 | 328 |
| 9 | Deferred tax | 525 | 362 |
| Tax payables | 237 | 335 | |
| Other payables | 81 | 44 | |
| Other non-current liabilities | 1,985 | 1,977 | |
| Total non-current liabilities | 15,209 | 16,727 | |
| 13 | Lease liabilities, current | 1,391 | 1,282 |
| 13 | Borrowings, current | 758 | 721 |
| 15 | Provisions | 725 | 458 |
| Trade payables | 5,156 | 5,567 | |
| Tax payables | 305 | 307 | |
| 16 | Derivatives | 228 | 87 |
| Other payables | 1,279 | 1,170 | |
| Deferred income | 121 | 168 | |
| Other current liabilities | 7,814 | 7,757 | |
| 10 | Liabilities associated with assets held for sale or distribution | 91 | 75 |
| Total current liabilities | 10,054 | 9,835 | |
| Total liabilities | 25,263 | 26,562 | |
| Total equity and liabilities | 56,117 | 55,399 | |
| Note | 2020 | 2019 | |
|---|---|---|---|
| Profit/loss before financial items | 4,186 | 1,725 | |
| 6,7,8,10 Depreciation, amortisation and impairment losses, net | 4,541 | 4,287 | |
| 3 | Gain on sale of non-current assets, etc., net | -202 | -71 |
| Share of profit/loss in joint ventures | -122 | -93 | |
| Share of profit/loss in associated companies | -177 | -136 | |
| 20 | Change in working capital | -239 | 476 |
| Change in provisions and pension obligations, etc. | 158 | 70 | |
| 20 | Other non-cash items | 107 | 162 |
| Cash flow from operating activities before tax | 8,252 | 6,420 | |
| Taxes paid | -424 | -501 | |
| Cash flow from operating activities | 7,828 | 5,919 | |
| 20 | Purchase of intangible assets and property, plant and equipment | -1,322 | -2,035 |
| Sale of intangible assets and property, plant and equipment | 435 | 186 | |
| 21 | Acquisition of subsidiaries and activities | -425 | -44 |
| 21 | Sale of subsidiaries and activities | 36 | -40 |
| Sale of associated companies | -12 | 46 | |
| Dividends received | 177 | 297 | |
| Sale of other equity investments | 5 | 2,617 | |
| Other financial investments, net | 81 | -152 | |
| Purchase/sale of securities, trading portfolio | 1 | -1 | |
| Cash flow used for investing activities | -1,024 | 874 | |
| Repayment of borrowings | -3,163 | -2,533 | |
| 13 | Repayments of lease liabilities | -1,710 | -1,291 |
| Proceeds from borrowings | 1,303 | 1,077 | |
| Financial income received | 92 | 91 | |
| Financial expenses paid | -384 | -350 | |
| 4 | Financial expenses paid on lease liabilities | -468 | -477 |
| Purchase of own shares | -806 | -791 | |
| Sale of own shares | 30 | - | |
| Dividends distributed | -430 | -469 | |
| Dividends distributed to non-controlling interests | -92 | -70 | |
| Sale of non-controlling interests | - | - | |
| Acquisition of non-controlling interest | -14 | -1 | |
| Other equity transactions | 24 | 14 | |
| Cash flow from financing activities | -5,618 | -4,800 | |
| Net cash flow from continuing operations | 1,186 | 1,993 | |
| 10 | Net cash flow from discontinued operations | - | -372 |
| Net cash flow for the period | 1,186 | 1,621 | |
| Cash and cash equivalents 1 January | 4,758 | 3,149 | |
| Currency translation effect on cash and cash equivalents | -80 | -12 | |
| Cash and cash equivalents 31 December | 5,864 | 4,758 | |
| Of which classified as assets held for sale | -19 | - | |
| Cash and cash equivalents 31 December | 5,845 | 4,758 | |
| Cash and cash equivalents | |||
| Cash and bank balances | 5,865 | 4,768 | |
| Overdrafts | 20 | 10 | |
| Cash and cash equivalents 31 December | 5,845 | 4,758 |
Cash and bank balances include USD 1.0bn (USD 0.9bn) 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.
| 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 2019 | 3,774 | -616 | -202 | -103 | 29,756 | 32,609 | 771 | 33,380 | |
| Other comprehensive income, net of tax | - | -76 | 180 | 6 | 84 | 194 | -11 | 183 | |
| Profit/loss for the period | - | - | - | - | -84 | -84 | 40 | -44 | |
| Total comprehensive income for the period | - | -76 | 180 | 6 | - | 110 | 29 | 139 | |
| Dividends to shareholders | - | - | - | - | -469 | -469 | -73 | -542 | |
| 12 | Value of share-based payment | - | - | - | - | 10 | 10 | - | 10 |
| Purchase of own shares | - | - | - | - | -791 | -791 | - | -791 | |
| 11 | Capital increases and decreases | - | - | - | - | - | - | 12 | 12 |
| 17 | Transfer of gain/loss on disposal of equity investments to retained earnings |
- | - | 18 | - | -18 | - | - | - |
| Distribution of shares in The Drilling Company of 1972 A/S to shareholders in A.P. Møller - Mærsk A/S |
- | - | - | - | -3,371 | -3,371 | - | -3,371 | |
| Total transactions with shareholders | - | - | 18 | - | -4,639 | -4,621 | -61 | -4,682 | |
| Equity 31 December 2019 | 3,774 | -692 | -4 | -97 | 25,117 | 28,098 | 739 | 28,837 | |
| 2020 | |||||||||
| Other comprehensive income, net of tax | - | 260 | 1 | 55 | -205 | 111 | -3 | 108 | |
| Profit/loss for the period | - | - | - | - | 2,850 | 2,850 | 50 | 2,900 | |
| Total comprehensive income for the period | - | 260 | 1 | 55 | 2,645 | 2,961 | 47 | 3,008 | |
| Dividends to shareholders | - | - | - | - | -430 | -430 | -90 | -520 | |
| 12 | Value of share-based payment | - | - | - | - | 11 | 11 | - | 11 |
| Addition of non-controlling interests | - | - | - | - | -14 | -14 | 302 | 288 | |
| Purchase of own shares | - | - | - | - | -806 | -806 | - | -806 | |
| Sale of own shares | - | - | - | - | 30 | 30 | - | 30 | |
| 11 | Capital increases and decreases | -142 | - | - | - | 142 | - | 6 | 6 |
| 17 | Transfer of gain/loss on disposal of equity | ||||||||
| investments to retained earnings Total transactions with shareholders |
- -142 |
- - |
-3 -3 |
- - |
3 -1,064 |
- -1,209 |
- 218 |
- -991 |
|
| Equity 31 December 2020 | 3,632 | -432 | -6 | -42 | 26,698 | 29,850 | 1,004 | 30,854 |
Note 3 74 Gain on sale of non-current assets, etc., net
Note 4 74 Financial income and expenses
78 Property, plant and equipment
82 Discontinued operations and assets held for sale or distribution
84 Share capital and earnings per share
Note 12 85 Share-based payment
Note 13 87 Borrowings and lease liability
89 Pensions and similar obligations
93 Financial instruments and risks
99 Financial instruments by category
101 Commitments – continuing operations
103 Acquisition/sale of subsidiaries and activities
105 Related parties
106 Significant accounting policies
110 Significant accounting estimates and judgements
| Table 1.1 | Ocean | Logistics & Services |
Terminals & Towage |
Manufacturing & Others |
Total |
|---|---|---|---|---|---|
| Full year 2020 | |||||
| External revenue | 28,705 | 6,752 | 3,007 | 1,212 | 39,676 |
| Inter-segment revenue | 470 | 211 | 800 | 42 | 1,523 |
| Total segment revenue | 29,175 | 6,963 | 3,807 | 1,254 | 41,199 |
| Unallocated | 83 | ||||
| Eliminations | -1,542 | ||||
| Total revenue | - | - | - | - | 39,740 |
| Segment profit/loss before depreciation, amortisation and impairment losses, etc. (EBITDA) Unallocated Eliminations |
6,545 | 454 | 1,205 | 165 | 8,369 -140 -3 |
| Consolidated profit/loss before depreciation, amortisation and impairment losses, etc. (EBITDA)¹ | 8,226 | ||||
| Profit/loss from joint ventures | 15 | 9 | 99 | -2 | 121 |
| Segment gross capital expenditures, excl. acquisitions and divestments (CAPEX) | 653 | 109 | 457 | 33 | 1,252 |
| Unallocated | 71 | ||||
| Eliminations | -1 | ||||
| Consolidated gross capital expenditures, excl. acquisitions and divestments (CAPEX) | 1,322 |
| Table 1.2 | Ocean | Logistics & Services |
Terminals & Towage |
Manufacturing & Others |
Total |
|---|---|---|---|---|---|
| Full year 2019 | |||||
| External revenue | 28,400 | 6,162 | 3,135 | 1,159 | 38,856 |
| Inter-segment revenue | 382 | 169 | 813 | 217 | 1,581 |
| Total segment revenue | 28,782 | 6,331 | 3,948 | 1,376 | 40,437 |
| Unallocated | 54 | ||||
| Eliminations | -1,601 | ||||
| Total revenue | - | - | - | - | 38,890 |
| Segment profit/loss before depreciation, amortisation and impairment losses, etc. (EBITDA) Unallocated Eliminations |
4,436 | 216 | 1,118 | 136 | 5,906 -195 1 |
| Consolidated profit/loss before depreciation, amortisation and impairment losses, etc. (EBITDA)1 | 5,712 | ||||
| Profit/loss from joint ventures | 10 | -2 | 87 | -2 | 93 |
| Segment gross capital expenditures, excl. acquisitions and divestments (CAPEX) Unallocated |
1,172 | 126 | 532 | 204 | 2,034 - |
| Eliminations | 1 | ||||
| Consolidated gross capital expenditures, excl. acquisitions and divestments (CAPEX) | 2,035 |
A.P. Moller - Maersk has organised segments in Ocean, Logistics & Services, Terminals & Towage and Manufacturing & Others.
The Ocean segment with the activities of Maersk Liner Business (Maersk Line, Safmarine and Sealand – A Maersk company) together with the Hamburg Süd brands (Hamburg Süd and Aliança), Maersk Oil Trading 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 with the logistics and supply chain management services, container inland services, inland haulage activities (intermodal), trade finance services and freight forwarding.
The Terminals & Towage segment including gateway terminals, involving landside activities such as port activities where the customers are mainly the carriers, and towage services under the Svitzer brand.
The Manufacturing & Others segment with Maersk Container Industry, Maersk Supply Service and others.
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 performance are evaluated based on revenue and profitability measured on earnings before interest, taxes, depreciation and amortisation (EBITDA).
1 Reference is made to the income statement for a reconciliation from EBITDA to profit/loss.
| Table 1.3 | |||
|---|---|---|---|
| USD million | Types of revenue | 2020 | 2019 |
| Ocean | Freight revenue | 24,920 | 24,466 |
| Other revenue, including hubs | 4,255 | 4,316 | |
| Logistics & Services | Intermodal revenue | 2,736 | 2,932 |
| Supply chain management revenue | 961 | 861 | |
| Inland services revenue | 527 | 519 | |
| Sea freight revenue | 460 | 546 | |
| Air freight revenue | 780 | 485 | |
| Other services revenue | 1,499 | 988 | |
| Terminals & Towage | Terminal services | 3,151 | 3,278 |
| Towage services | 681 | 695 | |
| Manufacturing & Others | Sale of containers and spare parts | 587 | 586 |
| Offshore supply services | 252 | 306 | |
| Other shipping activities | 347 | 404 | |
| Other services | 68 | 80 | |
| Eliminations1 | -1,484 | -1,572 | |
| Total revenue | 39,740 | 38,890 |
Set out below is the reconciliation of the revenue from contracts with customers to the amounts disclosed as total revenue:
| Table 1.4 | 2020 | 2019 |
|---|---|---|
| Revenue from contracts with customers | 38,727 | 37,641 |
| Revenue from other sources | ||
| Vessel-sharing and slot charter income | 929 | 1,188 |
| Lease income | 18 | 21 |
| Others | 66 | 40 |
| Total revenue | 39,740 | 38,890 |
| Table 1.5 Contract balances 2020 Trade receivables 3,634 Accrued income – contract asset - Accrued income – contract liability 149 Deferred income – contract liability 49 |
||
|---|---|---|
| 2019 | ||
| 3,248 | ||
| 48 | ||
| - | ||
| 59 |
1 Revenue eliminations between terminal services and towage services are included under Eliminations.
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 it is invoiced to the customer. 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 16 relate to receivables arising from contracts with customers.
| Table 1.6 | External revenue | Non-current assets 1 | ||
|---|---|---|---|---|
| Geographical split | 2020 | 2019 | 2020 | 2019 |
| Denmark | 268 | 310 | 18,087 | 19,375 |
| Australia | 1,612 | 1,241 | 361 | 321 |
| Brazil | 1,606 | 1,606 | 258 | 339 |
| Canada | 747 | 586 | 110 | 113 |
| China and Hong Kong | 2,193 | 2,056 | 2,360 | 2,593 |
| Germany | 772 | 1,204 | 446 | 475 |
| Mexico | 1,175 | 1,019 | 718 | 748 |
| Netherlands | 848 | 1,102 | 1,086 | 818 |
| Nigeria | 1,165 | 895 | 122 | 111 |
| Singapore | 335 | 445 | 4,699 | 4,950 |
| South Africa | 731 | 629 | 32 | 26 |
| UK | 708 | 1,391 | 476 | 579 |
| USA | 10,138 | 6,731 | 3,014 | 2,519 |
| Other | 17,442 | 19,675 | 8,180 | 7,228 |
| Total | 39,740 | 38,890 | 39,949 | 40,195 |
Revenue for the shipping activities is based on the destination for ships operated by the Group and on customer location for ships on time charter. 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 ships and containers registered in China, Denmark, Singapore and the US.
1 Comprise intangible assets and property, plant and equipment and right-of-use assets, excluding financial non-current assets relating to continuing operations.
| Table 2.1 | 2020 | 2019 |
|---|---|---|
| Costs of goods sold | 1,471 | 998 |
| Bunker costs | 3,820 | 4,628 |
| Terminal costs | 6,425 | 6,775 |
| Intermodal costs | 3,699 | 4,151 |
| Port costs | 2,146 | 2,265 |
| Rent and lease costs | 1,295 | 1,502 |
| Staff costs | 5,209 | 4,955 |
| Other | 7,739 | 7,856 |
| Total operating costs | 31,804 | 33,130 |
| Remuneration of employees | ||
| Wages and salaries | 4,560 | 4,321 |
| Severance payments | 148 | 118 |
| Pension costs, defined benefit plans | 29 | 31 |
| Pension costs, defined contribution plans | 197 | 170 |
| Other social security costs | 396 | 411 |
| Total remuneration | 5,330 | 5,051 |
| Of which: | ||
| Recognised in the cost of assets | 1 | 4 |
| Included in restructuring costs | 120 | 92 |
| Expensed as staff costs | 5,209 | 4,955 |
| Average number of employees1 | 83,624 | 83,512 |
| Table 2.2 | ||
| Fees and remuneration to the Executive Board | 2020 | 2019 |
| Fixed based salary | 8 | 10 |
| Short-term cash incentive | 6 | 5 |
| Long-term share-based incentives | 2 | 1 |
| Remuneration in connection with redundancy, resignations and release from duty to work | - | 6 |
| Total remuneration to the Executive Board | 16 | 22 |
| Table 2.3 | ||
| Fees to the statutory auditors | 2020 | 2019 |
| Statutory audit | 13 | 13 |
Other assurance services 1 1 Tax and VAT advisory services 1 1 Other services 2 2 Total fees 17 17
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 payment, reference is made to note 12.
1 Total number of employees (YTD average) is 83,624 (2019: 86,279) of which 83,624 (2019: 83,512) relate to continuing operations and 0 (2019: 2,767) relate to discontinued operations.
Contract of employment for the Executive Board contains terms customary in Danish listed companies, including termination notice and 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 3m (USD 3m).
Fees for other services than statutory audit of the financial statements provided by PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab to A.P. Moller - Maersk mainly consist of audit of non-statutory financial statements, financial due diligence and transaction advice, accounting advisory services, and other advisory accounting and tax services.
| Table 3.1 | 2020 | 2019 |
|---|---|---|
| Gains | 293 | 128 |
| Losses | 91 | 57 |
| Gain on sale of non-current assets, etc., net | 202 | 71 |
Gains in 2020 primarily related to the sale of containers of USD 124m, sale of vessels of USD 44m, and to a lesser extent sale of a facility in China, and gaining control of Port Towage Amsterdam and Pipavav India terminal.
Gains in 2019 were primarily related to the sale of containers of USD 81m and sale and leaseback of S-type vessels and Mitsubishi vessels of USD 12m.
| Table 4.1 | 2020 | 2019 |
|---|---|---|
| Interest expenses on liabilities1 4 | 839 | 971 |
| Of which borrowing costs capitalised on assets2 | 7 | 23 |
| Interest income on loans and receivables | 63 | 91 |
| Fair value adjustment transferred from equity hedge reserve (loss) | 40 | 28 |
| Net interest expenses | 809 | 885 |
| Exchange rate gains on bank balances, borrowings and working capital | 390 | 299 |
| Exchange rate losses on bank balances, borrowings and working capital | 629 | 250 |
| Net foreign exchange gains/losses | -239 | 49 |
| Fair value gains from derivatives | 331 | 98 |
| Fair value losses from derivatives | 137 | 41 |
| Net fair value gains/losses | 194 | 57 |
| Dividends received from securities3 | 1 | 13 |
| Impairment losses on financial non-current receivables | 33 | 2 |
| Reversal of write-downs of loans and other non-current receivables | 7 | 10 |
| Financial expenses, net | 879 | 758 |
| Of which: | ||
| Financial income | 895 | 511 |
| Financial expenses | 1,774 | 1,269 |
For an analysis of gains and losses from derivatives, reference is made to note 16.
| Table 5.1 | 2020 | 2019 |
|---|---|---|
| Tax recognised in the income statement | ||
| Current tax on profits for the year | 293 | 369 |
| Adjustment for current tax of prior periods | -28 | 5 |
| Utilisation of previously unrecognised deferred tax assets | -6 | -6 |
| Total current tax | 259 | 368 |
| Origination and reversal of temporary differences | 11 | -15 |
| Adjustment for deferred tax of prior periods | 7 | 3 |
| Adjustment attributable to changes in tax rates and laws | -3 | -3 |
| Recognition of previously unrecognised deferred tax assets | -7 | -4 |
| Reassessment of recoverability of deferred tax assets, net | 46 | 28 |
| Total deferred tax | 54 | 9 |
| Total income tax | 313 | 377 |
| Tonnage and freight tax | 94 | 81 |
| Total tax expense | 407 | 458 |
| Tax reconciliation | ||
| Profit/loss before tax | 3,307 | 967 |
| Profit/loss subject to Danish and foreign tonnage taxation, etc. | -2,210 | -439 |
| Internal gain/loss on sale of assets | 1 | - |
| Share of profit/loss in joint ventures | -122 | -93 |
| Share of profit/loss in associated companies | -177 | -136 |
| Profit/loss before tax, adjusted | 799 | 299 |
| Tax using the Danish corporation tax rate (22%) | 176 | 65 |
| Tax rate deviations in foreign jurisdictions | -123 | -44 |
| Non-taxable income | -65 | -74 |
| Non-deductible expenses | 212 | 246 |
| Adjustment to previous years' taxes | -21 | 8 |
| Effect of changed tax rate | -3 | -3 |
| Change in recoverability of deferred tax assets | 33 | 18 |
| Deferred tax asset not recognised | 32 | 126 |
| Other differences, net | 72 | 35 |
| Total income tax | 313 | 377 |
| Tax recognised in other comprehensive income and equity | -6 | -26 |
| Of which: | ||
| Current tax | -10 | -32 |
| Deferred tax | 4 | 6 |
| Table 6.1 | Goodwill Terminal and service concession rights |
Customer relations and brand name |
Other rights | Total | |
|---|---|---|---|---|---|
| Cost | |||||
| 1 January 2019 | 1,039 | 2,978 | 1,136 | 562 | 5,715 |
| Addition | - | 43 | - | 121 | 164 |
| Acquired in business combinations | 26 | - | 25 | - | 51 |
| Disposal | - | - | - | 3 | 3 |
| Disposal on sale of businesses | - | - | - | - | - |
| Transfer, assets held for sale | -4 | -22 | - | -8 | -34 |
| Exchange rate adjustment | -1 | -24 | -1 | -3 | -29 |
| 31 December 2019 | 1,060 | 2,975 | 1,160 | 669 | 5,864 |
| Addition | - | 23 | - | 203 | 226 |
| Acquired in business combinations1 | 309 | 240 | 272 | 86 | 907 |
| Disposal | - | - | - | 1 | 1 |
| Transfer | - | -7 | 3 | -3 | -7 |
| Transfer, assets held for sale | - | -57 | - | -4 | -61 |
| Exchange rate adjustment | 53 | 41 | 6 | 27 | 127 |
| 31 December 2020 | 1,422 | 3,215 | 1,441 | 977 | 7,055 |
| Amortisation and impairment losses | |||||
| 1 January 2019 | 394 | 498 | 75 | 470 | 1,437 |
| Amortisation | - | 100 | 70 | 30 | 200 |
| Impairment losses | 35 | 6 | - | 6 | 47 |
| Disposal | - | - | - | 3 | 3 |
| Transfer, assets held for sale | -4 | -17 | - | -6 | -27 |
| Exchange rate adjustment | -2 | -7 | - | - | -9 |
| 31 December 2019 | 423 | 580 | 145 | 497 | 1,645 |
| Amortisation | - | 113 | 82 | 38 | 233 |
| Impairment losses | - | 13 | - | - | 13 |
| Disposal | - | - | - | 1 | 1 |
| Transfer | - | -4 | - | - | -4 |
| Transfer, assets held for sale | - | -18 | - | - | -18 |
| Exchange rate adjustment | 31 | 1 | - | 10 | 42 |
| 31 December 2020 | 454 | 685 | 227 | 544 | 1,910 |
| Carrying amount: | |||||
| 31 December 2019 | 637 | 2,3952 | 1,015 | 1723 | 4,219 |
31 December 2020 968 2,5302 1,214 1 4333 5,145
1 Acquisition of KGH Customs Services, Performance Team LLC, Port Towage Amsterdam, and Pipavav Terminal cf. note 21.
2 Of which USD 22m (USD 95m) is under development. USD 27m (USD 31m) is related to terminal rights with indefinite useful life in Poti Sea Port Corp, Georgia. The impairment test is based on the estimated fair value according to business plans. An average discount rate of 11.8% (11.7%) p.a. after tax has been applied in the calculations. Furthermore, the developments in volumes and rates are significant parameters. Service concession rights with a carrying amount of USD 86m (USD 74m) have restricted title.
