Q2 2025 AP Moeller - Maersk AS Earnings Call
Welcome everyone, and thank you for joining us on this earnings call today as we present our second quarter results for 2025. My name is Vincent Clerc, and I am the CEO of Apollo Merck. With me in the room today is our CFO, Patrick Jany.
As usual, we start with the highlights from the quarter that just passed. In the second quarter of 2025, we demonstrated strong financial performance in a volatile external environment.
We delivered aid, with revenue of $2.3 billion and an EBIT of $845 million, driven by strong execution across all our businesses.
This happened against the backdrop of a historically uncertain external environment, which materialized already towards the start of the quarter, as we discussed at our earnings call in May.
The geopolitical volatility and low visibility into microeconomic factors that we experience this quarter are unprecedented.
Nevertheless, in each of our business segments, we have performed well.
In logistics and services, we carried on with our progress, delivering an EBIT margin of 4.8% toward our own targets of 6%. This reflects continuous improvements in relation to previous years and the previous quarter.
In Ocean, we successfully completed our transition to Gemini on our East-West Network and posted strong volume growth, as well as good profitability. All the while, we navigated significant volume and rate volatility, not the least on our Trans-Pacific service.
June marked the first month in which Gemini operated exclusively with the old 2m Network, which has now been fully phased out.
We are thankful to all the in the teams to all the teams who contributed to making this such a success.
Terminals continue to perform strongly, supported by high volumes, higher revenue per move, and higher utilization.
With the first half of the year now behind us, what does this mean? Then for our financial guidance,
First given the first 6 months and our view into Q3 as well. Our outlook for the container Market, volume growth for 2025 has improved. We now expect growth to be a positive to be between a positive 2 and positive 4%,
While there is continued uncertainty for North America, market demand outside North America has proven to be more resilient than initially expected, allowing us to increase our volume outlook.
Our view on the Red Sea situation remains unchanged such that there. We still expect that the disruption will last for the full year for the full year.
Ultimately for our financial guidance. We now expect our full year Abit to be between 2 and 3/2 billion dollars. This is up from the previous ebit, guidance of between 0 and 3 billion.
More details will follow later on the call.
Now, taking a closer look at each of our business segments, starting with Logistics and Services, we achieved an EBIT margin of 4.8%.
This represents a year-on-year improvement of 1.3 percentage points and brings us closer to our 6% target.
This reflects progress in our challenge products of our middle, Mile, and Last Mile areas, in which we have rebased our business as well as the cost base to improve profitability.
The progress we have made on the operational front, however, was impacted by the uncertainty we have experienced in North America.
With which is our single largest region, in terms of revenue, in logistics?
Regional revenue in North America was down 8% year-on-year for the quarter.
Growth.
In Ocean, we demonstrated strong execution, not least with Gemini now fully and successfully phased in.
As you might have seen from the different reports, we have already achieved, at this stage, a reliability score above 90% since the launch in February.
Cost savings are also on track, and we will be able to share more data on this in our next quarter's score.
Despite the volume and demand volatility we experienced throughout the quarter, we showed strong volume performance, with volume up 4.2% year on year and 10% sequentially.
This is a testament to the strength and agility of our network, not least our ability to manage vessel capacity swiftly and effectively to adjust to the demand changes. We see this in specific parts of the network.
This has also led to good capacity utilization of 94%, which increased by about 2 percentage points sequentially.
We continue to see the longer term of rates.
We continue to see the longer-term trend for rates coming under pressure as the supply-demand imbalance widens.
Our average loaded rates were down 7% sequentially.
Nevertheless, market spot rates at the quarter end were 37% higher at the end of the quarter than they were at the end of Q1.
This sets a good exit level for the quarter and a watermark to carry over into the next quarter.
In terminals, we delivered another excellent quarter, driven by record high volumes supported by the extravagance that Gemini has brought to our Gateway terminals.
Revenue per move increased, supported by storage revenue and price increases across the portfolio.
The terminal Roy also reached a record at 14, at 15.4%, well above the 9% target, and here our invested capital will increase in the coming quarters. As we continue to invest in our portfolio, including.