3 Of which USD 202m (USD 73m) is related to ongoing development of software.
Discount rates used in impairment tests of intangible assets and impairment losses recognised are specified as follows:
| Impairment losses | |||
|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 |
| 7.0% | 7.7% | - | - |
| 6.2% - 12.7% | 5.9% - 13% | - | 6 |
| 7.2% | 8.7% | - | 29 |
| 6.2% - 12.7% | 5.9% - 13% | 13 | 6 |
| 6.2% - 12.7% | 5.9% - 13% | - | 3 |
| 7.2% | 8.7% | - | 3 |
| 13 | 47 | ||
| Applied discount rate p.a.after tax |
| Table 6.3 | |||
|---|---|---|---|
| Operating segment | Cash-generating unit | 2020 | 2019 |
| Ocean | Ocean (Hamburg Süd acquisition) | 316 | 316 |
| Logistics & Services | Logistics & Services (KGH Customs Services, Performance Team and Vandergrift acquisitions) |
350 | 72 |
| Terminal & Towage | Multiple terminals (Grup Marìtim TCB acquisition) | 301 | 248 |
| Other | 1 | 1 | |
| Total | 968 | 637 |
The recoverable amount of each cash-generating unit is determined based on the higher of its value in use or fair value less cost to sell. The value in use is calculated using certain key assumptions for the expected future cash flows and applied discount factor.
The cash flow projections are based on financial budgets and business plans approved by management. In nature, these projections are subject to judgement and estimates that are uncertain, though based on experience and external sources where available. The discount rates applied reflect the time value of money as well as the specific risks related to the underlying cash flows, i.e. project and/ or country-specific risk premium. Further, any uncertainties reflecting past performance and possible variations in the amount or timing of the projected cash flows are generally reflected in the discount rates.
The carrying amount of goodwill has been allocated to the following operating segments and cash-generating units based on the management structure.
The most significant goodwill amount relates to the Logistics & Services segment, where the impairment test is based on the estimated value in use from five-year business plans where the volume and margin growth assumptions reflect current market expectations for the relevant period. A discount rate of 7.2% (8.7%) has been applied.
The impairment test for the Ocean segment is based on the estimated value in use from five-year business plans and a calculated terminal value with growth equal to the expected economic growth of 2% p.a. in both 2020 and 2019. A discount rate of 7.0 (7.7%) has been applied.
The key assumptions for Terminals & Towage's value calculations are container moves, revenue and cost per move and discount rate. The cash flow projections cover the concession period and extension options where deemed likely that they will be exercised. The growth rates assumed reflect current market expectations for the relevant period.
| Table 7.1 | Ships, containers, etc. |
Production facilities and equipment, etc. |
Construction work in progress and pay ment on account |
Total |
|---|---|---|---|---|
| Cost | ||||
| 1 January 2019 | 48,122 | 6,649 | 1,600 | 56,371 |
| Transfer of IAS 17 finance leases | -4,169 | -138 | - | -4,307 |
| Addition | 432 | 78 | 1,315 | 1,825 |
| Disposal | 754 | 127 | 10 | 891 |
| Transfer | 1,153 | 943 | -2,096 | - |
| Transfer, assets held for sale | -3 | -353 | 1 | -355 |
| Reclassification from/to right-of-use asset | 62 | 6 | - | 68 |
| Exchange rate adjustment | -3 | -68 | -15 | -86 |
| 31 December 2019 | 44,840 | 6,990 | 795 | 52,625 |
| Addition | 268 | 163 | 711 | 1,142 |
| Disposal | 1,442 | 190 | 25 | 1,657 |
| Additions from acquired companies | - | 277 | 3 | 280 |
| Transfer | 486 | 617 | -1,103 | - |
| Transfer, assets held for sale | -67 | -57 | 4 | -120 |
| Reclassification from/to right-of-use asset, net | 793 | 75 | -5 | 863 |
| Exchange rate adjustment | 39 | 156 | -3 | 192 |
| 31 December 2020 | 44,917 | 8,031 | 377 | 53,325 |
| Depreciation and impairment losses | ||||
| 1 January 2019 | 21,705 | 3,354 | 205 | 25,264 |
| Transfer of IAS 17 finance leases | -1,725 | -30 | - | -1,755 |
| Depreciation | 2,289 | 380 | - | 2,669 |
| Impairment losses | 46 | 35 | - | 81 |
| Reversal of impairment losses | - | 53 | 11 | 64 |
| Disposal | 654 | 120 | 2 | 776 |
| Transfer | 188 | - | -188 | - |
| Transfer, assets held for sale | -7 | -280 | - | -287 |
| Reclassification from/to right-of-use | 3 | - | - | 3 |
| Exchange rate adjustment | 8 | -34 | - | -26 |
| 31 December 2019 | 21,853 | 3,252 | 4 | 25,109 |
Table 7.1 Pledges
Ships, buildings, etc. with carrying amount of USD 0.8bn (USD 1.9bn) have been pledged as security for loans of USD 0.6bn (USD 1bn).
Table 7.1 continues on the next page.
| Table 7.1 – continued from previous page | Ships, containers, etc. |
Production facilities and equipment, etc. |
Construction work in progress and pay ment on account |
Total |
|---|---|---|---|---|
| Depreciation | 2,290 | 441 | - | 2,731 |
| Impairment losses | 82 | 34 | - | 116 |
| Reversal of impairment losses | 27 | 1 | - | 28 |
| Disposal | 1,261 | 137 | - | 1,398 |
| Transfer, assets held for sale | -46 | -27 | - | -73 |
| Reclassification from/to right-of-use | 316 | -3 | - | 313 |
| Exchange rate adjustment | 32 | 43 | -1 | 74 |
| 31 December 2020 | 23,239 | 3,602 | 3 | 26,844 |
| Carrying amount: | ||||
| 31 December 2019 | 22,987 | 3,738 | 791 | 27,516 |
| 31 December 2020 | 21,678 | 4,429 | 374 | 26,481 |
| Table 7.2 | Impairment losses | Reversal of impairment losses |
Applied discount rate p.a. after tax |
Recoverable amount |
|||||
|---|---|---|---|---|---|---|---|---|---|
| Operating segment | Cash-generating unit | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| Terminals & Towage | Terminals | 34 | - | 1 | - | 6% | - | - | - |
| Towage | 5 | 16 | - | - | - | 13% | 7 | 64 | |
| Manufacturing & Others | Anchor Handling Tug Supply vessels (onerous contracts) | 77 | 31 | - | - | - | - | 361 | - |
| Container manufacturing facilities | - | 34 | - | 13 | - | - | 392 | - | |
| Others | - | - | 27 | 51 | - | - | - | - | |
| Total | 116 | 81 | 28 | 64 |
made to note 6 and note 24.
Impairment analysis For more information on impairment tests reference is
In the cash-generating units the test gave rise to impairment losses and reversals.
| Table 8.1 | Ships, containers, etc. |
Concession agreements (non-IFRIC 12) |
Real estate and other leases |
Total |
|---|---|---|---|---|
| Right-of-use assets | ||||
| 1 January 2019 | 3,120 | 2,351 | 751 | 6,222 |
| Transfer from IAS 17 finance leases | 2,444 | 0 | 108 | 2,552 |
| Additions | 555 | 780 | 214 | 1,549 |
| Disposal | 321 | 2 | 18 | 341 |
| Depreciation cost | 1,023 | 188 | 185 | 1,396 |
| Transfer, assets held for sale | -4 | -58 | -1 | -63 |
| Transfer to owned assets, etc. | -59 | -1 | -5 | -65 |
| Exchange rate adjustment | - | 2 | - | 2 |
| 31 December 2019 | 4,712 | 2,884 | 864 | 8,460 |
| Additions | 1,040 | 240 | 281 | 1,561 |
| Acquired in business combinations | 0 | 0 | 313 | 313 |
| Disposal | 169 | 2 | 44 | 215 |
| Depreciation cost | 1,007 | 189 | 218 | 1,414 |
| Transfer, assets held for sale | 0 | -5 | -2 | -7 |
| Transfer to owned assets, etc. | -476 | 1 | -72 | -547 |
| Exchange rate adjustment | 2 | 137 | 33 | 172 |
| 31 December 2020 | 4,102 | 3,066 | 1,155 | 8,323 |
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 exercisable by the Group and options for extending the lease term. The Group also enters into arrangements 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 2020, the expected residual values were reviewed to determine if these reflect the actual residual values achieved on comparable assets and expectations about future prices. At 31 December 2020, USD 354m (USD 489m) 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 lease term has not yet commenced have an undiscounted value of USD 557m (USD 481m). They comprise of approx. 64 contracts commencing in 2021 and 2022.
Certain terminal concession agreements contain variable payment terms that are linked to future performance, i.e. number of containers handled, or depend on an index, or a combination hereof. Such payments are recognised in the income statement in the period in which the condition that triggers those payments occurs.
Lease liabilities are disclosed in note 13 and note 16.
| Total | |
|---|---|
| 2020 | 2019 |
| 1,414 | 1,396 |
| 468 | 477 |
| 799 | 861 |
| 296 | 414 |
| 183 | 202 |
| 22 | 25 |
| 1,300 | 1,502 |
Recognised deferred tax assets and liabilities are attributable to the following:
| Table 9.1 | Assets | Liabilities | Net liabilities | |||
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
| Intangible assets | 31 | 32 | 269 | 203 | 238 | 171 |
| Property, plant and equipment | 46 | 49 | 288 | 201 | 242 | 152 |
| Provisions, etc. | 128 | 110 | 66 | 42 | -62 | -68 |
| Tax loss carry-forwards | 87 | 129 | - | - | -87 | -129 |
| Other | 89 | 44 | 34 | 43 | -55 | -1 |
| Total | 381 | 364 | 657 | 489 | 276 | 125 |
| Offsets | -132 | -127 | -132 | -127 | - | - |
| Total | 249 | 237 | 525 | 362 | 276 | 125 |
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.
| Change in deferred tax, net, during the year | 2020 | 2019 |
|---|---|---|
| 1 January | 125 | 105 |
| Intangible assets | 63 | -15 |
| Property, plant and equipment | -4 | -6 |
| Provisions, etc. | -1 | 36 |
| Tax loss carry-forwards | 46 | 31 |
| Other | -50 | -37 |
| Recognised in the income statement | 54 | 9 |
| Transfer to held for sale | -12 | - |
| Other including business combinations | 109 | 11 |
| 31 December | 276 | 125 |
| Table 9.3 | ||
|---|---|---|
| Unrecognised deferred tax assets – continuing operations | 2020 | 2019 |
| Deductible temporary differences | 129 | 141 |
| Tax loss carry-forwards | 823 | 768 |
| Unused tax credits | 10 | 13 |
| Total | 962 | 922 |
| Table 10.1 | 2020 | 2019 |
|---|---|---|
| Profit/loss for the period – discontinued operations | ||
| Revenue | - | 308 |
| Expenses | - | 233 |
| Negative fair value adjustment | - | 628 |
| Profit/loss before tax, etc. | - | -553 |
| Profit/loss for the year – discontinued operations | - | -553 |
| A.P. Møller - Mærsk A/S' share of profit/loss | - | -553 |
| Earnings per share | - | -27 |
| Diluted earnings per share | - | -27 |
| Cash flows from discontinued operations | ||
| Cash flow from operating activities | - | 137 |
| Cash flow used for investing activities | - | -488 |
| Cash flow from financing activities | - | -21 |
| Net cash flow from discontinued operations | - | -372 |
| Table 10.2 | 2020 | 2019 |
|---|---|---|
| Balance sheet items comprise: | ||
| Intangible assets | 39 | 7 |
| Property, plant and equipment | 94 | 135 |
| Other assets | 54 | - |
| Non-current assets | 187 | 142 |
| Current assets | 31 | 7 |
| Assets held for sale or distribution | 218 | 149 |
| Provisions | - | 1 |
| Deferred tax liabilities | 13 | 1 |
| Other liabilities | 78 | 73 |
| Liabilities associated with assets held for sale or distribution | 91 | 75 |
There have been no discontinued operations in 2020.
Discontinued operations in 2019 included Maersk Drilling up to the demerger in April 2019, which concluded the separation of the energy-related businesses. The results of the discontinued operations are presented in one separate line in the 2019 income statement, balance sheet and cash flow statement.
In the consolidated financial statements in 2019, the results for Maersk Drilling are classified under discontinued operations with a net loss of USD 553m in 2019. Total cash flow from the discontinued operations was USD 0m (positive USD 372m).
Assets held for sale in 2020 largely relate to two terminals reported as held for sale within Terminals & Towage and one terminal within Ocean.
The terminal in Ocean was transferred to assets held for sale in 2019, and an impairment of USD 62m has been made against the asset in 2020, being the difference between carrying value and fair value less costs to sell.
On 2 April 2019, Maersk Drilling was demerged and listed separately.
A.P. Moller - Maersk recognised a loss of USD 553m for the Maersk Drilling activity, mainly due to a negative fair value adjustment of USD 628m. The cash flow from the demerger is summarised in Table 10.3.
The fair value of the new listed company of USD 3.4bn resulted in a negative fair value adjustment of USD 628m being recognised in Q1 2019. Measurement of the fair value of the disposal Group was categorised as level 1 in the fair value hierarchy, as measurement was based on observable market data.
| Table 10.3 | ||
|---|---|---|
| Cash flow from sale | 2020 | 2019 |
| Carrying amount | ||
| Intangible assets | - | 91 |
| Property, plant and equipment | - | 4,426 |
| Financial assets, non-current | - | 4 |
| Deferred tax assets | - | -14 |
| Current assets | - | 792 |
| Provisions | - | -24 |
| Liabilities | - | -1,904 |
| Net assets sold | - | 3,371 |
| Non-controlling interests | - | - |
| A.P. Møller - Mærsk A/S' share | - | 3,371 |
| Distribution of shares in The Drilling Company of 1972 A/S to shareholders | ||
| in A.P. Møller - Mærsk A/S | - | -3,371 |
| Total consideration | - | - |
| Cash and bank balances transferred at closing | - | -425 |
| Cash flow from sale of subsidiaries and activities | - | -425 |
The net cash flow effect of USD 372m for the period mainly related to cash and bank balances disposed to Maersk Drilling at demerger. As part of the demerger, A.P. Moller - Maersk was subject to a statutory demerger liability for liabilities existing as of 4 March 2019 assigned to The Drilling Company of 1972 A/S, pursuant to section 254(2) of the Danish Company Act. The liability is deemed remote.
Development in the number of shares:
| 31 December 2020 | 10,599,293 | 216 | 9,432,463 | 166 | 20,032 | 3,632 |
|---|---|---|---|---|---|---|
| Conversion | 5 | -10 | - | - | - | - |
| Cancellation | 156,977 | 627,938 | 785 | 142 | ||
| 31 December 2019 | 10,756,265 | 226 | 10,060,401 | 166 | 20,817 | 3,774 |
| Conversion | 3 | -6 | 3 | -6 | - | - |
| 1 January 2019 | 10,756,262 | 232 | 10,060,398 | 172 | 20,817 | 3,774 |
| DKK 1,000 | DKK 500 | DKK 1,000 | DKK 500 | DKK million USD million | ||
| Table 11.1 | A shares of | B shares of | Nominal value | |||
Development in the holding of own shares:
| Table 11.2 | No. of shares of DKK 1,000 | Nominal value DKK million | % of share capital | |||
|---|---|---|---|---|---|---|
| Own shares | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| A shares | ||||||
| 1 January | 134,279 | - | 134 | - | 0.65% | 0.00% |
| Addition | 141,874 | 134,279 | 142 | 134 | 0.69% | 0.65% |
| Cancellation | 156,977 | - | 157 | - | 0.75% | 0.00% |
| 31 December | 119,176 | 134,279 | 119 | 134 | 0.59% | 0.65% |
| B shares | ||||||
| 1 January | 587,949 | 55,515 | 588 | 56 | 2.82% | 0.27% |
| Addition | 567,493 | 537,143 | 567 | 537 | 2.83% | 2.57% |
| Cancellation | 627,938 | 628 | 3.02% | |||
| Disposal | 22,223 | 4,709 | 22 | 5 | 0.11% | 0.02% |
| 31 December | 505,281 | 587,949 | 505 | 588 | 2.52% | 2.82% |
All shares are fully issued and paid up.
One A share of DKK 1,000 holds two votes. B shares have no voting rights.
Adoption of resolutions regarding changes to the company's Articles of Association or increase or write-down of the share capital requires that at least two-thirds of the A share capital at the General Meeting shall be represented by persons entitled to vote and that at least two-thirds of the votes cast shall be cast in favour of the adoption of the resolution.
Apart from a resolution for the dissolution of the company, other resolutions at the General Meetings are passed by simple majority, as long as legislation does not require particular voting majority. Reference is made to the company's Articles of Association. In the event of an increase of the company's share capital, the shareholders in the given share class shall have a pre-emptive right to subscribe for a proportionate share of the capital increase.
At the Annual General Meeting of A.P. Møller - Mærsk A/S on 23 March 2020, the shareholders decided on the cancellation of treasury shares, whereby the share capital was decreased. On June 2, 2020, the company's share capital was reduced from nominally DKK 20,816,862,000 with nominally DKK 784,915,000 in total, divided into 156,977 A shares and 627,938 B shares of DKK 1,000 to nominally DKK 20,031,947,000 by cancellation of own shares.
The capital decrease took place at a premium at a price of DKK 761.57 and DKK 809.51 for A and B shares, respectively, cf. section 188(2) of the Danish Companies Act, corresponding to the average price at which the shares have been repurchased. The amount from the capital decrease has been paid out to the company as owner of the shares as the amount was transferred from the company's capital reserves to the free reserves.
The DKK 10bn share buy-back programme announced on 24 May 2019 was thereby concluded on 24 July 2020.
On 18 November 2020, A.P. Møller - Mærsk A/S decided to initiate a share buy-back programme of up to DKK 10bn
(around USD 1.6bn) and a maximum of 1.79 million shares to be acquired over a period of up to 15 months.
The share buy-back programme is initiated pursuant to the authorisation granted to the Board of Directors by the Annual General Meeting in 2019, which entitled the company to acquire treasury shares at a nominal value not exceeding 15% of the share capital at the market price applicable at the time of acquisition with a deviation of up to 10%.
The first phase of the programme will run from 1 December 2020 up to 29 April 2021. The shares to be acquired will be limited to a total market value of DKK 3.3bn. A maximum of 158,586 A shares and 620,270 B shares can be acquired in the first phase of the buy-back programme.
The share buy-back is carried out with the purpose to adjust the capital structure of A.P. Moller - Maersk. Shares which are not used for hedging purposes for the longterm incentive programmes will be proposed cancelled at the Annual General Meetings in 2021 and 2022.
A.P. Moller - Maersk has appointed Skandinaviska Enskilda Banken ('SEB') as lead manager. SEB will execute the purchase of shares on behalf of A.P. Moller - Maersk within the announced limits and will make all share purchase decisions independently and without the involvement of A.P. Moller - Maersk.
No shares may be bought back at a price exceeding the higher of i) share price of latest independent 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 business 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 last 20 trading days prior to the date of purchase.
Disposals of own shares are related to the Share Option Plans and the Restricted Shares Plan.
The basis for calculating earnings per share is the following:
| Table 11.3 | ||
|---|---|---|
| A.P. Møller - Mærsk A/S' shareholders' share of: | 2020 | 2019 |
| Profit/loss for the period of continuing operations | 2,850 | 469 |
| Profit/loss for the period of discontinued operations | - | -553 |
| Profit/loss for the year | 2,850 | -84 |
The Board of Directors proposes a dividend to the shareholders of DKK 330 per share of DKK 1,000 – a total of DKK 6,611, equivalent to USD 1,092 at the exchange rate as per 31 December 2020. (DKK 150 per share of DKK 1,000 – total of DKK 3,123m equivalent to USD 468m). Payment of dividends is expected to take place on 26 March 2021.
Payment of dividends to shareholders does not trigger taxes to A.P. Moller - Maersk.
At 31 December 2020, there is dilution effect on earnings per share of the 66,971 (0) issued share options while there is no dilution effect on earnings per share of the 21,459 (67,825) issued shares options. The issued share options correspond to 0.33% (0%) and 0.11% (0.33%) of the total average number of shares in the Group respectively.
All the restricted shares of 17,691 have dilution effect. The issued restricted shares correspond to 0.09% of the total average number of shares in the Group.
| Table 11.4 | 2020 | 2019 |
|---|---|---|
| Issued shares 1 January | 20,816,862 | 20,816,862 |
| Average number of own shares | 729,307 | 275,236 |
| Average number of cancelled shares | 456,795 | - |
| Average number of shares | 19,630,760 | 20,541,626 |
| Table 12.1 | Members of the Executive Board |
Employees | Total | Total fair value 1 |
|---|---|---|---|---|
| Outstanding restricted shares | No. | No. | No. | USD million |
| 1 January 2019 | 1,002 | 12,786 | 13,788 | |
| Granted | 1,310 | 4,319 | 5,629 | 7 |
| Granted in connection with Maersk Drilling demerger | 294 | 1,286 | 1,580 | |
| Exercised | - | 4,756 | 4,756 | |
| Forfeited | 739 | 1,700 | 2,439 | |
| Outstanding 31 December 2019 | 1,867 | 11,935 | 13,802 | |
| Granted | 1,626 | 6,165 | 7,791 | 7 |
| Exercised | - | 3,777 | 3,777 | |
| Forfeited | - | 125 | 125 | |
| Outstanding 31 December 2020 | 3,493 | 14,198 | 17,691 |
The restricted shares plan was introduced in 2013, and grants have been awarded to employees on a yearly basis since 2013. Beginning in 2018, grants have also been awarded to members of the Executive Board.