The Port Elizabeth extension, which we announced back in March.
Turning to our mid-term targets. As you can see, we are full on all but two of the circles on the page.
Needless to say, we are working to increase our profitability in logistics and services, which is trending in the right direction with sequential and year-on-year margin improvement.
We have made good operational progress in our challenge products of our Middle Mile and Last Mile, while seeing good revenue growth in other products, more in line with our organic revenue growth targets.
The message here is clear: we are progressing, but we are not satisfied with where we are.
Our priority is to continue to improve in the coming quarters and double down on our efforts.
Back in May, we expressed a more cautious view on demand due to the job market, political volatility, and lack of visibility into microeconomic factors.
The strong market demand that we expected.
At the start of the year, the outlook looked more uncertain and potentially worsening regarding the supply and demand balance for the rest of the year.
Nevertheless, the delay in the potential reopening of the Red Sea allowed us to maintain the original guidance communicated in February.
In the meantime, we have seen stronger volumes in the first six months of the year and expect part of this momentum to carry into the second half.
That said, the situation remains fluid, and we continue to watch trade developments, as well as consumer demand patterns and inventory levels, very closely.
On other supply-side rivers, there was essentially no change in new industry. Delivery is fixed such that about 2 million tonnes of capacity will continue to enter the global fleet for the full year.
The reopening of the Red Sea looks unlikely, and we still expect the disruption to remain with us for the full year, with potential congestion to ensue.
Similarly, our view on supply-side drivers in response to the Red Sea reopening remains unchanged from our expectations.
Overall, the positive delta of strong market demand looks more uncertain, allowing us to increase our container volume outlook and ultimately our financial guidance.
And that is a good segue into the next slide.
As mentioned earlier, we now expect global container volume growth to be between positive 2% and positive 4% for 2025, given the more resilient demand that we are seeing outside North America.
This puts us away from the scenario in which we could see negative volume growth for the year. And it is an upgrade from the previous volume outlook of negative 1% to 4% from May.
Disruption, which we still expect to be with us for the full year, is absorbing net supply in the industry.
Against the backdrop of these Factor, as well as a strong first half year performance. We upgrade our financial guidance for full year 2025 to an underlying Aida of 8 to 9 and a half billion dollars previously 6 to 9 billion dollars.
And our underlying Abit from 2 to 3 and a half billion dollars previously from 0 to 3 billion dollars and a free cash flow of negative of negative 1 billion or higher previously, negative -3 billion or higher.
Our capex guidance of $10 to $11 billion for 2024 combined and 2025 combined remains unchanged.
And I will now hand over to Patrick, who will walk you through the detailed financial and segment level performance.
Thank you, Vincent, and hello to everyone on the call.
Q2 2025 was another quarter with strong financial performance across the group.
Delivering results broadly in line with our previous year performance, despite a much more volatile operating environment.
We reported a bit of $2.3 billion and a debit of $845 million, resulting in a debit margin of 6.4%.
Compared to last year, a bit of $2.1 billion and an inhabit of 963 million.
Sequentially.
Performance declined moderately, as expected, driven by the softening of rates in Ocean, due to the increased supply across trade lanes.
The erosion in Ocean was, however, cushioned by our other businesses, with increased performance in logistics and services, benefiting from operational gains and continued excellent performance in terminals.
Net profit after tax was $639 million, leading to a strong return on invested capital of 13.7%, driven primarily by the high earnings in Q3 and Q4 of last year.
Free cash flow for the quarter was -$373 million.
Owing to the slightly lower profitability combined with ongoing ocean and thermal investments and an increase in working capital.
Our capital structure remains strong, and we returned $864 million in cash to shareholders during the quarter.
Including $514 million through share buyback.
Our buyback program is well on track, and we are committed to continuing to return cash to shareholders while also investing in our strategic priorities.
Total cash and deposits amounted to $19.9 billion, with net cash at $2.5 billion.
Our balance sheet remains, therefore, healthy and well above our maximum leverage thresholds.