The transfer of restricted shares is contingent upon the employee still being employed and not being under notice of termination and takes place when three years have passed from the time of granting. For members of the Executive Board the vesting period is five years.
The members of the Executive Board as well as other 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' holding of own B shares will be used to meet the company's obligations in connection with the restricted shares plan.
The fair value of restricted shares (A.P. Møller - Mærsk A/S B shares) granted to 96 (92) employees and five (five) members of the Executive Board was USD 7m (USD 7m) at the time of grant.
The fair value per restricted share at the time of grant is DKK 5,975 (DKK 8,668), which is equal to the volume weighted average share price on the date of grant, i.e. 1 April 2020.
The payroll expense related to the restricted shares plan is USD 6m (USD 5m).
On 1 April 2020, the restricted shares originally granted in 2017 were settled with the employees. The weighted average share price at that date was DKK 5,975.
The average remaining contractual life for the restricted shares as per 31 December 2020 is 1.8 years (1.7 years).
1 At the time of grant.
| Table 12.2 | Members of the Executive Board |
Employees | Total | Average exercise price 1 |
|---|---|---|---|---|
| Outstanding share options | No. | No. | No. | DKK |
| 1 January 2019 | 9,985 | 36,707 | 46,692 | 10,006 |
| Granted | 7,894 | 22,444 | 30,338 | 7,622 |
| Forfeited | 6,080 | 3,125 | 9,205 | 9,141 |
| Outstanding 31 December 2019 | 11,799 | 56,026 | 67,825 | 9,057 |
| Exercisable 31 December 2019 | - | 18,435 | 18,435 | 10,630 |
| Granted | 8,741 | 31,383 | 40,124 | 8,639 |
| Exercised | - | 18,446 | 18,446 | 9,968 |
| Forfeited | - | 1,073 | 1,073 | 9,636 |
| Outstanding 31 December 2020 | 20,540 | 67,890 | 88,430 | 8,670 |
| Exercisable 31 December 2020 | 2,347 | 32,474 | 34,821 | 10,187 |
The following principal assumptions are used in the valuation:
| Table 12.3 | Share options granted to members of the Executive Board |
Share options granted to employees not members of the Executive Board |
||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| Share price, volume weighted average at the date of grant, 1 April, DKK |
5,975 | 8,668 | 5,975 | 8,668 |
| Share price, five days volume weighted average after publication of Annual Report, DKK |
7,854 | 8,682 | 7,854 | 8,682 |
| Exercise price, DKK | 8,639 | 9,550 | 8,639 | 9,550 |
| Exercise price following the demerger of Maersk Drilling, 2 April 2019, DKK |
N/A | 7,670 | N/A | 7,605 |
| Expected volatility (based on historic volatility) | 31% | 32% | 31% | 32% |
| Expected term (years) | 5 | 5 | 5.75 | 5.75 |
| Expected dividend per share, DKK | 150 | 150 | 150 | 150 |
| Risk free interest rate | -0.66% | -0.36% | -0.63% | -0.28% |
In addition to the plan described above, A.P. Moller - Maersk has share option plans for members of the Executive Board and other 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' Annual Report. Exercise of the share options is contingent upon the option holder still being employed at the time of exercise. The share options can 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 time 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 own B shares will be used to meet the company's obligations in respect of the share option plans.
The fair value of awards granted to five (five) members of the Executive Board and 89 (75) employees was USD 4m (USD 9m) at the time of grant.
The payroll expense related to the share option plan is USD 5m (USD 5m).
The weighted average share price at the dates of exercise of share options was DKK 12,389. No share options were exercised during 2019.
The average remaining contractual life as per 31 December 2020 is 5.1 years (5.2 years) and the exercise price for outstanding share options is DKK 8,670 (DKK 9,057).
1 Average exercise prices were reduced following the demerger of Maersk Drilling.
The fair value per option granted to members of the Executive Board is calculated at DKK 625 (DKK 1,782) at the time of grant, based on Black & Scholes' option pricing model. The fair value per option granted to employees not members of the Executive Board is calculated at DKK 697 (DKK 1,914) at the time of grant based on the same option pricing model.
| Table 13.1 | Net debt as at 31 December |
Cash flows | Non-cash changes Net debt as at 31 December |
||||
|---|---|---|---|---|---|---|---|
| 2019 | Additions | Disposal | Foreign exchange movements |
Other1 | 2020 | ||
| Bank and other credit institutions | 3,357 | -637 | 96 | - | -14 | - | 2,802 |
| Issued bonds | 4,819 | -1,254 | - | - | 150 | 109 | 3,824 |
| Total borrowings | 8,176 | -1,8914 | 96 | - | 136 | 109 | 6,626 |
| Borrowings: | |||||||
| Classified as non-current | 7,455 | - | - | - | - | - | 5,868 |
| Classified as current | 721 | - | - | - | - | - | 758 |
| Leases: | |||||||
| Lease liabilities | 8,577 | -1,7102 | 1,8963 | -217 | 195 | 6 | 8,747 |
| Total leases | 8,577 | -1,710 | 1,896 | -217 | 195 | 6 | 8,747 |
| Leases: | |||||||
| Classified as non-current | 7,295 | - | - | - | - | - | 7,356 |
| Classified as current | 1,282 | - | - | - | - | - | 1,391 |
| Total borrowing and leases | 16,753 | -3,601 | 1,992 | -217 | 331 | 115 | 15,373 |
| Derivatives hedge of borrowings, net | 172 | 27 | - | - | -150 | -13 | 36 |
The maturity analysis of lease liabilities is disclosed in note 16.
| Table 13.2 | Net debt as at 31 December |
Cash flows | Non-cash changes Net debt as at 31 December |
|||||
|---|---|---|---|---|---|---|---|---|
| 2018 | IFRS 16 adoption |
Additions | Disposal | Foreign exchange movements |
Other1 | 2019 | ||
| Bank and other credit institutions | 4,249 | -997 | - | - | - | 7 | 98 | 3,357 |
| Issued bonds | 5,373 | -543 | - | - | - | -57 | 46 | 4,819 |
| Total borrowings | 9,622 | -1,5403 | - | - | - | -50 | 144 | 8,176 |
| Borrowings: | ||||||||
| Classified as non-current | 8,036 | - | - | - | - | - | - | 7,455 |
| Classified as current | 1,586 | - | - | - | - | - | - | 721 |
| Leases: | ||||||||
| Lease liabilities | 2,266 | -1,3112 | 6,245 | 1,744 | -323 | 5 | -49 | 8,577 |
| Total leases | 2,266 | -1,311 | 6,245 | 1,744 | -323 | 5 | -49 | 8,577 |
| Leases: | ||||||||
| Classified as non-current | 1,858 | - | - | - | - | - | - | 7,295 |
| Classified as current | 408 | - | - | - | - | - | - | 1,282 |
| Total borrowing and leases | 11,888 | -2,851 | 6,245 | 1,744 | -323 | -45 | 95 | 16,753 |
| Derivatives hedge of borrowings, net | 162 | -84 | - | - | - | 57 | 37 | 172 |
The maturity analysis of lease liabilities is disclosed in note 16.
| Table 14.1 | UK | Other | Total | UK | Other | Total |
|---|---|---|---|---|---|---|
| 2020 | 2020 | 2020 | 2019 | 2019 | 2019 | |
| Specification of net liability | ||||||
| Present value of funded plans | 2,427 | 516 | 2,943 | 2,248 | 490 | 2,738 |
| Fair value of plan assets | -2,691 | -416 | -3,107 | -2,690 | -388 | -3,078 |
| Net liability of funded plans | -264 | 100 | -164 | -442 | 102 | -340 |
| Present value of unfunded plans | - | 156 | 156 | - | 138 | 138 |
| Impact of minimum funding | ||||||
| requirement/asset ceiling | 79 | 1 | 80 | 65 | - | 65 |
| Net liability 31 December | -185 | 257 | 72 | -377 | 240 | -137 |
| Of which: | ||||||
| Pensions, net assets | 225 | 409 | ||||
| Pensions and similar obligations | 297 | 272 | ||||
| Table 14.2 | UK | Total | UK | Total |
|---|---|---|---|---|
| Significant financial assumptions | 2020 | 2020 | 2019 | 2019 |
| Discount rate | 1.6% | 1.7% | 1.9% | 1.9% |
| Inflation rate | 3.2% | 3.0% | 3.1% | 3.1% |
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 recognised 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.
Pension and medical plans which, as part of collective bargaining agreements, have been entered into with other enterprises, known as multi-employer plans, are treated as other pension plans. Such defined benefit plans are treated as defined contribution plans when sufficient information for calculating the individual enterprises' share of the obligation is not available.
In 2021, the Group expects to pay contributions totalling USD 16m to funded defined benefit plans, USD 27m in 2020.
The majority of the Group's defined benefit liabilities are 78% in the UK and 12% the US. All of the plans in the UK and the majority of the plans in the US 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 15 years and approximately 56% of the obligation is in respect of 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.
| Table 14.3 | 31 December | |||
|---|---|---|---|---|
| Life expectancy | 2020 | 2040 | 2019 | 2039 |
| 65-year-old male in the UK | 21.8 | 23.2 | 21.6 | 23.0 |
| Table 14.4 | Increase | Decrease | |
|---|---|---|---|
| Sensitivities for key assumptions in the UK Factors |
'Change in liability' | 2020 | 2020 |
| Discount rate | Increase/(decrease) by 25 basis points | -101 | 106 |
| Inflation rate | Increase/(decrease) by 25 basis points | 61 | -59 |
| Life expectancy | Increase/(decrease) by one year | 140 | -136 |
| Table 14.5 | UK | Other | Total | UK | Other | Total |
|---|---|---|---|---|---|---|
| Specification of plan assets | 2020 | 2020 | 2020 | 2019 | 2019 | 2019 |
| Insurance contracts | 1,734 | 69 | 1,803 | 199 | 58 | 257 |
| Shares | 77 | 137 | 214 | 179 | 131 | 310 |
| Government bonds | 379 | 107 | 486 | 1,403 | 99 | 1,502 |
| Corporate bonds | 331 | 86 | 417 | 652 | 79 | 731 |
| Real estate | 10 | 4 | 14 | 9 | 4 | 13 |
| Other assets | 160 | 13 | 173 | 248 | 17 | 265 |
| Fair value 31 December | 2,691 | 416 | 3,107 | 2,690 | 388 | 3,078 |
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.
In 2020, the Trustees of one of the UK plans, Maersk Retirement Benefit Scheme (MRBS), entered into an insurance contract to provide further security for all future benefit payments and annual increases to which members are entitled under the scheme. Following this MRBS buy-in transaction, over 70% 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.
The expected contributions to the UK plans for 2021 are USD 11m (USD 23m in 2020) of which USD 9m (USD 20m in 2020) is deficit recovery contributions. 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 2020 an adjustment of USD 3m (USD 2m) 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.
| Table 14.6 | Present value of |
Fair value of plan |
Adjustments | Net liability | Of which: UK |
|---|---|---|---|---|---|
| Change in net liability | obligations | assets | |||
| 1 January 2019 | 2,596 | 2,683 | 61 | -26 | -241 |
| Current service cost, administration cost etc. | 30 | -5 | - | 35 | 9 |
| Calculated interest expense/income | 73 | 77 | - | -4 | -7 |
| Recognised in the income statement in 2019 | 103 | 72 | - | 31 | 2 |
| Actuarial gains/losses from changes in financial and demographic assumptions, etc. | 262 | - | - | 262 | 207 |
| Return on plan assets, exclusive calculated interest income | - | 352 | - | -352 | -310 |
| Adjustment for unrecognised asset due to asset ceiling | - | - | -1 | -1 | -1 |
| Recognised in other comprehensive income in 2019 | 262 | 352 | -1 | -91 | -104 |
| Contributions from the Group and employees | - | 27 | - | -27 | -22 |
| Benefit payments | -141 | -130 | - | -11 | - |
| Settlements | -5 | -5 | - | - | - |
| Internal transfers | -1 | - | 1 | - | - |
| Effect of business combinations and disposals | -11 | -11 | - | - | - |
| Exchange rate adjustment | 73 | 90 | 4 | -13 | -12 |
| 31 December 2019 | 2,876 | 3,078 | 65 | -137 | -377 |
| Current service cost, administration cost etc. | 26 | -6 | - | 32 | 9 |
| Calculated interest expense/income | 55 | 58 | - | -3 | -7 |
| Recognised in the income statement in 2020 | 81 | 52 | - | 29 | 2 |
| Actuarial gains/losses from changes in financial and demographic assumptions, etc. | 180 | - | - | 180 | 148 |
| Return on plan assets, exclusive calculated interest income | - | -15 | - | 15 | 50 |
| Adjustment for unrecognised asset due to asset ceiling | - | - | 11 | 11 | 9 |
| Adjustment for minimum funding requirement | - | - | 1 | 1 | 1 |
| Recognised in other comprehensive income in 2020 | 180 | -15 | 12 | 207 | 208 |
| Contributions from the Group and employees | - | 21 | - | -21 | -16 |
| Benefit payments | -139 | -127 | - | -12 | - |
| Effect of business combinations and disposals | 1 | - | - | 1 | - |
| Exchange rate adjustment | 100 | 98 | 3 | 5 | -2 |
| 31 December 2020 | 3,099 | 3,107 | 80 | 72 | -185 |
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 hereof.
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. In 2020, the Group's contributions to the pension and welfare/medical plans are estimated at USD 91m (USD 83m) and USD 277m (USD 295m), respectively. The contributions to be paid in 2021 are estimated at USD 92m for the pension plans and USD 279m 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 amounts to USD 0.3bn (USD 0.7bn). 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 bargain agreements. They cover a limited part of employees' medical costs as occurred.
| Table 15.1 | Restructuring | Legal disputes, etc. |
Other | Total |
|---|---|---|---|---|
| 1 January 2020 | 107 | 618 | 369 | 1,094 |
| Provision made | 151 | 487 | 190 | 828 |
| Amount used | 78 | 144 | 50 | 272 |
| Amount reversed | 49 | 173 | 146 | 368 |
| Addition from business combinations | - | 3 | 10 | 13 |
| Exchange rate adjustment | 5 | -14 | -5 | -14 |
| 31 December 2020 | 136 | 777 | 368 | 1,281 |
| Of which: Classified as non-current Classified as current |
2 134 |
396 381 |
158 210 |
556 725 |
| Non-current provisions expected to be realised after more than five years |
- | 57 | 10 | 67 |
Restructuring includes provisions for decided and publicly announced restructurings. Legal disputes, etc. include among other things indirect tax and duty disputes. Other includes provisions for warranties and risk under certain self-insurance programmes. The provisions are subject to considerable uncertainty, cf. note 24.
Reversals of provisions primarily relate to legal disputes and contractual disagreements, which are recognised in the income statement under operating costs and tax.
| Assets, net | 59 | -211 |
|---|---|---|
| Current liabilities | 228 | 87 |
| Non-current liabilities | 289 | 328 |
| Current receivables | 307 | 43 |
| Non-current receivables | 269 | 161 |
| Derivatives recognised at fair value in the balance sheet | 2020 | 2019 |
| Table 16.1 |
• Credit risk
Table 16.1
the balance sheet.
• Liquidity risk.
and oil price risk
financial risks:
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.
The Group derivatives are presented at fair value in
The Group's activities are exposed to a variety of
• Market risks, i.e. currency risk, interest rate risk
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 2020.
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 2020. 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 in table 16.5 show the effect on profit and equity of a reasonably possible change in exchange rates and interest rates.
Hedges comprise primarily currency derivatives, interest rate derivatives and oil price hedges, which are further described in the following sections.
| Table 16.2 | ||
|---|---|---|
| The gain/losses of the derivatives are recognised as follows: | 2020 | 2019 |
| Hedging foreign exchange risk on revenue | 5 | -5 |
| Hedging foreign exchange risk on operating costs | 16 | -78 |
| Hedging interest rate risk | -40 | -28 |
| Hedging foreign exchange risk on the cost of non-current assets | 15 | -2 |
| Hedging foreign exchange risk on discontinued operations | - | -1 |
| Total effective hedging | -4 | -114 |
| Ineffectiveness recognised in financial expenses | -9 | -4 |
| Total reclassified from equity reserve for hedges | -13 | -118 |
| Derivatives accounted for as held for trading: | ||
|---|---|---|
| Currency derivatives recognised directly in financial income/expenses | 198 | 56 |
| Interest rate derivatives recognised directly in financial income/expenses | 107 | 45 |
| Oil prices and freight rate derivatives recognised directly in other income/costs | 213 | -64 |
| Net gains/losses recognised directly in the income statement | 518 | 37 |
| Table 16.3 | Fair value, asset |
Fair value, liability |
Nominal amount of |
Average hedge rate |
|---|---|---|---|---|
| Hedge of operating cash flows and investments in foreign currencies |
derivative | |||
| Main currencies hedged | ||||
| 2020 | ||||
| EUR | 36 | 1 | 681 | 1.17 |
| DKK | 13 | 1 | 246 | 6.37 |
| HKD | - | - | 161 | 7.76 |
| Other currencies | 64 | 2 | 1,064 | N/A |
| Total | 113 | 4 | ||
| 2019 | ||||
| EUR | 3 | 7 | 647 | 1.14 |
| DKK | 1 | 4 | 260 | 6.55 |
| HKD | - | - | 165 | 7.82 |
| Other currencies | 28 | 7 | 1,113 | N/A |
| Total | 32 | 18 |
| Table 16.4 | Fair value | |
|---|---|---|
| Recognised at fair value through profit and loss | 2020 | 2019 |
| Currency derivatives | -2 | -28 |
| Interest derivatives | 9 | 13 |
| Total | 7 | -15 |
| Table 16.5 | Profit before tax | Equity before tax | |||
|---|---|---|---|---|---|
| Currency sensitivity for financial instruments | 2020 | 2019 | 2020 | 2019 | |
| EUR | -38 | 15 | -101 | -43 | |
| CNY | 15 | 53 | 8 | 44 | |
| Other | 81 | 94 | -17 | -22 | |
| Total | 58 | 162 | -110 | -21 |
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, CNY, DKK, HKD, SGD and CAD. As the net income is in USD, this is also the primary financing currency. Income and expenses from other activities, including Terminals & Towage, 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:
Currency derivatives hedge future revenue, operating costs and investments/divestments, and are recognised when the hedged exposure occurs in the income statement or 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 measured with critical terms match approach according to IFRS 9.
Hedges of future revenue and operating costs matures within a year. There are no hedges of investments at the end of 2020 (2019: Mature within a year).
For hedges related to operating cash flows and investments, a gain of USD 95m in 2020 (gain of USD 48m) is recognised in other comprehensive income, and the cash flow hedge reserve amounts to a gain of USD 109m at 31 December (gain of USD 14m). For hedges where the cost of hedging is applied, the forward points are recognised in other comprehensive income and transferred with the effective hedge when the hedged transaction occurs. The cost of hedging reserve amounts to USD 0m (USD 0m). Ineffectiveness related to hedge of acquisition amounts to a gain of USD 3m (USD 0m).
Besides the designated cash flow hedges in table 16.3, the Group enters into derivatives to hedge currency exposures that do not qualify for hedge accounting. These derivatives are classified as fair value through profit or loss.
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 in table 16.5.
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.
| Table 16.61 | Maturity | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Interest rate hedging of borrowings | Fair value, asset |
Fair value, liability |
Nominal amount of derivative |
0-1 year | 2-4 years | 5- years | Gain/loss on hedged item |
Gain/loss on hedging instrument |
Average hedge rate |
| 2020 | |||||||||
| Combined fair value hedge, hedge of borrowings | |||||||||
| EUR | 45 | - | 559 | - | - | 559 | -61 | 44 | 1.8% |
| GBP | - | 7 | 95 | - | 95 | - | -8 | 5 | 2.5% |
| JPY | 17 | - | 121 | - | 121 | - | -3 | -2 | 1.8% |
| NOK | - | 11 | 256 | - | - | 256 | -5 | -2 | 2.5% |
| Fair value hedge, hedge of borrowings | |||||||||
| USD | 80 | - | 900 | - | 500 | 400 | -79 | 80 | 3.1% |
| Cash flow hedge, hedge of borrowings | |||||||||
| EUR | - | 35 | 461 | - | - | 461 | - | -34 | 4.2% |
| GBP | - | 49 | 313 | - | 313 | - | - | -11 | 4.6% |
| NOK | - | 4 | 81 | 51 | 30 | - | - | -1 | 2.4% |
| USD | 155 | 227 | 1,905 | 700 | 680 | 525 | - | -68 | 2.1% |
| Total | 297 | 333 | 4,691 | 751 | 1,739 | 2,201 | -156 | 11 | |
| 2019 | |||||||||
| Combined fair value hedge, hedge of borrowings | |||||||||
| EUR | 17 | 35 | 733 | - | 224 | 509 | -47 | 23 | 3.5% |
| GBP | - | 14 | 92 | - | - | 92 | -5 | 2 | 4.2% |
| JPY | 10 | 11 | 206 | 92 | - | 114 | -3 | -3 | 3.6% |
| NOK | - | 34 | 250 | - | - | 250 | 10 | -18 | 4.2% |
| Fair value hedge, hedge of borrowings | |||||||||
| USD | 14 | - | 900 | - | - | 900 | -9 | 14 | 4.0% |
| Cash flow hedge, hedge of borrowings | |||||||||
| EUR | 23 | 60 | 867 | - | 447 | 420 | - | -17 | 3.9% |
| GBP | - | 52 | 302 | - | - | 302 | - | -1 | 4.6% |
| NOK | - | 27 | 341 | - | 341 | - | - | -4 | 3.5% |
| USD | 82 | 98 | 1,182 | - | 730 | 452 | - | -12 | 2.4% |
| Total | 146 | 331 | 4,873 | 92 | 1,742 | 3,039 | -54 | -16 |
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, NOK, GBP and JPY. The Group strives to maintain a combination of fixed and floating interest rates on its net debt, reflecting expectations and risks.