Let's take a closer look at cash flow on slide 11, where we can see that cash flow from operations increased to $1.9 billion in the second quarter, driven by a higher year-over-year EBITDA of $2.3 billion.
Which was partially offset by a networking capital increase of $332 million, half of which was currency-related.
This led to an increased cash conversion of 81%, up 5%.
Compared to Q2 20224.
Capitalized lease installments increased to 1 billion impacted by, by the concession extension, of our terminal in Port. Elizabeth in New Jersey, while the gross capex remains sequentially stable at 1.3 billion and in line with our multi-year guidance, as we continue investing into growth in Terminals and LNS and maintain our Fleet renewal program in order,
You can also see the impact of the $687 million acquisition of the Panama Canal Railway Company that was made on April 1st. And our $6.864 million return to APMM shareholders during the quarter.
Turning to our ocean segment on slide 12.
Uh, Ocean delivered a solid operational performance in Q2, despite an extremely volatile trading environment, continued softening of rates, and elevated cost pressure. At the same time, the business successfully transitioned to the new Gemini network, with initial reliability scores in line with our ambition.
Volumes were strong, growing 10% quarter on quarter across all trades and 4.2% year on year.
This growth supported a higher utilization rate of 94%, up 1.8 percentage points compared to Q1.
Loaded freight rates continued to decrease in line with expectations, down 9.6% year on year and 6.9% sequentially, with increasing volatility throughout the quarter as market dynamics shifted rapidly.
This was partially mitigated by active capacity management and strong cost control.
From a financial standpoint, ocean generated a bit of $229 million.
Equivalent to a 2.7% margin and maybe DKK 1.4 billion, which is broadly in line with the same period last year and reflects strong execution on costs and volumes.
Despite rate erosion.
A bit was impacted by higher depreciation and amortization costs, following continued capacity investments and comparatively the absence of gains on vessels and containers of $202 million that we had in Q2 2024.
Slide 13 illustrates all the main elements of Ocean's year-on-year development on the left. You can see the large negative impact on profitability, with freight rates being 9.6% lower, cushioned by the tailwind of 4.2% increased volumes.
Ocean saw a positive impact of $271 million from lower bunker prices compared to last year.
While container handling and network costs increased slightly.
Aid. That was also supported by detention and emerging revenue, together with a large technical impact. From the timing effects of rates, we are comparing to a period of steep rate increases back in Q2 2024.
All in all, these offsetting factors brought Q2 2025 earnings to $1.4 billion, a 2.6% increase year on year.
Let's now have a look at the ocean KPIs on slide 14, the ocean business's solid performance in the second quarter, as highlighted in these metrics.
With strong volume growth helping to offset a dynamic rate and cost environment.
Loaded volumes increased 4.2% year-on-year, reaching 3.2 million FPS as demand remained resilient on key trade lanes, including Asia-Europe.
Middle East, Europe, Latin America, and Asia.
Sequentially, volumes were up 10%, supported by a strong network execution and growth across all regions.
As stated earlier, our average rate rates declined 9.6% year-on-year and 6.9% compared to Q1.
Reflecting the adverse sequential rate development, this rate erosion is a direct result of excess capacity and pricing pressure in the market.
During the quarter, volatility was high, and exit rates were significantly higher than the average rates of the quarter.
On the cross-side, operating costs excluding banker rows were 9.3%, largely due to higher handling charges and network-related costs.
Unit costs are fixed. Bunker was up 1.8% year on year at $249 per fee.
But improved 5.1% sequentially, reflecting the benefit of higher volumes.
Bunker costs were down 16% year-over-year, 1 year.
Due to both lower food prices and increased efficiency, which allowed for reduced consumption despite higher volumes.
The average operated fleet grew 7.1%, reaching 4.6 million tons.
In line with our plan for vessel deliveries and the strategic injection of capacity to meet the strong demand,
Capacity utilization also remained high at 94%.
In Q2, we maintain a balanced mix between short-term and long-term contracts, with 48% of volumes on the long-term agreements.
For the entire year, we expect a 50/50 term split.
Let's now turn to our logistics and services business on slide 15.
In the second quarter, Logistics and Services delivered revenue of $3.7 billion, up 1% year on year.