The hedging of the interest rate risk is governed by a duration range and is primarily obtained using interest rate swaps. The duration of the Group's debt portfolio is 2.1 years (2.2 years) excluding IFRS 16 leases.
A general increase in interest rates by one percentage point is estimated, all else being equal, to affect profit before tax and equity, excluding tax effect, positively by approx. USD 39m and positively by approx. USD 30m, respectively, (positively by approx. USD 11m and negatively by approx. USD 14m, 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 crosscurrency swaps and interest rate swaps. The hedging is a mix of fair value hedging, combined fair value hedging, and cash flow hedging.
Due to buy-back of issued bonds in 2020, ineffectiveness from cash flow hedges is recognised in the income statement with a loss of USD 12m (loss of USD 4m).
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 6m (gain of USD 6m).
1 Currency element of the cross-currency swaps is not designated into the hedge relationship and is recognised in financial items.
| Table 16.7 | Carrying amount | Next interest rate fixing | ||
|---|---|---|---|---|
| Borrowings by interest rate levels inclusive of interest rate swaps |
0-1 year | 2-4 years | 5- years | |
| 2020 | ||||
| 0-3% | 4,560 | 4,381 | -208 | 387 |
| 3-6% | 9,902 | 884 | 4,648 | 4,370 |
| 6%- | 911 | 117 | 250 | 544 |
| Total | 15,373 | 5,382 | 4,690 | 5,301 |
| Of which: Bearing fixed interest Bearing floating interest |
11,580 3,793 |
|||
| 2019 | ||||
| 0-3% | 1,829 | 1,342 | - | 487 |
| 3-6% | 13,994 | 5,038 | 4,673 | 4,283 |
| 6%- | 930 | 106 | 253 | 571 |
| Total | 16,753 | 6,486 | 4,926 | 5,341 |
| Of which: | ||||
| Bearing fixed interest | 11,584 | |||
| Bearing floating interest | 5,169 |
| Table 16.8 | Maturity | |||
|---|---|---|---|---|
| Commodity hedges | Fair value | 0-1 year | 2-4 years | 5- years |
| 2020 | ||||
| Commodity swaps | -13 | -13 | - | - |
| Commodity futures | -19 | -19 | - | - |
| Commodity options | 11 | - | 11 | - |
| Total | -21 | -32 | 11 | - |
| 2019 | ||||
| Commodity swaps | -12 | -12 | - | - |
| Commodity futures | -13 | -13 | - | - |
| Commodity options | - | - | - | - |
| Total | -25 | -25 | - | - |
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 large quantities and stored for processing and resale. The oil price risk arising from these oil price exposures is mitigated by entering into commodity derivative agreements. The overall risk limit is set in the Group's risk policy, defining a maximum net open position for the Group. The sensitivity of the consolidated net open position is calculated daily on a one day Value-at-Risk (VaR) with a confidence level of 95% and 255 days of historical observations. The Group VaR limit is USD 6m, and position as of 31 December 2020 of USD 3m (USD 3m). Due to the use of portfolio hedging, the Group does not use hedge accounting for these hedges. All gains and losses regarding these hedges are recognised in other income or other cost on a net basis, due to the nature of the hedging model.
| Table 16.9 | ||
|---|---|---|
| Maturity analysis of trade receivables | 2020 | 2019 |
| Receivables not due | 2,358 | 2,431 |
| Less than 90 days overdue | 1,133 | 1,020 |
| 91 – 365 days overdue | 161 | 150 |
| More than 1 year overdue | 152 | 145 |
| Receivables, gross | 3,804 | 3,746 |
| Provision for bad debt | 170 | 215 |
| Carrying amount | 3,634 | 3,531 |
The loss allowance provision for trade receivables as at 31 December 2020 reconciles to the opening loss allowance as follows:
| Table 16.10 | ||
|---|---|---|
| Change in provision for bad debt | 2020 | 2019 |
| 1 January | 215 | 269 |
| Provision made | 238 | 217 |
| Amount used | 160 | 149 |
| Amount reversed | 124 | 121 |
| Transfer, assets held for sale | - | - |
| Exchange rate adjustment and others | 1 | -1 |
| 31 December | 170 | 215 |
| Table 16.11 | ||
|---|---|---|
| Net interest-bearing debt and liquidity | 2020 | 2019 |
| Borrowings Net interest-bearing debt |
15,373 9,232 |
16,753 11,662 |
| Liquidity reserve1 | 10,962 | 10,485 |
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, not due trade receivables have also been impaired.
Approximately 89% (67%) of the provision for bad debt is related to trade receivables overdue by more than one year.
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.
The Group's objective is to maintain a liquidity profile in line with an investment grade credit rating. Capital is managed for the Group. The equity share of total equity and liabilities was 55.0% at the end of 2020 (52.0% end of 2019).
For information about cash and bank balances in countries with exchange control or other restrictions, 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 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 2019).
Further information about capital structure and funding strategy can be found on pages 60-62.
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.
| Table 16.12 | Carrying amount |
Cash flows including interest | |||
|---|---|---|---|---|---|
| Maturities of liabilities and commitments | 0-1 year | 2-4 years | 5- years | Total | |
| 2020 | |||||
| Bank and other credit institutions | 2,802 | 476 | 1,135 | 1,502 | 3,113 |
| Lease liabilities | 8,747 | 1,791 | 4,832 | 5,360 | 11,983 |
| – hereof interest | 400 | 1,140 | 1,695 | 3,235 | |
| Issued bonds | 3,824 | 461 | 2,108 | 1,909 | 4,478 |
| Trade payables | 5,156 | 5,156 | - | - | 5,156 |
| Other payables | 1,360 | 1,279 | 69 | 12 | 1,360 |
| Non-derivative financial liabilities | 21,889 | 9,163 | 8,144 | 8,783 | 26,090 |
| Derivatives | 517 | 228 | 134 | 155 | 517 |
| Total recognised in balance sheet | 22,406 | 9,391 | 8,278 | 8,938 | 26,607 |
| Capital commitments | 508 | 713 | 518 | 1,739 | |
| Total | 9,899 | 8,991 | 9,456 | 28,346 | |
| 2019 | |||||
| Bank and other credit institutions | 3,357 | 564 | 2,074 | 1,291 | 3,929 |
| Lease liabilities | 8,577 | 1,725 | 5,046 | 5,326 | 12,097 |
| – hereof interest | 444 | 1,331 | 1,745 | 3,520 | |
| Issued bonds | 4,819 | 429 | 2,295 | 2,901 | 5,625 |
| Trade payables | 5,567 | 5,567 | - | - | 5,567 |
| Other payables | 1,214 | 1,170 | 32 | 12 | 1,214 |
| Non-derivative financial liabilities | 23,534 | 9,455 | 9,447 | 9,530 | 28,432 |
| Derivatives | 415 | 87 | 98 | 230 | 415 |
| Total recognised in balance sheet | 23,949 | 9,542 | 9,545 | 9,760 | 28,847 |
| Capital commitments | 570 | 531 | 642 | 1,743 | |
| Total | 10,112 | 10,076 | 10,402 | 30,590 |
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.
| Table 17.1 | Carrying amount | Fair value3 | |||
|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | ||
| Carried at amortised cost | |||||
| Loan receivables | 227 | 399 | 227 | 399 | |
| Lease receivables | 21 | 31 | |||
| Other interest-bearing receivables and deposits | 61 | 62 | 61 | 62 | |
| Trade receivables | 3,634 | 3,531 | |||
| Other receivables (non-interest-bearing) | 1,019 | 1,078 | |||
| Cash and bank balances | 5,865 | 4,768 | |||
| Financial assets at amortised cost | 10,827 | 9,869 | |||
| Derivatives | 576 | 204 | 576 | 204 | |
| Carried at fair value through profit/loss | |||||
| Other receivables (non-interest-bearing)1 | 3 | 4 | 3 | 4 | |
| Bonds | - | 1 | - | 1 | |
| Other securities | 1 | 1 | 1 | 1 | |
| Financial assets at fair value through profit or loss | 4 | 6 | 4 | 6 | |
| Carried at fair value through other comprehensive income Equity investments (FVOCI)2 Financial assets at fair value through OCI |
107 107 |
78 78 |
107 107 |
78 78 |
|
| Total financial assets | 11,514 | 10,157 | |||
| Carried at amortised cost | |||||
| Bank and other credit institutions | 2,802 | 3,357 | 2,835 | 3,415 | |
| Lease liabilities | 8,747 | 8,577 | |||
| Issued bonds | 3,824 | 4,819 | 4,047 | 5,040 | |
| Trade payables | 5,156 | 5,567 | |||
| Other payables | 1,302 | 1,213 | |||
| Financial liabilities at amortised cost | 21,831 | 23,533 | |||
| Derivatives | 517 | 415 | 517 | 415 | |
| Carried at fair value | |||||
| Other payables | 58 | 1 | 58 | 1 | |
| Financial liabilities at fair value | 58 | 1 | 58 | 1 | |
| Total financial liabilities | 22,406 | 23,949 |
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.
| Table 17.2 | Other equity | Other | Total | Other | Total |
|---|---|---|---|---|---|
| Movement during the year in level 3 | investments (FVOCI) |
receivables | financial assets |
payables | financial liabilities |
| Carrying amount 1 January 2019 | 26 | 4 | 30 | - | - |
| Addition | 38 | -1 | 37 | - | - |
| Disposal | - | - | - | - | - |
| Gains/losses recognised in the income statement |
- | - | - | 1 | 1 |
| Gains/losses recognised in other comprehensive income |
-3 | - | -3 | - | - |
| Transfer, assets held for sale | -0 | - | -0 | - | - |
| Exchange rate adjustment, etc. | -2 | -2 | - | - | |
| Carrying amount 31 December 2019 | 59 | 3 | 62 | 1 | 1 |
| Addition | 32 | - | 32 | 55 | 55 |
| Disposal | 4 | - | 4 | - | - |
| Gains/losses recognised in the income statement |
- | - | - | 3 | 3 |
| Gains/losses recognised in other comprehensive income |
2 | - | 2 | - | - |
| Transfer, assets held for sale | - | - | - | - | - |
| Exchange rate adjustment, etc. | - | - | - | -1 | -1 |
| Carrying amount 31 December 2020 | 89 | 3 | 92 | 58 | 58 |
Financial instruments measured at fair value can be divided into three levels:
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.
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.
The future charter and operating lease payments are:
| Table 18.1 | Ocean | Logistics & Services |
Terminals & Towage |
Manu facturing |
Total |
|---|---|---|---|---|---|
| Lease commitments | & Others | ||||
| 2020 | |||||
| Within one year | 152 | 2 | 19 | 4 | 177 |
| Total | 152 | 2 | 19 | 4 | 177 |
| 2019 | |||||
| Within one year | 79 | 23 | 24 | 91 | 217 |
| Total | 79 | 23 | 24 | 91 | 217 |
As part of the Group's activities, customary agreements are entered into regarding charter and operating leases of ships, containers, port facilities, etc. From 1 January 2019, the Group has recognised right-of-use assets for these leases, except for short-term and low-value leases, see note 8 for further information.
The decrease in capital commitments is primarily related to contractual payments during 2020.
USD 1.7bn relates to investments mainly within the Ocean and Terminals & Towage segments. Commitments related to the newbuilding programme for tugs is USD 18m.
| Table 18.2 | Ocean | Logistics | Terminals | Manu | Total |
|---|---|---|---|---|---|
| Capital commitments | & Services | & Towage | facturing & Others |
||
| 2020 | |||||
| Capital commitments relating to the acquisition of non-current assets |
311 | - | 162 | 8 | 481 |
| Commitments towards concession grantors |
294 | - | 964 | - | 1,258 |
| Total capital commitments | 605 | - | 1,126 | 8 | 1,739 |
| 2019 | |||||
| Capital commitments relating to the acquisition of non-current assets |
345 | 12 | 202 | 2 | 561 |
| Commitments towards concession grantors |
269 | - | 913 | - | 1,182 |
| Total capital commitments | 614 | 12 | 1,115 | 2 | 1,743 |
| Total | 6 | 6 |
|---|---|---|
| Tugboats | 6 | 6 |
| Newbuilding programme at 31 December 2020 | 2021 | Total |
| Table 18.3 |
| Table 18.4 | ||
|---|---|---|
| Capital commitments relating to the newbuilding programme at 31 December 2020 | 2021 | Total |
| Tugboats | 18 | 18 |
| Total | 18 | 18 |
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.
Custom bonds of USD 503m (USD 484m) have been provided to various port authorities in India.
Maersk Line and APM Terminals have entered into certain agreements with terminals and port authorities, etc., containing volume commitments including an extra payment in case minimum volumes are not met.
The Group is involved in a number of legal cases, tax and other disputes. Some of these involve significant amounts and are subject to considerable uncertainty. Management continuously assess 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 the term of amount or timing. The Group does not expect these to have a material impact on the Consolidated financial statements.
Tax may crystallise on repatriation of dividends. 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.
As part of the divestment of Mærsk Olie & Gas A/S (MOGAS) to Total S.A. in 2018, A.P. Møller - Mærsk A/S has assumed a secondary liability related to the decommissioning of the offshore facilities in Denmark by issuance of a declaration. A.P. Møller - Mærsk A/S assesses the risk of economic outflows because of this secondary liability as very remote.
| Table 20.1 | 2020 | 2019 |
|---|---|---|
| Change in working capital | ||
| Trade receivables | -115 | 195 |
| Other working capital movements | -88 | 291 |
| Exchange rate adjustment of working capital | -36 | -10 |
| Total | -239 | 476 |
| Purchase of intangible assets and property, plant and equipment | ||
| Addition | -2,929 | -9,757 |
| Of which right-of-use assets, etc. | 1,575 | 7,989 |
| Of which borrowing costs capitalised on assets | 7 | 23 |
| Change in payables to suppliers regarding purchase of assets | 25 | -290 |
| Total | -1,322 | -2,035 |
| Table 21.1 | ||||
|---|---|---|---|---|
| Cash flow from acquisition | Performance Team | KGH | Pipavav | Total 2020 |
| Fair value at time of acquisition | ||||
| Intangible assets | 192 | 161 | 240 | 593 |
| Property, plant and equipment | 326 | 9 | 260 | 595 |
| Financial assets | 2 | 1 | 48 | 51 |
| Deferred tax assets | - | 3 | - | 3 |
| Current assets | 49 | 50 | 120 | 219 |
| Provisions | -2 | -9 | -3 | -14 |
| Liabilities | -345 | -155 | -125 | -625 |
| Net assets acquired | 222 | 60 | 540 | 822 |
| Non-controlling interests | - | - | -308 | -308 |
| A.P. Møller - Mærsk A/S' share | 222 | 60 | 232 | 514 |
| Goodwill | 95 | 172 | - | 267 |
| Gain on business acquisition | - | - | -46 | -46 |
| Purchase price | 317 | 232 | 186 | 735 |
| Contingent consideration assumed | -10 | -44 | - | -54 |
| Derecognition of associate company | - | - | -182 | -182 |
| Cash and bank balances assumed | 2 | -16 | -92 | -106 |
| Cash flow used for acquisition of subsidiaries and activities |
309 | 172 | -88 | 393 |
On 1 April 2020, the Group acquired 100% of the shares in Performance Team LLC, a US-based warehousing and distribution company, to further strengthen its capabilities as an integrated container logistics company, offering end-to-end supply chain solutions to its customers.
Taking control of Performance Team LLC has positioned A.P. Moller - Maersk among North America's leading warehouse and distribution providers with 56 warehouses for customers and accelerates the company's regional logistics and services model.
The total enterprise value of USD 622m consisted of a total purchase price of USD 317m on a cash and debt-free basis and acquired lease liabilities of around USD 305m. The purchase price mainly relates to fixed assets and customer list. The lease liabilities have been adjusted in accordance with IFRS 16 from the last communication.
The goodwill of USD 95m is attributable to workforce and commercial/operational synergies between Performance Team and A.P. Moller - Maersk and is deductible for tax purposes.
From the acquisition date to 31 December 2020, Performance Team LLC contributed with a revenue of USD 398m and a minor contribution to net profit.
If the acquisition had occurred on 1 January 2020, the impact on the Group's revenue would have been USD 512m. The net profit contributed to the Group would have been minor.
The accounting for the business combination is considered provisional at 31 December 2020 due to certain contingencies, indemnities etc.
The Group had a stake of 43.01% in Gujarat Pipavav Port Ltd (GPPL) and treated the entity as an associated company. On 9 June 2020, the Group obtained the majority of seats on the Board of Directors of GPPL, thereby obtaining control of the entity.
The acquisition consists of net assets of USD 540m at fair value of which USD 240m is terminal rights and non-controlling interest of USD 308m, offset by the derecognition of associate company of USD 182m. A gain of USD 45m was recognised for disposing GPPL as an associate, and the cumulative translation reserve loss of USD 61m related to the associate was also recycled to profit/loss. Liquid funds acquired amounted to USD 92m. On the date of acquisition, the fair value of the net assets acquired exceeded the listed share price, therefore, the transaction has been reported as the bargain purchase. The gain from bargain purchase has been reported at USD 46m.
From the acquisition date to 31 December 2020, Pipavav terminal contributed positively to the results with a revenue of USD 59m. If the acquisition had occurred on 1 January 2020, the impact on the Group's revenue would have been USD 95m.
The accounting for the business combination is considered provisional at 31 December 2020.
Dovana Holdings AB (KGH Customs Service Group) On 1 September 2020, the Group acquired 100% of the shares in Dovana Holding AB, KGH Customs Services, a leading Sweden-based specialist in trade and customs services management in Europe, further enhancing its
capabilities as an integrated container logistics company, offering end-to-end supply chain solutions to its global customers.
The total enterprise value of USD 294m consisted of a total purchase price of USD 288m on a cash and debt-free basis and acquired lease liabilities of around USD 6m.
Out of the purchase price of USD 288m, debt of USD 100m has been deducted, and discounted maximum earnout of USD 45m has been added to arrive at the USD 233m in aggregate purchase consideration as reported.
The goodwill of USD 172m is mainly attributable to the synergies between KGH Customs Services and A.P. Moller - Maersk.
From the acquisition date to 31 December 2020, KGH Customs Services contributed positively to the results. If the acquisition had occurred on 1 January 2020, the impact on the Group's revenue would have been USD 91m.
The accounting for the business combination is considered provisional at 31 December 2020 due to certain contingencies, indemnities, etc.
In addition to the above acquisitions, there has been a small acquisition in Terminals & Towage and therefore the total of all acquisitions sums up to USD 425m.
For the year 2020, total acquisition cost for the acquisitions recognised in the income statement amounted to USD 8m.
No acquisitions of subsidiaries or activities, to an extent of significance to the Group, were completed in 2019.
No material external sales were performed during 2020.
No material external sales were performed during 2019.
| Table 22.1 | Controlling parties Associated companies |
Joint ventures | Management 1 | |||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
| Income statement | ||||||||
| Revenue | 36 | 41 | 29 | 35 | 91 | 114 | - | - |
| Operating costs | 38 | 19 | 525 | 524 | 583 | 550 | 72 | 82 |
| Remuneration to management | - | - | - | - | - | - | 21 | 27 |
| Financial income | 59 | 10 | - | - | - | - | - | - |
| Other | - | - | - | - | 1 | 1 | - | - |
| Assets | ||||||||
| Other receivables, non-current | 25 | 27 | - | - | 151 | 124 | - | - |
| Trade receivables | 4 | 16 | 26 | 21 | 14 | 15 | - | - |
| Other receivables, current | 55 | 19 | 44 | 39 | 27 | 40 | - | - |
| Cash and bank balances | 555 | 736 | - | - | - | - | - | - |
| Liabilities | ||||||||
| Bank and other credit institutions, etc., current | - | - | - | - | 23 | 30 | - | - |
| Trade payables | 0 | 1 | 66 | 71 | 86 | 75 | 0 | 1 |
| Other | 48 | 45 | - | - | 19 | - | - | - |
| Purchase of property, plant and equipment, etc. | ||||||||
| Sale of companies, property, plant and equipment, etc. | ||||||||
| Capital increase | - | - | 9 | - | 64 | 13 | - | - |
| Dividends | - | - | 86 | 92 | 93 | 156 | - | - |
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.
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.
According to separate agreement, A.P. Møller Holding A/S participates on a pro rata basis to the shares purchased in the company's share buy-back programme. 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.
Dividends distributed are not included.
The consolidated financial statements for 2020 for A.P. Moller - Maersk have been prepared on a going concern basis and in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU and additional Danish disclosure requirements for listed companies. The consolidated financial statements are also in accordance with IFRS as issued by the International Accounting Standards Board (IASB).
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 2019, except for the changes to the accounting standards that were effective from 1 January 2020 and were endorsed by the EU.
From 2020, A.P. Møller - Mærsk A/S is required to file the annual report in the new European Single Electronic Format (ESEF) and the annual report in 2020 is therefore prepared in the XHTML format that can be displayed in a standard browser. The primary statements in 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 is not defined 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 included in a file named APMM-2020-12-31.zip.
As part of the refinement of A.P. Moller - Maersk's segment structure to further align with internal management structure and demarcation between the reportable segment activities, a number of changes have been made.
The main changes involve moving the Maersk Oil Trading activity to the Ocean segment from Manufacturing & Others, and the intermodal activity in Hamburg Süd to Logistics & Services from Ocean.
Comparison figures for note 1 have been restated as if the changes had been implemented in 2019. The reportable segments are disclosed below.
A number of changes to accounting standards are effective from 1 January 2020 and endorsed by the EU:
A.P. Moller - Maersk follows the guidelines in the above amendments, and the implementation did not change the accounting policies.