This was driven by growth.
Across most products, particularly in lead logistics, warehousing, and the first mile, we continued to see strong customer demand, while executing the rebasing of the middle mile. The first mile activities impacted the previous year comparison.
Geographically, as we alluded to before, logistical services are experiencing growth from all markets outside of North America. We see strong year-on-year growth, in particular from Latin America, India, and the Middle Eastern Asia.
However, the operational growth made across the broader portfolio was partially offset by continued headwinds in the segment's largest markets in North America, where performance was sluggish during the second quarter.
Aid improved to $275 million, representing a 39% year-on-year increase.
And the EBIT margin rose to 4.8%, up 1.3%.
Percentage points from Q2 last year, the increase a bit reflects ongoing profitability and productivity gains in multiple products.
No, but steady improvement in our middle mile, first mile in our businesses.
Now, let's have a look at the product level. Breakdown with logistics services on slide 16, starting with our freight management offerings. Revenue here is increasing by 6.3% year on year to $522 million.
With the EIT R margin improving to 21.7% from 18.1% last year, this performance was driven by strong contributions from the upselling of value, adding services in logistics, and strong performance. Of course, in logistics.
In fulfillment services, refocusing efforts in the middle mile and last mile in North America, together with continued momentum in warehousing, led to improvements in profitability with only modest impact to the top line.
Revenue declined slightly by 1.7%, reaching $1.4 billion, whereas the EBITDA margin improved to -1.1% from -3.2% last year.
Revenue rose moderately in our road and air transport activities to $1.8 billion, representing a 1.7% increase year on year.
And supported by high volumes in first-mile land transportation.
Aida's margin remained flat at 7.4%.
We round off with our terminals business on slide 17, where terminals delivered another strong quarter, continuing the positive trend seen across the last several quarters.
Revenue grew by 20% year-on-year to $1.3 billion, driven by higher volumes, improved tariffs, and higher storage revenue.
Volumes increased 9.9%, with a strong uplift across all regions.
and supported by our new Gemini Network as volumes from our ocean business alone increased 29%.
The higher volumes boosted utilization, which rose to 86%, with several terminals operating close to maximum capacity.
Revenue per move increased by 8.9%, reflecting an improved terminal, mixed pricing, and storage revenue.
Meanwhile, cost per move increased by 12%, largely due to significant global inflation but partially mitigated by the increased utilization.
EBIT has increased by 31% year on year to $461 million, with a margin of 35.3%, up 2.9 percentage points from Q2 last year.
It's 3. 3.
This was supported not only by the strong operational result but also by higher income from joint ventures and associates at companies, and the one offset, the current high level.
Roy rose to a record 15.4%, underlying the strong return profile of this business. Despite the continued high level of investment, capex for the quarter came in at $141 million, with the increase driven by the construction and expansion of new terminals.
Turning to the breakdowns of the terminals. EBITDA down, slide 18.
Terminals delivered an increase in AITA of $50 million, from $48 million to $458 million. This growth was driven by the increase in volumes and the positive results from GVS and participations.
The revenue per move also increased significantly, allowing us to fully offset the $103 million headwind from higher costs per move, primarily due to labor inflation.
And with that, we have finalized the review of our business segments, and we are ready for the Q&A.
Operators. Um, please go ahead.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their telephone.
You will hear a tone to confirm that you have entered the queue.
If you wish to remove yourself from the question queue, you may press star, then 2.
Question is on the phone are requested to disable the loudspeaker mode while asking a question.
In the interest of time, please limit yourself to one question.
Anyone who has a question may press star and 1 at this time.
The first question from Alexa, dugani JP Morgan. Please go ahead.
Yes, good morning, thank you for taking my question. Can you firstly discuss, um, your ocean cause position please? And how would you describe, um, your bit margin versus the industry currently? Because when I look at Q1 and the most recent performance, the slightly or kind of well dependency compared to the Asian car is quite below average.