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.
A.P. Møller - Mærsk A/S. Control is based on the power to direct the relevant activities of an entity and the exposure, 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 significant but non-controlling influence are considered associated 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 financial statements of the parent company and its subsidiaries, including the proportionate share of joint operations, part-owned vessels and pool arrangements, which have been prepared 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 transactions with associated companies and joint arrangements are eliminated in proportion to A.P. Moller - Maersk's ownership 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.
The consolidated financial statements are presented in USD, the functional currency of the parent company. In the translation to the presentation currency for subsidiaries, associates or joint arrangements with functional 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 differences arising from such translations are recognised 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 container 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.
The allocation of business activities into segments reflects 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 hubs and sale of bunker oil |
|---|---|
| Logistics & Services |
Freight forwarding, supply chain management, inland haulage and other logistics services |
| Terminals & Towage |
Gateway terminal activities, towage and related marine activities |
| Manufacturing & Others |
Production of reefer and dry containers, providing off-shore supply service and trading and other businesses |
Operating segments have not been aggregated.
The reportable segments comprise:
Ocean activities
Activities under Maersk Line, Safmarine, Sealand – A Maersk company, and Hamburg Süd brands 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 services, container services as well as container storage.
Activities under the APM Terminals brand generating revenue by providing port services only in major transshipment ports such as Rotterdam, Maasvlakte-II, Algeciras, Tangier, Tangier-Med II, Port Said, and joint ventures in Salalah, Tanjung Pelepas and Bremerhaven. 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.
Sourcing marine fuels and lubricants for A.P. Moller - Maersk's fleet in addition to refinery activities and sales to external parties, including Maersk Tankers.
Supply chain management Activities within supply chain management and 4PL services.
Operating activities with the main stream of revenue deriving from the transportation of containers from vendors (shippers) to the port of shipment, and from discharge port to the point of stripping (consignee) by truck and/or rail.
Operating activities in inland activities facilities fully or partially controlled by APM Terminals, with the main revenue stream being inland services such as full container storage, bonded warehousing, empty depot, local transportation, etc.
Operating activities within sea and air freight forwarding services.
Operating activities within warehousing and distribution, trade finance with export finance solutions, post-shipment and import finance solutions, and Star Air, operating cargo aircrafts on behalf of UPS.
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.
Activities under the Svitzer brand, a provider of offshore towage and salvage services.
Maersk Container Industry Manufacturer that produces dry containers and reefer containers.
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.
Bulk and tanker activity acquired as part of the Hamburg Süd acquisition.
Consists of Maersk Training, a provider of training services to the maritime, oil and gas, offshore wind and crane industries.
The reportable segments do not comprise costs in A.P. Moller - Maersk's corporate functions. These functions are reported as unallocated items.
Revenue between segments is limited, except for the Terminals & Towage 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. Sales of products and services between segments are based on market terms.
Revenue for all businesses is recognised when the performance obligation has been satisfied, which happens upon the transfer of control to the customer at an amount that reflects 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 balance sheet date. Invoiced revenue related to an estimated proportion of remaining voyage time and activities at the destination port is deferred. Number of days of a voyage, as a percentage of the total number of days a voyage is estimated to last, is considered as a close approximation of percentage of completion. Detention and demurrage fees are recognised over time up until the time of the customer's late return or pick-up of containers. Retrospective volume rebates provided to certain customers which give rise to variable consideration are based on the expected value method and allocated to Ocean freight revenue.
Revenue from terminal operations and towing activities is recognised upon completion of the service. In container terminals operated under certain restrictive terms of pricing and service, etc., the value of tangible assets constructed on behalf of the concession grantor is recognised 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.
Share of profit/loss in associated companies and joint ventures 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.
Tax comprises an estimate of current and deferred income tax as well as adjustments to previous years of those. Income tax is tax on taxable profits, and consists of corporation 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.
Earnings per share are calculated as the A.P. Møller - Mærsk A/S' share of the profit/loss for the year divided by the number of shares (of DKK 1,000 each), excluding A.P. Moller - Maersk's holding of own shares. Diluted earnings per share are adjusted for the dilution effect of share-based compensation issued by the parent company.
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 adjustment relating to the relevant entity with a non-USD functional currency 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 recognised in other comprehensive income are taxable or deductible.
Intangible assets are measured at cost less accumulated amortisation and impairment losses. Amortisation is calculated on a straight-line basis over the estimated useful lives of the assets. Intangible assets regarding acquired customer relationships and brand names are amortised over a useful life of 15 and 20 years, respectively. IT software is amortised over a useful life of 3-5 years.
For container terminals operated under certain restrictive price and service conditions, etc., concessional rights to collect usage charges are included under 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 a grantor of a concession. The rights are amortised from the commencement of operations over the concession period.
Property, plant and equipment are valued at cost less accumulated depreciation and impairment losses. Depreciation is charged to the income statement on a straight-line basis over the useful lives at an estimated residual value. The useful lives of new assets are typically as follows:
| Ships, etc. | 20-25 years |
|---|---|
| Containers, etc. | 12 years |
| Buildings | 10-50 years |
| Terminal infrastructure | 10-20 years or concession period, if shorter |
| Plant and machinery, cranes and other terminal equipment |
5-20 years |
| Other operating equipment, fixtures, etc. |
3-7 years |
Estimated useful lives and residual values are reassessed on a regular basis.
The cost of an asset is divided into separate components, which are depreciated separately if the useful lives of the individual components differ. Dry-docking costs are recognised in the carrying amount of ships 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 construction period from specific as well as general borrowings are attributed to cost. In addition, the cost includes the net present value of estimated costs of removal and restoration.
Right-of-use assets: The Group mainly leases vessels, containers, concessions arrangements and real estate property. Lease contracts for vessels and containers are typically made for fixed periods of about five years but may have extension options as described below. 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 leases liability at the date on which the leased asset is available for use by the Group. 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.
Intercompany leases will continue to be presented according to IFRS 8 – Segment Reporting, as operating leases in accordance with the old lease standard, IAS 17.
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 impairment. 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.
Assets are held for sale, when the carrying amount of an individual non-current asset, or disposal groups, will be recovered principally through a sale transaction rather than through continuing use. Assets are classified as held for sale when activities to carry out a sale have been initiated, when the activities are available 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 carrying amount immediately before classification as held for sale and fair value less costs to sell, and 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.
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 associated companies and joint ventures and is therefore subject to an impairment test together with the investment as a whole. 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 estimated 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, containers (manufacturing), spare parts not qualifying for property, plant and equipment, and other consumables. Inventories are measured at cost, 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-down is made for anticipated losses based on specific individual or group assessments. For trade receivables, the loss allowance is measured in accordance with IFRS 9 applying a provision matrix to calculate the minimum impairment. The provision matrix includes an impairment for non-due receivables.
Equity includes total comprehensive income for the year comprising the profit/loss for the year and other comprehensive income. Proceeds on the purchase and sale of own shares and dividend from such shares are recognised in equity.
The translation reserve comprises 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 comprises accumulated changes in the fair value of equity investments (at FVOCI), net of tax. Reserve for hedges includes the accumulated fair value of derivatives qualifying for cash flow hedge accounting, net of tax, as well as forward points and currency basis spread.
Equity-settled restricted shares and share options allocated to the executive employees of A.P. Moller - Maersk as part of A.P. Moller - Maersk's long-term incentive programme are recognised as staff costs over the vesting period at estimated fair value at the grant date and a corresponding adjustment in equity. Cash-settled performance awards allocated to employees below executive levels as part of A.P. Moller - Maersk's long-term incentive programme are recognised as staff costs over the vesting period and a corresponding adjustment in other payables.
At the end of each reporting period, A.P. Moller - Maersk revises its estimates of the 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 and other payables.
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, provisions for onerous contracts, unfavourable contracts acquired as part of a business combination, as well as provisions for incurred, but not yet reported, incidents under certain insurance programmes, primarily in the US. 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.
Pension obligations are the net liabilities of defined benefit obligations and the dedicated assets adjusted for
the effect of minimum funding and asset ceiling requirements. Plans with a funding surplus are presented as net assets on the balance sheet. The defined benefit obligations are measured at the present value of expected future payments to be made in respect of services provided 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 with the same rates as used for discounting the obligations. Actuarial gains/losses are recognised in other comprehensive income.
Pension plans where A.P. Moller - Maersk, as part of collective 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.
Deferred tax is calculated on temporary differences between 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 recognised for undistributed earnings in subsidiaries, when A.P. Moller - Maersk controls the timing of dividends, and 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.
Financial liabilities are initially recognised at fair value less transaction costs. Subsequently, the financial liabilities are measured at amortised cost using the effective interest 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 interest component. Liabilities in respect of leases are measured at the interest rate implicit in the lease, if practicable to determine, or else at A.P. Moller - Maersk's incremental borrowing rate.
Lease liabilities are initially measured at the present value of the lease payments over the lease term, discounted using the incremental borrowing rate.
The following lease payments are included in the net present value:
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit/loss.
Extension and termination options in lease contracts are included in contracts, where A.P. Moller - Maersk will probably exercise the options. These terms are used to maximise operational flexibility in terms of managing contracts. In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended or not terminated. Most of the extension 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.
Lease payments are discounted at the implicit interest rate, to the extent this can be determined, otherwise discounted using incremental borrowing rates (IBRs). 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 approach 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 amortised 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.
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 derivative financial instruments designated to hedge highly probable future transactions is recognised in other comprehensive income until the hedged transactions are realised. At that time, the accumulated gains/losses are transferred to the items under which the hedged transactions are recognised. The effective portion of changes in the value of derivative 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 attributed to the hedging relationship. Currency basis spread and forward points are considered a cost of hedging and deferred in equity.
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.
Cash flow from operating activities includes all cash transactions other than cash flows arising from investments and divestments, 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 noncash 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.
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 recognised if they arise from a contractual right or can otherwise 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 other income or other costs in the income statement. 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 re-measured 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 re-measured 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.
Discontinued operations represent a separate major line of businesses disposed of or in preparation for sale. The results of discontinued operations are presented separately in the income statement, and the cash flows from discontinued operations are presented separately in the cash flow statement with restatement of comparative figures.
Assets and liabilities held for sale from discontinued operations are presented as separate items in the balance sheet with no restatement of comparative figures. Elimination between continuing and discontinued operations is presented to reflect continuing operations as
post-separation, which entails the elimination of interest, borrowing, dividends and capital increases.
Assets and liabilities from discontinued operations and assets held for sale, except financial assets, etc., are measured at the lower of carrying amount immediately before classification as held for sale and fair value less cost to sell, and impairment tests are performed immediately before classification as held for sale. Non-current assets held for sale are not depreciated.
A.P. Moller - Maersk has not yet adopted the following accounting standards/requirements:
IFRS 17: An analysis of the impact is being assessed and is expected to be concluded in due course ahead of the implementation date.
Other changes to IFRS are not expected to have any significant impact on recognition and measurement.
The preparation of the consolidated financial statements requires management, on an ongoing basis, to make judgements and estimates and form assumptions that affect the reported amounts. Management forms its judgements and estimates based on historical experience, independent advice and external data points, as well as on in-house specialists and on other factors believed to be reasonable under the circumstances.
In certain areas, the outcome of business plans, including ongoing negotiations with external parties to execute those plans or 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. This note includes the areas in which A.P. Moller - Maersk is particularly exposed to a material adjustment of the carrying amounts as at the end of 2020.
Determination of cash-generating units Judgement is applied in the definition of cash-generating units and in the selection of methodologies and assumptions for impairment tests.
The determination of cash-generating units differs for the various business areas. Ocean operates its fleet of
container vessels and hub terminals in an integrated network. Consequently, the Ocean activities are tested for impairment as a single cash-generating unit. In addition, the intermodal activities reported under Logistics & Services are included in the Ocean cash-generating unit for impairment testing to apply consistency between the asset base and related cash flows. In Logistics & Services, apart from intermodal, each main product is defined as a cash-generating unit. In gateway terminals, each terminal is considered individually in impairment tests, except when the capacity is managed as a portfolio. Towage groups vessels according to type, size, etc. in accordance with the structure governing management's ongoing follow-up. Projected cash flow models are used when fair value is not obtainable or when fair value is deemed lower than value in use. External data is used to the extent possible, and centralised processes, involving corporate functions, ensure that indices or data sources are selected consistently while observing differences in risks and other circumstances. Current market values for vessels, etc. are estimated using acknowledged brokers.
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 access to
repatriating surplus cash is limited. In these coun-
tries, management makes judgements as to whether these cash positions can be recognised as cash or cash equivalents.
In its assumption setting, management deals with different aspects of uncertainty. One aspect of uncertainty is whether an asset or liability exists, where the assessment forms the basis for recognition or derecognition decisions, including assessment of control. Another aspect is the measurement uncertainty, where management makes assumptions about the value of recognised assets and liabilities. These assumptions concern the timing and amount of future cash flows, and the risks inherent in these.
The outcome of impairment tests is subject to estimates of the development of freight rates, volumes, bunker prices and discount rates.
The future development in freight rates is an uncertain and significant factor impacting especially the Ocean segment, whose financial results are directly affected by fluctuations in container freight rates. Freight rates are influenced by both regional and global economic environment and trade patterns, as well as by industry-specific
trends in respect of capacity supply and demand. The longterm economic consequences of COVID-19 are still unknown and could cause a shift in freight rates or volumes.
The future development in the oil price is an uncertain and significant factor impacting accounting estimates across A.P. Moller - Maersk, either directly or indirectly. The Ocean segment is directly impacted by the price of bunker oil, where the competitive landscape determines the extent to which the development is reflected in the freight rates charged to the customer. APM Terminals is indirectly impacted by the oil price as terminals located in oil-producing countries, e.g. Nigeria, Angola, Egypt, Russia and Brazil, are indirectly impacted by the development in oil prices and the consequences on the countries' economies, which not only affect volume handled in the terminals, but also exchange rates.
A.P. Moller - Maersk carries goodwill of USD 968m (USD 637m).
In Ocean, the cash flow projection is based on forecasts as per Q3 2020, covering plans for 2021-2025. Management has applied an assumption of growth in volumes, pressure on freight rates and continued cost efficiency. The impairment test continues to show headroom from value in use to the carrying amount. Management is of the opinion that the assumptions applied are sustainable.
In Terminals & Towage, management assesses impairment triggers and based on these, estimates recoverable amounts on the individual terminals. For APM Terminals' interest in Global Port Investments, being the share of equity and significant intangible assets acquired, management assesses the recoverable amount of its interest on an ongoing basis. Uncertain variables in the estimate are the economic outlook, local competition, effect on volumes, operating expenses and discount rate. The carrying amount of the investment may not be sustainable in the next few years if markets develop significantly adversely compared to current expectations. Estimates of recoverable amounts were also prepared for other terminals where decreasing volumes triggered impairment tests. Key sensitivities are expected volumes, local port rates, concession right extensions as well as discount rate. The impairment tests showed headroom from fair value less cost of disposal and value in use calculations compared to carrying amount for all terminals in continued use. Therefore, no impairment was recognised in 2020 (USD 0m in 2019) related to terminals in markets with challenging commercial conditions. For assets held for sale, USD 62m was recognised in impairments. Continued economic deterioration and a lack of cash repatriation opportunities in certain oil-producing countries can potentially put pressure on carrying amounts of individual terminals.
Reference is made to notes 6 and 7 for information about impairment losses, recoverable amounts and discount rates.
Amortisation, depreciation and residual values Useful lives are estimated based on experience. Management decides from time to time to revise the estimates for individual assets or groups of assets with similar characteristics due to factors such as quality of maintenance and repair, technical development and environmental requirements. Please refer to note 23 for the useful lives typically used for new assets.
Residual values are difficult to estimate given the long lives of vessels, the uncertainty as to future economic conditions and the future price of steel, which is considered the main determinant of the residual price. Generally, the residual values of vessels are initially estimated at 10% of
the purchase price excluding dry-docking costs. The longterm view is prioritised to disregard, to the extent possible, temporary market fluctuations, which may be significant.
Provisions for pension and other employee benefits For defined benefit schemes, management makes assumptions about future remuneration and pension changes, employee attrition rates, life expectancy, inflation and discount rates. When setting these assumptions, management takes advice from the actuaries performing the valuation. The inflation and discount rates are determined centrally for the major plans on a country-by-country basis. All other assumptions are determined on a plan-by-plan basis. Refer to note 14 for information about key assumptions and the sensitivity of the liability to changes in these assumptions.
Plan assets are measured at fair value by fund administrators.
Provision for legal cases, disputes, uncertain tax positions etc. Management's estimate of the provisions regarding legal cases and disputes, including disputes on taxes and duties, is based on the knowledge available on the actual 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 complete and the outcome is subject to considerable uncertainty.
A.P. Moller - Maersk is engaged in a number of disputes with tax authorities of varying scope. Appropriate provisions 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 liabilities are recognised where the aggregated probability of the tax position being upheld is considered less than 50%.
Judgement has been applied in the measurement of deferred tax assets with respect to A.P. Moller - Maersk's ability to utilise the assets. Management considers the likelihood of utilisation based on the latest business plans and recent financial performances of the individual entities. Net deferred tax assets recognised in entities having suffered an accounting loss in either the current or preceding period amount to USD 87m (USD 98m) for continuing operations, excluding entities participating in joint taxation schemes. These assets mainly relate to unused tax losses or deductible temporary differences generated during the construction of terminals, where taxable profits have been generated either in the current period or are expected within a foreseeable future.
(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 service on multi-year agreements. 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 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.
(In parenthesis, the corresponding figures for 2019)
Statement of comprehensive income
Statement of changes in equity
Notes to the parent company financial statements
| Note | 2020 | 2019 |
|---|---|---|
| 1 Revenue |
17 | 18 |
| 2 Operating costs |
90 | 178 |
| Profit/loss before depreciation, amortisation and impairment losses, etc. | -73 | -160 |
| 3 Gain/loss on sale of companies and non-current assets, etc., net |
1 | 4 |
| Profit/loss before financial items | -72 | -156 |
| 4 Dividends |
413 | 324 |
| 4 Financial income |
1,452 | 1,598 |
| 4 Financial expenses |
1,056 | 1,663 |
| Profit/loss before tax | 737 | 103 |
| 5 Tax |
136 | 113 |
| Profit/loss for the year | 601 | -10 |
| Appropriation: | ||
| Proposed dividend | 1,092 | 468 |
| Retained earnings | -491 | -478 |
| 601 | -10 | |
| Proposed dividend per share, DKK | 330 | 150 |
| Proposed dividend per share, USD | 55 | 22 |
| Note | 2020 | 2019 | |
|---|---|---|---|
| Profit/loss for the year | 601 | -10 | |
| 12 Cash flow hedges: | |||
| Value adjustment of hedges for the year | -50 | -54 | |
| Reclassified to income statement | 32 | 30 | |
| 5 | Tax on other comprehensive income | 10 | 13 |
| Total items that have been or may be reclassified subsequently to the income statement |
-8 | -11 | |
| 13 Other equity investments (FVOCI), fair value adjustments for the year | 3 | - | |
| Total items that will not be reclassified to the income statement | 3 | - | |
| Other comprehensive income, net of tax | -5 | -11 | |
| Total comprehensive income for the year | 596 | -21 |
| Note | Assets | ||
|---|---|---|---|
| 2020 | 2019 | ||
| 6 | Investments in subsidiaries | 17,823 | 13,435 |
| 6 | Investments in associated companies | 1 | 2 |
| 13 Other equity investments | 1 | 2 | |
| 13 Interest-bearing receivables from subsidiaries, etc. | 15,044 | 7,913 | |
| 12 Derivatives | 259 | 165 | |
| Other receivables | 4 | 9 | |
| Financial non-current assets, etc. | 33,132 | 21,526 | |
| Total non-current assets | 33,132 | 21,526 | |
| Trade receivables | 3 | 8 | |
| 13 Interest-bearing receivables from subsidiaries, etc. | 2,122 | 12,804 | |
| 12 Derivatives | 317 | 65 | |
| Other receivables | 125 | 112 | |
| Other receivables from subsidiaries, etc. | 249 | 286 | |
| Prepayments | 33 | 74 | |
| Receivables, etc. | 2,849 | 13,349 | |
| Cash and bank balances | 4,491 | 3,395 | |
| Total current assets | 7,340 | 16,744 | |
| Total assets | 40,472 | 38,270 |
| Note Equity and liabilities |
|||
|---|---|---|---|
| 2020 | 2019 | ||
| 8 | Share capital | 3,632 | 3,774 |
| Reserves | 20,500 | 20,958 | |
| Total equity | 24,132 | 24,732 | |
| 10 Borrowings, non-current | 5,631 | 7,154 | |
| 10 Interest-bearing debt to subsidiaries, etc. | 13 | - | |
| 11 Provisions | 43 | 78 | |
| 12 Derivatives | 287 | 324 | |
| 7 | Deferred tax | 48 | 33 |
| Other non-current liabilities | 378 | 435 | |
| Total non-current liabilities | 6,022 | 7,589 | |
| 10 Borrowings, current | 598 | 543 | |
| 10 Interest-bearing debt to subsidiaries, etc. | 9,078 | 5,031 | |
| 11 Provisions | - | 3 | |
| Trade payables | 54 | 58 | |
| Tax payables | 51 | 43 | |
| 12 Derivatives | 302 | 94 | |
| Other payables | 213 | 156 | |
| Other payables to subsidiaries, etc. | 15 | 15 | |
| Deferred income | 7 | 6 | |
| Other current liabilities | 642 | 375 | |
| Total current liabilities | 10,318 | 5,949 | |
| Total liabilities | 16,340 | 13,538 | |
| Total equity and liabilities | 40,472 | 38,270 |
| Note | 2020 | 2019 | |
|---|---|---|---|
| Profit/loss before financial items | -72 | -156 | |
| 3 | Gain/loss on sale of companies and non-current assets, etc., net | - | -4 |
| 17 Change in working capital | 141 | -37 | |
| Change in provisions, etc. | -38 | - | |
| Other non-cash items | -3 | 14 | |
| Cash from operating activities before tax | 28 | -183 | |
| Taxes paid | -104 | -185 | |
| Cash flow from operating activities | -76 | -368 | |
| Capital increases in subsidiaries and activities | -136 | - | |
| Sale of subsidiaries and associates | - | 62 | |
| Dividends received | 123 | 2,792 | |
| Other financial investments, net | 6 | - | |
| Cash flow used for investing activities | -7 | 2,854 | |
| Repayment of borrowings | -2,941 | -2,132 | |
| Proceeds from borrowings | 1,245 | 1,081 | |
| Purchase of own shares | -806 | -791 | |
| Financial income received | 978 | 1,140 | |
| Financial expenses paid | -295 | -423 | |
| Sale of own shares | 30 | - | |
| Dividends distributed | -430 | -469 | |
| Movements in interest-bearing loans to/from subsidiaries, etc., net | 3,407 | 1,341 | |
| Cash flow from financing activities | 1,188 | -253 | |
| Net cash flow for the year | 1,105 | 2,233 | |
| Cash and cash equivalents 1 January | 3,390 | 1,147 | |
| Currency translation effect on cash and cash equivalents | -7 | 10 | |
| Cash and cash equivalents 31 December | 4,488 | 3,390 | |
| Cash and cash equivalents | |||
| Cash and bank balances | 4,491 | 3,395 | |
| Overdrafts | 3 | 5 | |
| Cash and cash equivalents 31 December | 4,488 | 3,390 |
| Note | Share capital |
Reserve for other equity investments |
Reserve for hedges |
Retained earnings |
Total equity |
|
|---|---|---|---|---|---|---|
| Equity 1 January 2019 | 3,774 | - | -34 | 25,634 | 29,374 | |
| Other comprehensive income, net of tax | - | - | -11 | - | -11 | |
| Profit/loss for the year | - | - | - | -10 | -10 | |
| Total comprehensive income for the year | - | - | -11 | -10 | -21 | |
| Dividends to shareholders | - | - | - | -469 | -469 | |
| 9 | Value of share-based payments | - | - | - | 10 | 10 |
| 8 | Purchase of own shares | - | - | - | -791 | -791 |
| Distribution of shares in The Drilling Company of 1972 A/S to shareholders in A.P. Møller - Mærsk A/S | - | - | - | -3,371 | -3,371 | |
| Total transactions with shareholders | - | - | - | -4,621 | -4,621 | |
| Equity 31 December 2019 | 3,774 | - | -45 | 21,003 | 24,732 | |
| 2020 | ||||||
| Other comprehensive income, net of tax | - | 3 | -8 | - | -5 | |
| Profit/loss for the year | - | - | - | 601 | 601 | |
| Total comprehensive income for the year | - | 3 | -8 | 601 | 596 | |
| Dividends to shareholders | - | - | - | -430 | -430 | |
| 9 | Value of share-based payments | - | - | - | 10 | 10 |
| 8 | Purchase of own shares | - | - | - | -806 | -806 |
| 8 | Sale of own shares | - | - | - | 30 | 30 |
| 8 | Capital increases and decreases | -142 | - | - | 142 | - |
| 13 Transfer of gain/loss on disposal of equity investments to retained earnings | - | -3 | - | 3 | - | |
| Total transactions with shareholders | -142 | -3 | - | -1,051 | -1,196 | |
| Equity 31 December 2020 | 3,632 | - | -53 | 20,553 | 24,132 | |
Activities comprise holding of shares in subsidiaries and associated companies, as well as funding, procurement and cash management.
In the parent company financial statements, shares in subsidiaries and associated companies are recognised at cost, cf. note 19, less impairment losses, and in the income statement, dividends from subsidiaries and associated companies are recognised as income.
The net profit for the year was USD 601m (loss of USD 10m). The main difference is financial expenses as 2019 was impacted by impairment loss on the Maersk Drilling Holding A/S demerger. Furthermore, reversal of provisions, etc. reduces operational costs compared to 2019.
Cash flow from operating activities was negative USD 76 (negative USD 368). Total assets amounted to USD 40.5bn (USD 38.3bn) and total equity was USD 24.1bn (USD 24.7bn) at 31 December 2020.
118 Revenue
118 Operating costs
119 Gain on sale of companies and non-current assets, etc., net
119 Financial income and expenses
121 Investments in subsidiaries and associated companies
122 Share capital
125 Borrowings and lease liability reconciliation
Note 11 126 Provisions
Note 12 126 Financial instruments and risks
Note 13 131 Financial instruments by category
132 Pledges
Note 15 133 Commitments
Note 16 133 Contingent liabilities
Note 17 133 Cash flow specifications
Note 19 135 Significant accounting policies
Note 20 135 Significant accounting estimates and judgements
| Table 1.1 | 2020 | 2019 |
|---|---|---|
| Other revenue | 17 | 18 |
| Total revenue | 17 | 18 |
Other revenue is internal lease income.
| Table 2.1 | 2020 | 2019 |
|---|---|---|
| Rent and lease costs | 11 | 14 |
| Staff costs reimbursed to Rederiet A.P. Møller A/S1 | 149 | 124 |
| Other, including recharging of operating costs, net2 | -70 | 40 |
| Total operating costs | 90 | 178 |
| Average number of employees directly employed by the company | 2 | 2 |
| Table 2.2 | ||
|---|---|---|
| The company's share of fees and remuneration to the Executive Board | 2020 | 2019 |
| Fixed base salary | 6 | 5 |
| Short-term cash incentive | 4 | 2 |
| Long-term share-based incentive plans | 1 | - |
| Remuneration in connection with redundancy, resignation and release from duty to work | - | 5 |
| Total remuneration to the Executive Board | 11 | 12 |
| Table 2.3 | ||
|---|---|---|
| Fees to the statutory auditors | 2020 | 2019 |
| Statutory audit | 1 | 1 |
| Other assurance services | - | - |
| Tax and VAT advisory services | - | - |
| Other services | 1 | 1 |
| Total fees | 2 | 2 |
1 Wages and salaries USD 127m (USD 116m) and pension plan contributions USD 22m (USD 8m). Staff costs included in integration and restructuring costs amount to USD 0m (USD 3m).
For information about share-based payment, reference is made to note 9.
2 Other operating costs are positively impacted by USD 35m reversal of other provisions, ref. note 11, other reversals and recharging of cost, etc.
Contract of employment for the Executive Board contains terms customary in Danish listed companies, including termination notice and 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 3m (USD 3m).
Fees for other services than statutory audit of the financial statements provided by Pricewaterhouse-Coopers Statsautoriseret Revisionspartnerselskab to A.P. Møller - Mærsk A/S mainly consist of audit of non-statutory financial statements, financial due diligence and transaction advice, accounting advisory services, review of the interim report and other advisory accounting and tax services.
| Table 3.1 | 2020 | 2019 |
|---|---|---|
| Gains | 1 | 4 |
| Gain/loss on sale of companies and non-current assets, etc., net | 1 | 4 |
One subsidiary and two associated companies were liquidated in 2020 after activities ceased. aries.
In 2019, gains were liquidation of two dormant subsidi-
| Table 4.1 | 2020 | 2019 |
|---|---|---|
| Interest expenses on liabilities | 325 | 490 |
| Interest income on loans and receivables | 887 | 1,143 |
| Fair value adjustment transferred from equity hedge reserve (loss) | 25 | 26 |
| Net interest income | 537 | 627 |
| Exchange rate gains on bank balances, borrowings and working capital | 76 | 71 |
| Exchange rate losses on bank balances, borrowings and working capital | 190 | 30 |
| Net foreign exchange gains/losses | -114 | 41 |
| Fair value gains from derivatives | 193 | 113 |
| Fair value losses from derivatives | 49 | 73 |
| Net fair value gains/losses | 144 | 40 |
| Dividends received from subsidiaries, associated companies and joint ventures, net1 | 413 | 324 |
| Total dividend income | 413 | 324 |
| Reversal of impairment losses, investments in subsidiaries and associated companies2 | 296 | 116 |
| Impairment losses, investments in subsidiaries and associated companies3 | 467 | 1,042 |
| Reversal of write-down of loans4 | - | 155 |
| Write-down of loan receivables from subsidiaries | - | 2 |
| Financial income/expenses, net | 809 | 259 |
| Of which: | ||
| Dividends | 413 | 324 |
| Financial income | 1,452 | 1,598 |
| Financial expenses | 1,056 | 1,663 |
Reference is made to note 12 for an analysis of gains and losses from derivatives.
Refer to note 20 for significant accounting estimates.
1 Mainly dividend from A.P. Moller Finance SA (in 2019 Orion Limited, Maersk FPSOs A/S and A.P. Moller Finance SA each paid around USD 0.1bn).
2 Reversal of impairment losses mostly relates to Maersk Oil Trading and Investments A/S (in 2019 A.P. Moller Finance SA, Star Air A/S and Maersk Container Industry A/S).
3 Impairment losses to recoverable amount relate to fair value adjustment of A.P. Moller Finance SA and Maersk Supply Service A/S (in 2019 Maersk Supply Service A/S, Damco International A/S, Maersk FPSOs A/S and demerger of Maersk Drilling Holding A/S).
4 2019 reversal of write-down of loan concerns Maersk Supply Service A/S and Maersk Container Industry A/S.
| Table 5.1 | 2020 | 2019 |
|---|---|---|
| Tax recognised in the income statement | ||
| Current tax on profit for the year | 119 | 70 |
| Adjustment of tax provision | -26 | 45 |
| Adjustment for current tax of prior periods | 18 | -49 |
| Withholding taxes | 10 | 15 |
| Total current tax | 121 | 81 |
| Origination and reversal of temporary differences | 2 | 24 |
| Adjustment for deferred tax of prior periods | 13 | 8 |
| Total deferred tax | 15 | 32 |
| Total tax expense | 136 | 113 |
| Tax reconciliation: | ||
| Profit/loss before tax | 737 | 103 |
| Tax using the Danish corporation tax rate (22%) | 162 | 23 |
| Non-deductible expenses | 13 | 34 |
| Gains/losses related to shares, dividends, etc. | -46 | 50 |
| Adjustment to previous years' taxes | 5 | 4 |
| Other differences, net | 2 | 2 |
| Total income tax | 136 | 113 |
| Tax recognised in other comprehensive income and equity | 10 | 13 |
| Of which: | ||
| Current tax | 10 | 13 |
| Table 6.1 | Investments in subsidiaries |
Investments in associated companies |
|---|---|---|
| 2020 | 2020 | |
| Cost | ||
| 1 January 2019 | 21,305 | 819 |
| Addition1 | 850 | - |
| Return of capital2 | 5,780 | - |
| Disposal | 250 | - |
| Transfer from assets held for sale3 | 1,465 | - |
| 31 December 2019 | 17,590 | 819 |
| Addition4 | 4,565 | - |
| Disposal | 10 | 4 |
| 31 December 2020 | 22,145 | 815 |
| Impairment losses | ||
| 1 January 2019 | 2,552 | 814 |
| Impairment losses5 | 480 | 3 |
| Disposal | 226 | - |
| Reversal of impairment losses | 116 | - |
| Transfer from assets held for sale3 | 1,465 | - |
| 31 December 2019 | 4,155 | 817 |
| Impairment losses5 | 467 | 1 |
| Disposal | 4 | 4 |
| Reversal of impairment losses | 296 | - |
| 31 December 2020 | 4,322 | 814 |
| Carrying amount: |
| 31 December 2019 | 13,435 | 2 |
|---|---|---|
| 31 December 2020 | 17,823 | 1 |
Reference is made to pages 144-146 for a list of significant subsidiaries and associated companies.
Recognised deferred tax assets and liabilities are attributable to the following:
| Table 7.1 | Assets | Liabilities | Net liabilities | |||
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
| Liabilities, etc. | - | - | 48 | 33 | 48 | 33 |
| Total | - | - | 48 | 33 | 48 | 33 |
| Table 7.1 and Table 7.2 | |||
|---|---|---|---|
| ------------------------- | -- | -- | -- |
There are no unrecognised deferred tax assets.
There are no material unrecognised tax liabilities on investments in subsidiaries, associated companies and joint ventures.
| Table 7.2 | ||
|---|---|---|
| Change in deferred tax, net during the year | 2020 | 2019 |
| 1 January | 33 | 1 |
| Recognised in the income statement | 15 | 32 |
| 31 December | 48 | 33 |
Development in the number of shares:
| Table 8.1 | A shares of | B shares of | Nominal value | |||
|---|---|---|---|---|---|---|
| DKK 1,000 | DKK 500 | DKK 1,000 | DKK 500 | DKK million | USD million | |
| 1 January 2019 | 10,756,262 | 232 | 10,060,398 | 172 | 20,817 | 3,774 |
| Conversion | 3 | -6 | 3 | -6 | - | - |
| 31 December 2019 | 10,756,265 | 226 | 10,060,401 | 166 | 20,817 | 3,774 |
| Cancellation | 156,977 | - | 627,938 | - | 785 | 142 |
| Conversion | 5 | -10 | - | - | - | - |
| 31 December 2020 | 10,599,293 | 216 | 9,432,463 | 166 | 20,032 | 3,632 |
Shareholder disclosure subject to section 104 of the Danish Financial Statements Act:
| Table 8.2 | Share capital | Votes |
|---|---|---|
| A.P. Møller Holding A/S, Copenhagen, Denmark | 40.29% | 50.88% |
| A.P. Møller og Hustru Chastine Mc-Kinney Møllers Familiefond, Copenhagen, Denmark | 9.18% | 13.31% |
| Den A.P. Møllerske Støttefond, Copenhagen, Denmark | 3.23% | 6.07% |
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 the company on 23 March 2020, it was decided to decrease the company's share capital by cancellation of treasury shares. The capital decrease was completed and registered with the Danish Business Authority on 2 June 2020.
Development in the holding of own shares:
| Table 8.3 | No. of shares of DKK 1,000 | Nominal value DKK million | % of share capital | |||
|---|---|---|---|---|---|---|
| Own shares | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| A shares | ||||||
| 1 January | 134,279 | - | 134 | - | 0.65% | 0.00% |
| Addition | 141,874 | 134,279 | 142 | 134 | 0.69% | 0.65% |
| Cancellation | 156,977 | - | 157 | - | 0.75% | 0.00% |
| 31 December | 119,176 | 134,279 | 119 | 134 | 0.59% | 0.65% |
| B shares | ||||||
| 1 January | 587,949 | 55,515 | 588 | 56 | 2.82% | 0.27% |
| Addition | 567,493 | 537,143 | 567 | 537 | 2.83% | 2.57% |
| Cancellation | 627,938 | - | 628 | - | 3.02% | 0.00% |
| Disposal | 22,223 | 4,709 | 22 | 5 | 0.11% | 0.02% |
| 31 December | 505,281 | 587,949 | 505 | 588 | 2.52% | 2.82% |
Note 11 in the consolidated financial statements includes rules for changing the share capital, and information regarding the authorisation of the Board of Directors to acquire own shares as well as the total number of own shares held by the Group.
Addition of own shares relates to the share buy-back programme announced in May 2019. Note 11 in the consolidated financial statements provides more information about the share buy-back programme. Disposal of own shares relates to the share option plan and the restricted shares plan.
| Table 9.1 | Members of the Executive Board 1 |
Employees 1 | Total | Total fair value 1 |
|---|---|---|---|---|
| Outstanding restricted shares | No. | No. | No. | USD million |
| 1 January 2019 | 1,002 | 12,786 | 13,788 | |
| Granted | 1,310 | 4,319 | 5,629 | 7 |
| Granted in connection with Maersk Drilling demerger | 294 | 1,286 | 1,580 | |
| Exercised | - | 4,756 | 4,756 | |
| Forfeited | 739 | 1,700 | 2,439 | |
| Outstanding 31 December 2019 | 1,867 | 11,935 | 13,802 | |
| Granted | 1,626 | 6,165 | 7,791 | 7 |
| Exercised | - | 3,777 | 3,777 | |
| Forfeited | - | 125 | 125 | |
| Outstanding 31 December 2020 | 3,493 | 14,198 | 17,691 |
The restricted shares plan was introduced in 2013 and grants have been awarded to employees on a yearly basis since 2013. Beginning in 2018, grants have also been awarded to members of the Executive Board.
The transfer of restricted shares is contingent upon the employee still being employed and not being under notice of termination and takes place when three years have passed from the time of granting. For members of the Executive Board the vesting period is five years.
The members of the Executive Board as well as other 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' holding of own B shares will be used to meet the company's obligations in connection with the restricted shares plan.
The fair value of restricted shares (A.P. Møller - Mærsk A/S B shares) granted to 96 (92) employees and five (five) members of the Executive Board was USD 7m (USD 7m) at the time of grant.
The fair value per restricted share at the time of grant is DKK 5,975 (DKK 8,668), which is equal to the volume weighted average share price on the date of grant, i.e. 1 April 2020.
The payroll expense related to the restricted shares plan is USD 1m (USD 1m).
On 1 April 2020, the restricted shares originally granted in 2017 were settled with the employees. The weighted average share price at that date was DKK 5,975.
The average remaining contractual life for the restricted shares as per 31 December 2020 is 1.8 years (1.7 years).
1 At the time of grant.
| Table 9.2 | Members of the Executive Board 1 |
Employees 1 | Total | Average exercise price 2 |
Total fair value 1 |
|---|---|---|---|---|---|
| Outstanding share options | No. | No. | No. | DKK | USD million |
| 1 January 2019 | 9,985 | 36,707 | 46,692 | 12,791 | |
| Granted | 7,894 | 22,444 | 30,338 | 7,622 | 9 |
| Forfeited | 6,080 | 3,125 | 9,205 | 9,141 | |
| Outstanding 31 December 2019 | 11,799 | 56,026 | 67,825 | 12,156 | |
| Exercisable 31 December 2019 | - | 18,435 | 18,435 | 10,630 | |
| Granted | 8,741 | 31,383 | 40,124 | 8,639 | 4 |
| Exercised | - | 18,446 | 18,446 | 9,968 | |
| Forfeited | - | 1,073 | 1,073 | 9,636 | |
| Outstanding 31 December 2020 | 20,540 | 67,890 | 88,430 | 8,670 | |
| Exercisable 31 December 2020 | 2,347 | 32,474 | 34,821 | 10,187 |
The following principal assumptions are used in the valuation:
| Table 9.3 | Share options granted to members of the Executive Board |
Share options granted to employees not members of the Executive Board |
||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| Share price, volume weighted average at the date of grant, 1 April, DKK |
5,975 | 8,668 | 5,975 | 8,668 |
| Share price, five days volume weighted average after publication of Annual Report, DKK |
7,854 | 8,682 | 7,854 | 8,682 |
| Exercise price, DKK | 8,639 | 9,550 | 8,639 | 9,550 |
| Exercise price following the demerger of Maersk Drilling, 2 April 2019, DKK |
n/a | 7,670 | n/a | 7,605 |
| Expected volatility (based on historic volatility) | 31% | 32% | 31% | 32% |
| Expected term (years) | 5.00 | 5.00 | 5.75 | 5.75 |
| Expected dividend per share, DKK | 150 | 150 | 150 | 150 |
| Risk free interest rate | -0.66% | -0.36% | -0.63% | -0.28% |
In addition to the plan described above, the company has share options plans for members of the Executive Board and other 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 were 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' Annual Report. Exercise of the share options is contingent on the option holder still being employed at the time of exercise. The share options can 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 time of granting. 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 own B shares will be used to meet the company's obligations in respect of the share option plans.
The fair value of awards granted to five (five) members of the Executive Board and 89 (75) employees was USD 4m (USD 9m) at the time of grant.
The payroll expense related to the share options plan is USD 1m (USD 1m).
The weighted average share price at the dates of exercise of share options was DKK 12,389. No share options were exercised during 2019.
The average remaining contractual life as per 31 December 2020 is 5.1 years (5.2 years) and the exercise price for outstanding share options is DKK 8,670 (DKK 9,057).
The fair value per option granted to members of the Executive Board is calculated at DKK 625 (DKK 1,782) at the time of grant based on Black & Scholes' option pricing model. The fair value per option granted to employees not members of the Executive Board is calculated at DKK 697 (DKK 1,914) at the time of grant based on the same option pricing model.
| Table 10.1 | Net debt as at 31 December |
Cash flow | Other changes | Net debt as at 31 December |
|
|---|---|---|---|---|---|
| 2019 | Foreign exchange movements |
Other1 | 2020 | ||
| Bank and other credit institutions | 2,865 | -464 | - | - | 2,401 |
| Lease liabilities | 13 | -9 | - | - | 4 |
| Issued bonds | 4,819 | -1,254 | 150 | 109 | 3,824 |
| Subsidiaries, etc., net | -15,686 | 3,407 | 32 | 4,172 | -8,075 |
| Total borrowings, net | -7,989 | 1,6802 | 182 | 4,281 | -1,846 |
| Derivatives hedge of borrowings, net | 156 | 27 | -150 | -69 | -36 |
| Borrowings classification: | |||||
| Classified as non-current | 7,154 | 5,644 | |||
| Classified as current | 5,574 | 9,676 |
1 Non-cash dividends, capital increases, fair value adjustments, IFRS 16 lease liabilities, etc.
2 Total cash flow from borrowings amounts to USD 1,680m and cash flow from related hedges at USD 31m, in total USD 1,711m.
| Table 10.2 | Net debt as at 31 December |
Cash flow | Other changes | Net debt as at 31 December |
|
|---|---|---|---|---|---|
| 2018 | Foreign exchange movements |
Other1 | 2019 | ||
| Bank and other credit institutions | 3,373 | -508 | - | - | 2,865 |
| Lease liabilities | - | - | - | 13 | 13 |
| Issued bonds | 5,373 | -543 | -57 | 46 | 4,819 |
| Subsidiaries, etc., net | -14,426 | 1,341 | -25 | -2,576 | -15,686 |
| Total borrowings, net | -5,680 | 290 | -82 | -2,517 | -7,989 |
| Derivatives hedge of borrowings, net | 187 | -84 | 57 | -4 | 156 |
| Borrowings classification: | |||||
| Classified as non-current | 7,573 | 7,154 | |||
| Classified as current | 9,916 | 5,574 | |||
| Table 11.1 | Restructuring | Other | Total |
|---|---|---|---|
| 1 January 2020 | 3 | 78 | 81 |
| Amount used | 3 | - | 3 |
| Amount reversed | - | 35 | 35 |
| 31 December 2020 | - | 43 | 43 |
| Of which: | |||
| Classified as non-current | - | 43 | 43 |
Other includes provisions for unsettled claims, legal disputes, etc.