Question because you helpfully show that the queue to 2209 is margin was around 3 and a half percent, but at the time, the SDI was around 760 and today, the average, in Q2 of the SFI is almost double more than double and the margins are lower. So, I guess my question is
How should we think about the cost evolution, particularly in the ocean? And
Yeah. Given where we are today, thank you.
Hi, Alexa. Uh, Vincent here. So, I think let me just start by saying that at least compared to the
the revenues that have been uh that have been published uh, here over the last couple of quarters by the few who do that. We see both our cost and our Abit being uh well ahead of what others are achieving in the current market.
Obviously, the fact that we have a large part of our network sailing around the Cape of Good Hope has added a lot of cost. It has done that for everybody, and it means that actually the relationship between what your break-even point...
And what, uh, and, and, uh, and therefore to equate a certain CFI level to a certain profit, uh, level that has.
that has basically split.
Already in part during COVID, where you saw a lot of inflation on costs, mostly around the time Charter markets and um,
And, uh, inflation in, uh, terminal cost, but certainly also following the disruption on the Red Sea. We saw, we saw simply, uh, further inflation in the cost base because of the, uh, the longer sailing distances that, uh, that we have, which means that our break-even point.
Uh, is of course, higher now than it was in 2019.
which is also what your study is, uh, is showing.
but in the current market,
Uh, I think came out recently and uh, CMA had some limited disclosure and so on, I mean, over overall, we achieve better volume, uh, and better margin performance than, uh, than what they are able to achieve at at this stage.
Okay, and can I just ask a follow up just on helping with modeling the, the third, the sorry, the the merge and detention revenues in Q2 for ocean, we're up really strongly up, 20% year-over-year. Is that going to continue and why? Thanks,
Yeah, so what you see with the demerge is two things. When you have uncertainty, you have more demerge.
There was plenty of that in the second quarter. There is still some of that in the third quarter.
Uh, and uh, and also when you see, uh, a deceleration of demand, that tends to be more the merge because customers are slower at picking up their containers. When the economy has strongly up, uh, then you see, um, you see actually less the merge because customers are eager to pull their containers and get the get the goods, moving through the through the supply chain. So what we had uh is is higher the merge Revenue because of a a lot was dictated by the uncertainty on T and some of that uncertainty is still there. It's hard to see what this is going to mean because since we don't know
How the China negotiations are going to play out which is really the big uh, the big chunk of it. Uh, it's hard to see yet. How what this will mean in the in the, for the rest of the year. But uh, but yeah, the continued uncertainty and uh, and sluggish demand into the US, it's like to produce a higher than average uh the merge revenues in for the rest of the year.
Okay, thank you. I appreciate the time.
Next question from Christina. Godson's EB. Please go ahead.
Thank you. Um, so I'll name myself to 1, question to start with. So, uh, question on Gemini. So maybe could you give some more flavor and you mentioned that that you would, uh, uh, give an indication on providing an update on the on the cost Savings of that that you are indicating that there could be above the 500 million. You have you mentioned and then also maybe to comment now that you have lived up to your uh your target of Plus 90, 90% reliability. Um could you comment on the potential for you to get a a premium on on on the freight rates? Um, when you'll have that discussion with clients, thank you.
Yeah. Thank you, Christian. I think, uh, so.
All indicators show that, as you mentioned, we have now had 5 months since the first service faced into Gemini, and when we look at the data for the Gemini part of the network, all 5 months have been above 90%. So, we're quite happy with the start.
My reliability is a real secret. Now is the time to prove to customers that it happens. What we can always deliver is that high reliability.
Which goes a bit to your questions. I think it's too early yet to talk about premium.
There are skeptics that there might have been in the market before about the ability to deliver the 90% is gone.
What is, and what is really important is, this is not only on schedule, but we can see it through data that also on cargo availability. And so we are... there is a wedge that is coming as a result of Gemini between what Gemini delivers and what the rest of the market delivers, which is really encouraging.
Now, we need to sustain this for a while and then we need to, uh, and then we need to move towards a more commercial discussion. I think it's premature at this stage. I don't think customers have experienced this long enough that they are ready to to entertain such a discussion. But but it is something that is going to to come, um, with respect to, uh, with respect to cost all indications that we have, in terms of how we're able to operate, uh, uh, in the second quarter, uh, indicates that that we will deliver in excess of of what we have promised. I would like to be able to come back to that with more detail at the next quarter's call because then we will have actually a full quarter of actual that we can.