The provisions are subject to considerably uncertainty, cf. note 20.
The company's derivatives are presented in the balance sheet with the following amounts:
| Table 12.1 | 2020 | 2019 |
|---|---|---|
| Non-current receivables | 259 | 165 |
| Current receivables | 317 | 65 |
| Non-current liabilities | 287 | 324 |
| Current liabilities | 302 | 94 |
| Assets/liabilities, net | -13 | -188 |
| Table 12.2 | 2020 | 2019 |
|---|---|---|
| Hedging interest rate risk | -25 | -26 |
| Total effective hedging | -25 | -26 |
| Ineffectiveness recognised in financial expenses | -12 | -4 |
| Total reclassified from equity reserve for hedges | -37 | -30 |
| Total | 221 | 54 |
|---|---|---|
| Net gains/losses recognised directly in the income statement | 258 | 84 |
| Oil prices and freight rate derivatives recognised directly in other income/costs | - | -1 |
| Interest rate derivatives recognised directly in financial income/expenses | 59 | 19 |
| Currency derivatives recognised directly in financial income/expenses | 199 | 66 |
The company's activities expose it to a variety of financial risks:
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 2020.
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 2020. 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.
Hedges comprise primarily currency derivatives and interest rate derivatives, which are further described in the following sections.
| Table 12.3 | Fair value | |
|---|---|---|
| Recognised at fair value through profit and loss | 2020 | 2019 |
| Currency derivatives | 13 | -20 |
| Interest derivatives | -62 | 1 |
| Total | -49 | -19 |
| Table 12.4 | Profit before tax | Equity before tax | ||||
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||
| EUR | -91 | -307 | -91 | -307 | ||
| Other currencies | -65 | -50 | -65 | -50 | ||
| Total | -156 | -357 | -156 | -357 |
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:
The company enters into derivatives to hedge currency exposures that do not qualify for hedge accounting. These derivatives 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.
| Table 12.5 | Maturity | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Fair value, asset |
Fair value, liability |
Nominal amount of derivative |
0-1 years | 2-4 years | 5- years | Gain/loss on hedged item |
Gain/loss on hedging instrument |
Average hedge rate |
|
| 2020 | |||||||||
| Combined fair value hedge, hedge of borrowings | |||||||||
| EUR | 45 | - | 559 | - | - | 559 | -61 | 44 | 1.8% |
| GBP | - | 7 | 95 | - | 95 | - | -8 | 5 | 2.5% |
| JPY | 17 | - | 121 | - | 121 | - | -3 | -2 | 1.8% |
| NOK | - | 11 | 256 | - | - | 256 | -5 | -2 | 2.5% |
| Fair value hedge, hedge of borrowings | |||||||||
| USD | 80 | - | 900 | - | 500 | 400 | -79 | 80 | 3.1% |
| Cash flow hedge, hedge of borrowings | |||||||||
| EUR | - | 35 | 461 | - | - | 461 | - | -34 | 4.2% |
| GBP | - | 49 | 313 | - | 313 | - | - | -11 | 4.6% |
| NOK | - | 4 | 81 | 51 | 30 | - | - | -1 | 2.4% |
| Total | 142 | 106 | 2,786 | 51 | 1,059 | 1,676 | -156 | 79 | |
| 2019 | |||||||||
| Combined fair value hedge, hedge of borrowings | |||||||||
| EUR | 17 | 35 | 733 | - | 224 | 509 | -47 | 23 | 3.5% |
| GBP | - | 14 | 92 | - | - | 92 | -5 | 2 | 4.2% |
| JPY | 10 | 11 | 206 | 92 | - | 114 | -3 | -3 | 3.6% |
| NOK | - | 34 | 250 | - | - | 250 | 10 | -18 | 4.2% |
| Fair value hedge, hedge of borrowings | |||||||||
| USD | 14 | - | 900 | - | - | 900 | -9 | 14 | 4.0% |
| Cash flow hedge, hedge of borrowings | |||||||||
| EUR | 23 | 60 | 867 | - | 447 | 420 | - | -17 | 3.9% |
| GBP | - | 52 | 302 | - | - | 302 | - | -1 | 4.6% |
| NOK | - | 27 | 341 | - | 341 | - | - | -4 | 3.5% |
| Total | 64 | 233 | 3,691 | 92 | 1,012 | 2,587 | -54 | -4 |
Sensitivity 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.
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.
The hedging of the interest rate risk is governed by a duration range and is primarily obtained using interest rate swaps. The duration of the company's debt portfolio is 2.1 years (2.2 years) excluding IFRS 16 leases.
A general increase in interest rates by one percentage point is estimated, all else being equal, to affect profit before tax and equity, excluding tax effect, positively by approx. USD 151m and positively by approx. USD 96m, respectively (positively by approx. USD 192m and positively by approx. USD 127m, 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 crosscurrency swaps and interest rate swaps. The hedging is a mix of fair value hedging, combined fair value hedging and cash flow hedging.
Due to buy-back of issued bonds in 2020, ineffectiveness from cash flow hedges is recognised in the income statement with a loss of USD 12m (loss of USD 4m).
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.
| Table 12.6 | Carrying amount |
Next interest rate fixing | ||
|---|---|---|---|---|
| Borrowings and interest-bearing debt to subsidiaries by interest rate levels inclusive of interest rate swaps |
0-1 year | 2-4 years | 5- years | |
| 2020 | ||||
| 0-3% | 12,942 | 13,172 | -330 | 100 |
| 3-6% | 2,378 | -366 | 1,853 | 891 |
| Total | 15,320 | 12,806 | 1,523 | 991 |
| Of which: | ||||
| Bearing fixed interest | 2,668 | |||
| Bearing floating interest | 12,652 | |||
| 2019 | ||||
| 0-3% | 6,081 | 6,181 | -300 | 200 |
| 3-6% | 6,647 | 3,696 | 1,987 | 964 |
| Total | 12,728 | 9,877 | 1,687 | 1,164 |
| Of which: | ||||
| Bearing fixed interest | 2,862 | |||
| Bearing floating interest | 9,866 |
| Table 12.7 | ||
|---|---|---|
| Maturity analysis of trade receivables incl. subsidiaries, etc. | 2020 | 2019 |
| Receivables not due | 2 | 1 |
| Less than 90 days overdue | 1 | 7 |
| Receivables, gross | 3 | 8 |
| Provision for bad debt | - | - |
Carrying amount 3 8
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 6m (gain of USD 6m).
The borrowing interest levels is specified in table 12.6
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 comprise loans receivable, 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.
A.P. Møller - Mærsk A/S applies the simple 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, also non-due trade receivables have been impaired.
Other financial assets at amortised cost include loans to subsidiaries. As of 31 December 2020, the loans amount to USD 17.2bn (USD 20.7bn) 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. Prior years' loan write-down balance on Maersk Supply Service A/S loan receivables remains recognised in 2020, while Maersk Container Industry A/S loan is settled.
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.
| Table 12.8 | Carrying amount | ||||
|---|---|---|---|---|---|
| Maturities of liabilities and commitments | 0-1 year | 2-4 years | 5- years | Total | |
| 2020 | |||||
| Bank and other credit institutions | 2,401 | 285 | 872 | 1,494 | 2,651 |
| Lease liabilities | 4 | 4 | - | - | 4 |
| Issued bonds | 3,824 | 461 | 2,108 | 1,909 | 4,478 |
| Interest bearing loans from subsidiaries, etc. | 9,091 | 9,085 | 13 | - | 9,098 |
| Trade payables | 54 | 54 | - | - | 54 |
| Other payables | 213 | 213 | - | - | 213 |
| Other payables to subsidiaries, etc. | 15 | 15 | - | - | 15 |
| Non-derivative financial liabilities | 15,602 | 10,117 | 2,993 | 3,403 | 16,513 |
| Derivatives | 589 | 302 | 132 | 155 | 589 |
| Total recognised in balance sheet | 16,191 | 10,419 | 3,125 | 3,558 | 17,102 |
| Total | 10,419 | 3,125 | 3,558 | 17,102 | |
| 2019 | |||||
| Bank and other credit institutions Lease liabilities |
2,865 13 |
336 9 |
1,745 4 |
1,247 - |
3,328 13 |
| Issued bonds | 4,819 | 429 | 2,295 | 2,901 | 5,625 |
| Interest bearing loans from subsidiaries, etc. | 5,031 | 5,048 | - | - | 5,048 |
| Trade payables | 58 | 58 | - | - | 58 |
| Other payables | 156 | 156 | - | - | 156 |
| Other payables to subsidiaries, etc. | 15 | 15 | - | - | 15 |
| Non-derivative financial liabilities | 12,957 | 6,051 | 4,044 | 4,148 | 14,243 |
| Derivatives | 418 | 94 | 94 | 230 | 418 |
| Total recognised in balance sheet | 13,375 | 6,145 | 4,138 | 4,378 | 14,661 |
| Total | 6,145 | 4,138 | 4,378 | 14,661 |
| Table 13.1 | Carrying amount | Fair value2 | |||
|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | ||
| Carried at amortised cost | |||||
| Interest-bearing receivables from subsidiaries, etc. | 17,166 | 20,717 | 17,217 | 20,723 | |
| Lease receivables | 9 | 19 | |||
| Total interest-bearing receivables | 17,175 | 20,736 | 17,217 | 20,723 | |
| Trade receivables | 3 | 8 | |||
| Other receivables (non-interest-bearing) | 120 | 102 | |||
| Other receivables from subsidiaries, etc. | 249 | 286 | |||
| Cash and bank balances | 4,491 | 3,395 | |||
| Financial assets at amortised cost | 22,038 | 24,527 | |||
| Derivatives | 576 | 230 | 576 | 230 | |
| Equity investments (FVOCI)1 | 1 | 2 | 1 | 2 | |
| Other financial assets | 577 | 232 | 577 | 232 | |
| Total financial assets | 22,615 | 24,759 | |||
| Carried at amortised cost | |||||
| Bank and other credit institutions | 2,401 | 2,865 | 2,428 | 2,918 | |
| Lease liabilities | 4 | 13 | |||
| Issued bonds | 3,824 | 4,819 | 4,047 | 5,040 | |
| Interest-bearing loans from subsidiaries, etc. | 9,091 | 5,031 | 9,091 | 5,031 | |
| Total borrowings | 15,320 | 12,728 | 15,566 | 12,989 | |
| Trade payables | 54 | 58 | |||
| Other payables | 213 | 156 | |||
| Other payables to subsidiaries and associated | |||||
| companies, etc. | 15 | 15 | |||
| Financial liabilities at amortised cost | 15,602 | 12,957 | |||
| Carried at fair value | |||||
| Derivatives | 589 | 418 | 589 | 418 | |
| Financial liabilities at fair value | 589 | 418 | 589 | 418 | |
| Total financial liabilities | 16,191 | 13,375 |
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.
| Table 13.2 Non-listed shares Total financial |
assets |
|---|---|
| Equity investments Movement during the year in level 3 (FVOCI) |
|
| Carrying amount 1 January 2019 2 |
2 |
| Carrying amount 31 December 2019 2 |
2 |
| Disposal 4 |
4 |
| Gains/losses recognised in other comprehensive income 3 Carrying amount 31 December 2020 1 |
3 1 |
Financial instruments measured at fair value can be divided into three levels:
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 reasonably possible change in the discount rate is not estimated to affect the company's profit or equity significantly.
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.
After separating the drilling activities in 2019, the company holds no property, plant and equipment.
Vessels and containers, etc., owned by subsidiaries with a carrying amount of USD 0.7bn (USD 1.4bn) have been pledged as security for loans of USD 0.3bn (USD 0.6bn).
The future charter and operating lease payments for continuing operations are:
| Table 15.1 | 2020 | 2019 |
|---|---|---|
| Within one year | 5 | 5 |
| Total | 5 | 5 |
As part of the company's activities, customary agreements are entered into regarding operating lease of vessels, equipment and office buildings, etc.
Total operating lease costs incurred are stated in note 2.
The company has no material capital commitments at the end of 2020.
As part of the divestment of Mærsk Olie og Gas A/S (MOGAS) to Total S.A. in 2018, the company has assumed a secondary liability related to the decommissioning of the offshore facilities in Denmark by issuance of a declaration. The company assesses the risk of economic outflows due to this secondary liability as very remote.
Guarantees amount to USD 0.3bn (USD 0.4bn). Thereof, USD 0.3bn (USD 0.4bn) is related to subsidiaries. The guarantees are not expected to be realised, but they can mature within one year.
Except for customary agreements within the company's activities, no material agreements have been entered into that will take effect, change or expire upon changes of the control over the company.
The company is involved in a number of legal cases, tax, and other disputes. Some of these involve significant amounts and are subject to considerable uncertainty. Management continuously assess the risks associated with the cases and disputes, and their likely outcome. It is the opinion of Management that, apart from items recognized in the financial statements, the outcome of these cases and disputes are not probable or cannot be reliably estimated in the term of amount or timing. The Company does not expect these to have a material impact on the financial statements.
Tax may crystallise on repatriation of dividends. 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.
| Table 17.1 | 2020 | 2019 |
|---|---|---|
| Change in working capital | ||
| Trade receivables | 5 | -2 |
| Other receivables and prepayments | 70 | -64 |
| Trade payables and other payables, etc. | 53 | 28 |
| Exchange rate adjustment of working capital | 13 | 1 |
| Total | 141 | -37 |
| Table 18.1 | Controlling parties | Subsidiaries | Associated companies | Joint ventures | Management 1 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Continuing operations | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| Income statement | ||||||||||
| Revenue | - | - | 17 | 18 | - | - | - | - | - | - |
| Operating costs | - | - | 11 | 12 | - | - | - | - | - | - |
| Remuneration to management | - | - | - | - | - | - | - | - | 14 | 15 |
| Dividends | - | - | 413 | 305 | - | - | - | 19 | - | - |
| Financial income | 59 | 12 | 895 | 1,151 | - | - | - | - | - | - |
| Financial expenses | - | 2 | 169 | 141 | - | - | - | - | - | - |
| Assets | ||||||||||
| Interest-bearing receivables, | ||||||||||
| non-current | - | - | 15,044 | 7,913 | - | - | - | - | - | - |
| Derivatives, non-current | - | - | - | 4 | - | - | - | - | - | - |
| Other receivables, non-current | 25 | 27 | - | - | - | - | - | - | - | - |
| Trade receivables | - | - | 3 | 8 | - | - | - | - | - | - |
| Interest-bearing receivables, current | - | - | 2,121 | 12,804 | - | - | 1 | - | - | - |
| Derivatives, current | - | - | 19 | 24 | - | - | - | - | - | - |
| Other receivables, current | 49 | 5 | 249 | 286 | - | - | - | - | - | - |
| Cash and bank balances | 487 | 644 | - | - | - | - | - | - | - | - |
| Liabilities | ||||||||||
| Interest-bearing debt, non-current | - | - | 13 | - | - | - | - | - | - | - |
| Derivatives, non-current | - | 33 | 6 | 1 | - | - | - | - | - | - |
| Interest-bearing debt, current | - | - | 9,078 | 5,031 | - | - | - | - | - | - |
| Trade payables | - | - | 23 | 20 | - | - | - | - | - | - |
| Derivatives, current | 44 | 5 | 107 | 35 | - | - | - | - | - | - |
| Other liabilities, current | 4 | 6 | 15 | 15 | - | - | - | - | - | - |
| Sale of companies, property, plant and equipment |
- | - | 10 | - | 4 | - | - | - | - | - |
| Capital increases and purchase | ||||||||||
| of shares | - | - | 4,565 | 850 | - | - | - | - | - | - |
| Return of capital | - | - | - | 5,780 | - | - | - | - | - | - |
| Table 18.1 |
|---|
| 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 agree |
| ment 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 |
| participates on a pro rata basis to the shares purchased in |
| the company's share buy-back programme. |
| 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. |
Dividends distributed are not included.
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 significant influence).
A.P. Møller - Mærsk A/S have been prepared on a going concern basis and in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU and additional Danish disclosure requirements for listed companies. The consolidated financial statements are also in accordance with IFRS as issued by the International Accounting Standards Board (IASB).
The accounting policies of the company are consistent with those applied in the financial statements for 2019, apart from the fact that the company in December 2019 elected to early adopt the amendments to IFRS 9, IAS 39 and IFRS 7 included in IASB's project 'Interest Rate Benchmark Reform'.
The accounting policies are furthermore consistent with the accounting policies for the Group's financial statements (note 23 in the consolidated financial statements) with the following exceptions:
The company has not yet adopted the following accounting standards/requirements:
IFRS 17 – Insurance contracts IFRS 17: An analysis of the impact is being assessed and is expected to be concluded in due course ahead of the implementation date.
Other changes to IFRS are not expected to have any significant impact on recognition and measurement.
When preparing the financial statements of the company, management undertakes a number of accounting estimates and judgements to recognise, measure and classify the company's assets and liabilities.
Estimates that are material to the company's financial reporting are made on the basis of, inter alia, determination of impairment of financial non-current assets including subsidiaries and associated companies (including assets held for sale) and recognition and measurements of provisions. Reference is made to notes 4, 6 and 11.
Management assesses impairment indicators for investments in subsidiaries and associated companies and determines recoverable amount generally consistent with the assumptions described in notes 6, 7 and 24 of the consolidated financial statements.
The accounting estimates and judgements are described in further detail in note 24 of the consolidated financial statements.
The Board of Directors and the Executive Board have today discussed and approved the Annual Report of A.P. Møller - Mærsk A/S for 2020.
The Annual Report for 2020 of A.P. Møller - Mærsk A/S has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and further requirements in the Danish Financial 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 2020 and of the results of A.P. Moller - Maersk's and the company's operations and cash flows for
the financial year 2020.
In our opinion, the Directors' Report 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 significant risks and uncertainty factors that A.P. Moller - Maersk and the company face.
In our opinion, the annual report of A.P. Møller - Mærsk A/S for the financial year 1 January to 31 December 2020 identified as with the file name APMM-2020-12-31.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 23 March 2021.
| Executive Board | Board of Directors |
|---|---|
| Søren Skou — CEO | Jim Hagemann Snabe — Chairman |
| Patrick Jany — CFO | Ane Mærsk Mc-Kinney Uggla — Vice Chairman |
| Vincent Clerc | Dorothee Blessing |
| Morten Engelstoft | Bernard L. Bot |
| Henriette Hallberg Thygesen | Marc Engel |
| Arne Karlsson | |
| Thomas Lindegaard Madsen | |
| Blythe S. J. Masters | |
| Jacob Andersen Sterling | |
| Robert Mærsk Uggla |
To the shareholders of A.P. Møller - Mærsk A/S.
In our opinion, the consolidated financial statements and the parent company financial statements (pages 64-135 and 144-146, respectively) give a true and fair view of the Group's and the parent company's financial position at 31 December 2020 and of the results of the Group's and the parent company's operations and cash flows for the financial year 1 January to 31 December 2020 in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act.
Our opinion is consistent with our Auditor's Longform Report to the Audit Committee and the Board of Directors.
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 2020 comprise income statement and statement of comprehensive income, balance sheet, cash flow statement, statement of changes in equity and notes, including
summary of significant accounting policies for the Group as well as for the parent company. Collectively referred to as the 'financial statements'.
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.
We are independent of the Group in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) and the additional requirements applicable in Denmark. We have also fulfilled our other ethical responsibilities in accordance with the IESBA Code.
To the best of our knowledge and belief, prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No 537/2014 were not provided.
We were first appointed auditors of A.P. Møller - Mærsk A/S on 12 April 2012 for the financial year 2012. We have been reappointed annually by shareholder resolution for a total period of uninterrupted engagement of nine years including the financial year 2020.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements for 2020. 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.
| 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 customer behavior, market conditions, terms and nature of services in the various segments. Further, the volume of transactions and extent of different revenue streams require various IT setups to ensure correct revenue recognition, which are complex and introduce an inherent risk to the revenue recognition process.
Reference is made to notes 1 and 23 in the consolidated financial statements.
Our audit procedures included considering the appropriateness of the revenue recognition accounting policies and assessing compliance with applicable accounting standards.
We tested the IT setups supporting the revenue recognition as well as relevant internal controls and Management's monitoring of internal controls.
We used data analytics on selected revenue streams 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.
The most significant risks in relation to Management's assessment of the recoverability of the carrying amount of property, plant and equipment relate to the definition of cash-generating units (CGUs), identification of CGUs with indicators 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.
Bearing in mind the generally long-lived nature of the assets, the most critical assumptions in estimating the future cash flows are Management's long-term outlook for freight and terminal rates, volume growth, bunker price and capital expenditures as well as determining the discount rates.
We focused on this area, as the carrying amounts are significant and because Management is required to exercise considerable judgement because of the inherent complexity in estimating the fair values less costs to sell or the values in use.
Reference is made to notes 7 and 23, 24 in the consolidated financial statements.
In addressing the risks, we considered the appropriateness of the defined CGUs within the businesses. We examined the methodology used by Management to assess the carrying amount of property, plant and equipment assigned to CGUs, and the process for identifying CGUs that required impairment testing to determine compliance with IFRS as adopted by the EU.
We performed detailed testing for the assets where indicators of impairment were identified. For those assets, we reviewed Management's testing of the fair values less costs to sell or the values in use, including analysed the reasonableness of key assumptions in relation to the ongoing operation of the assets.
We corroborated Management's estimates of future cash flows and challenged whether these are appropriate in respect of key assumptions, such as freight and terminal rates, volume growth, bunker price and capital expenditures.
We used our internal valuation specialists to independently challenge 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 relevant fair value less cost to sell and value in use models prepared by Management.
Management is responsible for Directors' Report (pages 3-62, 142-143 and 149, respectively).
Our opinion on the financial statements does not cover Directors' Report, 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 Directors' Report and, in doing so, consider whether Directors' Report is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
Moreover, we considered whether Directors' Report includes the disclosures required by the Danish Financial Statements Act.
Based on the work we have performed, in our view, Directors' Report 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. We did not identify any material misstatement in Directors' Report.
Management is responsible for the preparation of consolidated financial statements and parent company financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act, and for such internal control as Management determines 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 Management either intends to liquidate the Group or the parent company or to cease operations, or has no realistic alternative but to do so.
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 assurance, 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, individually 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 requirements 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, forgery,
intentional omissions, misrepresentations, or the override of internal control.
direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
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 independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our Auditor's Report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
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 2020 with the filename APMM-2020-12-31.zip is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the consolidated financial statements.
Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes:
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 requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include:
In our opinion, the annual report of A.P. Møller - Mærsk A/S for the financial year 1 January to 31 December 2020 with the file name APMM-2020-12-31.zip is prepared, in all material respects, in compliance with the ESEF Regulation.
Mogens Nørgaard Mogensen State Authorised Public Accountant mne21404
Lars Baungaard State Authorised Public Accountant mne23331
Quarterly summary2 Company overview1 Stock exchange announcements Definition of terms External financial reporting for A.P. Moller - Maersk2
1 Part of Financials 2 Part of the Directors' Report
| 2020 | 2019 | |||||||
|---|---|---|---|---|---|---|---|---|
| Income statement | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Revenue | 11,255 | 9,917 | 8,997 | 9,571 | 9,668 | 10,055 | 9,627 | 9,540 |
| Profit before depreciation, amortisation and impairment losses, etc. (EBITDA) | 2,711 | 2,297 | 1,697 | 1,521 | 1,463 | 1,656 | 1,357 | 1,236 |
| Depreciation, amortisation and impairment losses, net | 1,222 | 1,097 | 1,149 | 1,073 | 1,160 | 1,021 | 1,024 | 1,082 |
| Gain on sale of non-current assets, etc., net | 30 | 8 | 145 | 19 | 1 | 36 | 16 | 18 |
| Share of profit/loss in joint ventures and associated companies | 75 | 81 | 58 | 85 | 38 | 66 | 67 | 58 |
| Profit/loss before financial items (EBIT) | 1,594 | 1,289 | 751 | 552 | 342 | 737 | 416 | 230 |
| Financial items, net | -272 | -160 | -232 | -215 | -212 | -148 | -170 | -228 |
| Profit/loss before tax | 1,322 | 1,129 | 519 | 337 | 130 | 589 | 246 | 2 |
| Tax | 21 | 182 | 76 | 128 | 191 | 69 | 92 | 106 |
| Profit/loss for the period – continuing operations | 1,301 | 947 | 443 | 209 | -61 | 520 | 154 | -104 |
| Profit/loss for the period – discontinued operations | - | - | - | - | - | - | -1 | -552 |
| Profit/loss for the period | 1,301 | 947 | 443 | 209 | -61 | 520 | 153 | -656 |
| A.P. Møller - Mærsk A/S' share | 1,299 | 927 | 427 | 197 | -72 | 506 | 141 | -659 |
| Underlying profit/loss – continuing operations | 1,361 | 1,043 | 359 | 197 | 29 | 452 | 134 | -69 |
| Balance sheet | ||||||||
| Total assets | 56,117 | 56,162 | 55,319 | 53,990 | 55,399 | 55,662 | 56,555 | 61,701 |
| Total equity | 30,854 | 29,547 | 28,569 | 27,945 | 28,837 | 28,879 | 28,997 | 32,843 |
| Invested capital | 40,121 | 40,404 | 40,186 | 39,977 | 40,555 | 40,938 | 41,910 | 46,491 |
| Net interest-bearing debt | 9,232 | 10,804 | 11,564 | 11,978 | 11,662 | 12,056 | 12,910 | 12,565 |
| Cash flow statement | ||||||||
| Cash flow from operating activities | 2,569 | 2,176 | 1,867 | 1,216 | 1,535 | 1,732 | 1,170 | 1,482 |
| Gross capital expenditure, excl. acquisitions and divestments (CAPEX) | 370 | 280 | 362 | 310 | 469 | 343 | 445 | 778 |
| Cash flow from financing activities | -2,400 | -1,539 | -59 | -1,620 | -1,209 | -1,520 | -769 | -1,302 |
| Free cash flow | 1,666 | 1,486 | 1,051 | 445 | 800 | 946 | 270 | 324 |
| Net cash flow from discontinued operations | - | - | - | - | - | - | -419 | 47 |
| 2020 | 2019 | |||||||
|---|---|---|---|---|---|---|---|---|
| Financial ratios | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| EBITDA margin | 24.1% | 23.2% | 18.9% | 15.9% | 15.1% | 16.5% | 14.1% | 13.0% |
| Cash conversion | 95% | 95% | 110% | 80% | 105% | 105% | 86% | 120% |
| Return on invested capital after tax – continuing operations (ROIC) | 9.4% | 5.9% | 4.7% | 3.8% | 3.1% | 3.0% | 1.4% | 0.6% |
| Return on equity after tax, annualised | 17.2% | 13.0% | 6.3% | 2.9% | -0.8% | 7.2% | 2.0% | -7.9% |
| Equity ratio | 55.0% | 52.6% | 51.6% | 51.8% | 52.1% | 51.9% | 51.3% | 53.2% |
| Stock market ratios | ||||||||
| Earnings per share – continuing operations, USD | 66 | 48 | 21 | 10 | -3 | 24 | 7 | -5 |
| Diluted earnings per share – continuing operations, USD | 66 | 48 | 21 | 10 | -3 | 24 | 7 | -5 |
| Cash flow from operating activities per share, USD | 132 | 111 | 95 | 61 | 76 | 84 | 57 | 71 |
| Share price (B share), end of period, DKK | 13,595 | 10,080 | 7,728 | 6,092 | 9,608 | 7,746 | 8,142 | 8,442 |
| Share price (B share), end of period, USD | 2,246 | 1,585 | 1,161 | 894 | 1,439 | 1,132 | 1,241 | 1,270 |
| Total market capitalisation, end of period, USD-m | 41,957 | 29,583 | 21,827 | 17,002 | 28,000 | 22,309 | 24,749 | 25,743 |
A.P. Moller - Maersk comprises more than 790 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 https://investor.maersk.com/financials.cfm
| Company | Country of incorporation |
Owned share |
|---|---|---|
| A.P. Moller Finance SA | Switzerland | 100% |
| A.P. Moller Singapore Pte. Ltd. | Singapore | 100% |
| Addicks & Kreye Container Service GmbH & Co. KG | Germany | 51% |
| 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 Bahrain B.S.C. | Bahrain | 64% |
| APM Terminals Callao S.A. | Peru | 64% |
| APM Terminals China Co. Ltd. | Hong Kong | 100% |
| APM Terminals Elizabeth, LLC | United States | 100% |
| APM Terminals Gothenburg AB | Sweden | 100% |
| APM Terminals India Pvt. Ltd. | India | 100% |
| Company | Country of incorporation |
Owned share |
|---|---|---|
| APM Terminals Inland Services S.A. | Peru | 100% |
| APM Terminals North America B.V. | Netherlands | 100% |
| APM Terminals Pacific LLC | United States | 90% |
| APM Terminals Rotterdam B.V. | Netherlands | 100% |
| APM Terminals Tangier SA | Morocco | 90% |
| Aqaba Container Terminal Company (Pvt) Co. | Jordan | 50% |
| Bermutine Transport Corporation Ltd. | Bermuda | 100% |
| Coman SA | Benin | 100% |
| Container Operators S.A. | Chile | 100% |
| Damco (UAE) FZE | United Arab Emirates | 100% |
| Damco A/S | Denmark | 100% |
| Damco Australia Pty. Ltd. | Australia | 100% |
| Damco Belgium NV | Belgium | 100% |
| Damco China Ltd. | China | 100% |
| Damco Distribution Services Inc. | United States | 100% |
| Damco France SAS | France | 100% |
| Damco India Pvt. Ltd. | India | 100% |
| Damco International A/S | Denmark | 100% |
| Damco Logistics Uganda Ltd. | Uganda | 100% |
| Damco Sweden AB | Sweden | 100% |
| Damco USA Inc. | United States | 100% |
| Farrell Lines Inc. | United States | 100% |
| Gateway Terminals India Pvt. Ltd. | India | 74% |
| Gujarat Pipavav Port Ltd. | India | 44% |
| Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft A/S & Co KG1 | Germany | 100% |
| Lilypond Container Depot Nigeria Ltd. | Nigeria | 100% |
| Maersk (China) Shipping Company Ltd. | China | 100% |
| Maersk A/S | Denmark | 100% |
| Maersk Agency U.S.A. Inc. | United States | 100% |
| Maersk B.V. | Netherlands | 100% |
| Maersk Bangladesh Ltd. | Bangladesh | 100% |
1 Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft A/S & Co KG, Hamburg, is in accordance with paragraph 264b HGB (German commercial code) exempt from preparing, auditing and disclosing statutory financial statements as well as a management report in accordance with the German commercial law.
| Company | Country of incorporation |
Owned share |
|---|---|---|
| Maersk Container Industry A/S | Denmark | 100% |
| Maersk Container Industry Qingdao Ltd. | China | 100% |
| Maersk Denizcilik A.S. | Turkey | 100% |
| Maersk Egypt For Maritime Transport SAE | Egypt | 100% |
| Maersk FPSOs A/S | Denmark | 100% |
| Maersk Gabon SA | Gabon | 100% |
| Maersk Global Service Centres (Chengdu) Ltd. | China | 100% |
| Maersk Global Service Centres (India) Pvt. Ltd. | India | 100% |
| Maersk Holding B.V. | Netherlands | 100% |
| Maersk Hong Kong Ltd. | Hong Kong | 100% |
| Maersk Inc. | United States | 100% |
| Maersk Inter Holding B.V. | Netherlands | 100% |
| Maersk Line Agency Holding A/S | Denmark | 100% |
| Maersk Line UK Ltd. | United Kingdom | 100% |
| Maersk Line, Limited | United States | 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 Shipping Hong Kong Ltd. | Hong Kong | 100% |
| Maersk Supply Service (Angola) Lda. | Angola | 49% |
| Maersk Supply Service A/S | Denmark | 100% |
| Maersk Supply Service Canada Ltd. | Canada | 100% |
| Maersk Supply Service International A/S | Denmark | 100% |
| Maersk Supply Service UK Ltd. | United Kingdom | 100% |
| Maersk Vietnam Ltd. | Vietnam | 100% |
| New Times International Transport Service Co. Ltd. | China | 100% |
| Poti Sea Port Corporation | Georgia | 100% |
| PT Damco Indonesia | Indonesia | 98% |
| Rederiaktieselskabet Kuling | Denmark | 100% |
| Rederiet A.P. Møller A/S | Denmark | 100% |
| Safmarine (Pty) Ltd. | South Africa | 100% |
| Safmarine MPV NV | Belgium | 100% |
| Sealand Europe A/S | Denmark | 100% |
| Sealand Maersk Asia Pte. Ltd. | Singapore | 100% |
| Sogester - Sociedade Gestora De Terminais S.A. | Angola | 51% |
| Company | Country of incorporation |
Owned share |
|---|---|---|
| Suez Canal Container Terminal SAE | Egypt | 55% |
| Svitzer A/S | Denmark | 100% |
| Svitzer Australia Pty Ltd | Australia | 100% |
| Svitzer Marine Ltd. | United Kingdom | 100% |
| Terminal 4 S.A. | Argentina | 100% |
| West Africa Container Terminal BVI Ltd. | British Virgin Islands | 100% |
| West Africa Container Terminal Nigeria Ltd. | Nigeria | 100% |
| Company | Country of incorporation |
Owned share |
|---|---|---|
| Abidjan Terminal SA | Côte d'Ivoire | 49% |
| Brigantine International Holdings Ltd. | Hong Kong | 30% |
| Brigantine Services Ltd. | Hong Kong | 30% |
| Congo Terminal Holding SAS | France | 30% |
| Congo Terminal SA | Republic of the Congo | 15% |
| Cosco Ports (Nansha) Ltd. | British Virgin Islands | 34% |
| Guangzhou South China Oceangate Container Terminal Co. Ltd. | China | 20% |
| Höegh Autoliners Holdings AS | Norway | 39% |
| Meridian Port Services Ltd. | Ghana | 35% |
| Pelabuhan Tanjung Pelepas Sdn. Bhd. | Malaysia | 30% |
| Salalah Port Services Company SAOG | Oman | 30% |
| Shanghai Tie Yang Multimodal Transportation Co. Ltd. | China | 29% |
| South Asia Gateway Pvt. Ltd. | Sri Lanka | 33% |
| Tianjin Port Alliance International Container Terminal Co. Ltd. | China | 20% |
Joint ventures
| Company | Country of incorporation |
Owned share |
|---|---|---|
| Anchor Storage Ltd. | Bermuda | 51% |
| Brasil Terminal Portuario S.A. | Brazil | 50% |
| Cai Mep International Terminal Co. Ltd. | Vietnam | 49% |
| Douala International Terminal S.A. | Cameroon | 44% |
| Eurogate Container Terminal Wilhelmshaven Beteiligungsgesellschaft GmbH | Germany | 30% |
| First Container Terminal ZAO | Russian Federation | 31% |
| Global Ports Investments PLC | Cyprus | 31% |
| North Sea Terminal Bremerhaven Verwaltungsgesellschaft GmbH | Germany | 50% |
| Petrolesport Inc. | Russian Federation | 31% |
| 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 | USA | 49% |
| Vostochnaya Stevedore Company OOO | Russian Federation | 31% |
| Xiamen Songyu Container Terminal Co. Ltd. | China | 25% |
The complete list of announcements is available at http://investor.maersk.com/press-releases
• Management change
• Notice convening the Annual General Meeting 2020 in A.P. Møller - Mærsk A/S
• Initiates third phase of share buy-back programme
• Proposal for election of new members for the Board of Directors
• Trading update for Q1 and suspension of 2020 full-year guidance
• Interim Report Q1 2020
• Registration of capital decrease in connection with cancellation of treasury shares completed
• Trading update for Q2 2020
• Information about changed number of votes and share capital
• Interim Report Q2 2020
• Trading update for Q3 2020 and 2020 full-year guidance adjustment
• Upgrading the full-year EBITDA guidance for 2020
Alphaliner is a worldwide provider of container shipping data and analyses.
The direction of the trade route that has the lowest volumes, whereas the opposite direction is referred to as headhaul.
Cash payments for intangible assets and property, plant and equipment, excluding acquisitions and divestments.
Cash flow from operating activities to EBITDA ratio.
A.P. Moller - Maersk's operating cash flow from continuing operations divided by the number of shares (of DKK 1,000 each), excluding A.P. Moller - Maersk's holding of own shares.
Cash return on invested capital is calculated as free cash flow excluding acquisitions/divestments (cash flow from operating activities less gross CAPEX) divided by average invested capital for continuing operations.
EBIT costs including VSA income and hub income and adjustments for restructuring costs, the result from associated companies and gains/losses.
Compensation payable when a customer holds A.P. Moller - Maersk's containers beyond the agreed amount of free time, including any storage costs that A.P. Moller - Maersk may have
incurred in connection therewith as well as compensation by way of liquidated damages for not having the containers available for circulation.
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 disclosed 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. Discontinued operations include Maersk Drilling up to demerger in April 2019.
Earnings Before Interest, Taxes, Depreciation and Amortisation.
Calculated as equity divided by total assets.
EBITDA weighted on terminal ownership percentages of all entities (subsidiaries, joint ventures and associated companies).
The headcount number of accidents leading to the death of the employee.
Forty Foot container Equivalent unit.
Cash flow from operating activities less cash flow from investing activities. Lease payments (repayments of lease liabilities and financial expenses paid
on lease liabilities) are not included in the free cash flow.
The sum of revenue, less variable costs and loss on debtors.
The direction of the trade route that has the highest volume, whereas the return direction is referred to as backhaul.
The International Maritime Organization's (IMO) 0.5% global cap on sulphur dioxide (SOx) content in fuels for shipping has entered into force on 1 January 2020.
A sum of revenue for Terminals & Towage and Logistics & Services reporting segments less freight forwarding revenue and excluding eliminations between the segments.
Segment assets less liabilities.
1,000 cubic meter is the freight volume of the shipment for domestic and international freight. Cubic meter (CBM) measurement is calculated by multiplying the width, height and length together of the shipment.
Loaded volumes refer to the number of FFEs loaded on a shipment which is loaded on first load at vessel departure time excluding displaced FFEs.
Measures the number of lost-time injuries per million exposure hours. Lost-time injuries are the sum of fatalities, permanent total disability, permanent partial disability and lost workday cases.
Equals interest-bearing debt, including lease liabilities, fair value of derivatives hedging the underlying debt, less cash and bank balances as well as other interest-bearing assets.
Non-Ocean includes the current Logistics & Services, Terminals & Towage and Manufacturing & Others segments, but excludes Maersk Oil Trading and tramp activities acquired as part of the Hamburg Süd transaction.
Productivity is calculated as the average of the gross moves per hour for each call. Gross moves per hour for a single vessel call is defined as the total container moves (on load, off load and repositioning) divided by the number of hours for which the vessel is at berth.
Average freight rate per FFE for all the 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.
Cost per FFE assuming a bunker price at USD 200/tonne excluding intermodal but including hubs and time charter income. Hamburg Süd is not excluding intermodal.
Calculated as the profit/loss for the year divided by the average equity.
Profit/loss before financial items for the year (EBIT) less tax on EBIT divided by the average invested capital.
The value of future revenue covered by contracts.
Annualised EBITDA per tug equivalent (pilot boats and others count for 0.5).
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.
Twenty-foot container Equivalent Unit.
Hire of a vessel for a specified period.
Total number of shares – excluding A.P. Møller - Mærsk A/S' holding of own shares – multiplied by the end-of-year price quoted by Nasdaq Copenhagen.
Underlying profit/loss is profit/loss for the year from continuing operations adjusted for net gains/losses from sale of non-current assets, etc., and net impairment losses as well as transaction, restructuring and integration costs related to major transactions. The adjustments are net of tax and include A.P. Moller - Maersk's share of
mentioned items in joint ventures and associated companies.
A vessel sharing agreement is usually reached between various partners within a shipping consortium who agree to operate a liner service along a specified route using a specified number of vessels.
The percentage of women referenced as Senior Managers, Leaders, Senior Leaders, and Executives, compared to total headcount of the same levels.
A 4PL is a fourth-party logistics provider managing resources, technology, infrastructure, and managing external 3PLs to design, build and provide supply chain solutions for businesses.
A.P. Moller - Maersk provides additional disclosure to satisfy legal requirements and stakeholder interests. Supplementary reports can be downloaded from https://investor.maersk.com/financial-reports, while additional information can be found here.
The statutory annual report is available in electronic format at https://investor.maersk.com/ financial-reports
The annual report has been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU and further requirements in the Danish Financial Statements Act.
A.P. Moller- Maersk also produces quarterly interim reports.
To further add value and with a focus on the professional segment and others with more specific interests, detailed presentations are available each quarter following the release of the interim reports and the annual report.
The interim reports, presentations and webcasts can be found on our Investor Relations website at https://investor.maersk.com/
Quarterly figures for 2010-2020 are available at https://investor.maersk.com/financials.cfm
The Board of Directors of A.P. Møller - Mærsk A/S continues to consider the 'Recommendations for Corporate Governance' implemented by Nasdaq Copenhagen. For further information, see page 51 of the annual report.
The remuneration report includes the total remuneration received by each member of the Board of Directors and the Executive Board of A.P. Møller - Mærsk A/S for 2020. The report is available at https://investor.maersk.com/remuneration
An independently assured Sustainability Report for 2020 has been published, which provides detailed information on A.P. Moller - Maersk's sustainability performance. The report serves as A.P. Moller - Maersk's Communication on Progress as required by the UN Global Compact and ensures compliance with the requirements of Section 99a of the Danish Financial Statements Act on corporate social responsibility.
The report further ensures compliance with the requirements of Section 99b of the Danish Financial Statements Act on reporting on the gender composition of management.
Finally the report ensures compliance with section 107d of the Danish Financial Statements Act on A.P. Moller - Maersk's statutory statement on social responsibility, underrepresented gender
and diversity. The report is available on Investor Relations websitehttps://investor.maersk.com/ and at https://www.maersk.com/about/sustainability/reports
Additional information on how A.P. Moller - Maersk manages issues and explains implementation, progress and relevant commitments and frameworks can be found on the Sustainability website at https://www.maersk.com/about/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 available in the 2020 ESG data overview on the Investor Relations website at https://investor.maersk.com/
Stig Frederiksen Finn Glismand Henrik Jensen
Design and layout
e-Types
Produced in Denmark 2021
Jim Hagemann Snabe, Chairman Ane Mærsk Mc-Kinney Uggla, Vice Chairman Dorothee Blessing Bernard L. Bot Marc Engel Arne Karlsson Thomas Lindegaard Madsen Blythe S. J. Masters Jacob Andersen Sterling Robert Mærsk Uggla
Søren Skou, Chief Executive Officer (CEO) Patrick Jany (CFO) Vincent Clerc Morten H. Engelstoft Henriette Hallberg Thygesen
Arne Karlsson, Chairman Bernard L. Bot Jim Hagemann Snabe
Jim Hagemann Snabe, Chairman Arne Karlsson Robert Mærsk Uggla
Ane Mærsk Mc-Kinney Uggla, Chairman Jim Hagemann Snabe Robert Mærsk Uggla
Jim Hagemann Snabe, Chairman Marc Engel Blythe S. J. Masters Robert Mærsk Uggla
PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab
A.P. Møller - Mærsk A/S Esplanaden 50, DK-1098 Copenhagen K +45 33 63 33 63 www.maersk.com [email protected]
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