Put in a in a topical slide in this investor call, showing showing basically what we achieved versus our Baseline, uh, for the, for the business case and and, uh, what that means. But, uh, I think the, the strong, the strong utilization that we have, uh, on the same Fleet means an increase in asset turns, uh, lower bunker consumption. So so the costs are coming. The cost savings are coming through exactly uh, in in the buckets that that we expected just a little bit more. So I would like to confirm this for the quarter and get back to you in in November with some uh some more evidence and and Quantified uh math behind it.
Okay, thank you. I look forward to that.
Question is from Alex Irving Bernstein. Please go ahead.
Mr. Irving, your line is open. You can ask your question.
On mute. Good morning, gentlemen. Thanks for taking the question. My questions are also on Gemini, specifically around the unit cost.
How has that been performing relative to your expectations? What cost savings have you realized? So far from Gemini, what cost savings remain ahead and when do you expect to realize those, please?
Hey Alex, I think, uh, let me...
I think take again what what we had at the at the previous, uh, question so so on the on the we we're seeing the unit cost come down as a result of uh Gemini a little bit in excess of of what we had put forward in the business place. So so that that is really good and it's coming down into uh into 2 2 buckets that are Drive 2, principal buckets that are driving down. The the unit cost 1 is the reliability on the schedule means lower fuel consumption.
And the second one is uh, uh, less uh, less sale distances. Uh, also means higher asset intensity, so we can basically move more cargo on, uh, on the same uh, on the same amount of tonnage, which lowers the unit cost as well through these efficiencies. So, uh, by next quarter, we will have a full quarter of data.
That is just on 1 system that we can then compared to the Baseline that we have for our investment uh, or for the, for the, for the project. And then we will we will present this in in somewhat more detail at the next quarter because the, uh, it's important to have the data that that that can show. So you can follow actually the waterfall on on on how the different buckets play. Like we have more train shipment. That was expected. We have less bunker that was expected. We have higher asset intensity, that was expected and how this Nets out to a lower unit cost.
All right. Thank you very much.
Question from Lars handles norda. Please go ahead.
This morning, thank you for taking my question as well. Uh, if I can stay on the ocean part of the business. Vincent, I hear you talking about the Gemini, and you can value a bit about it, and I understand this.
It will take a bit of time before we see the full proof, and I'm sure you'll give us a lot more data when we get to November and preview also beyond. But so far, if you look at this quarter here, next up by 16%, nominal capacity up by 7%, volumes up by 4%.
Try to tie those numbers together, which to me doesn't really appear to be super strong.
So, I think, I think the best we can do last is um, is really to come back to you. Uh, next quarter with, with the, uh, with the math behind, uh, how this is working. I I cannot quite recognize, uh, the fact that we're not making progress on, uh, on the unit cost in the quarter, uh, given given the volumes, uh, that we have delivered. And, and the fact that, uh, that the fleet is, is, is fairly stable. So, so I think that's what I would like to to do is from a, from a cost perspective. I think there's clearly been, uh,
um progress and uh and and 1 of the key, levers of that progress is Gemini and that's why I think it's important for us to come with a clean quarter where there is only Jim and I and then compare it with the Baseline where there is no Gemini so that you can see, actually, where this is happening and you can see the different buckets and I
I promise you, we'll, we'll get to you with with a slide that helps that helps kind of unpack. Uh, this and until the onion, uh, what, what we can see at least right now is from, from a cost perspective, we're making more progress than the competition. We're we're up against and and that is certainly something that is encouraging and that for us we assign already to the
To the early, uh, cost savings that we're getting out of, uh, out of Gemini.
Should we expect just to follow? Should we expect that the capacity? Growth will continue around these levels here, 7% in the second quarter. In the second quarter.
No, we don’t, uh, we don’t have, uh, any plan of, uh, capacity growth in terms of fleet growth.
Okay, all right. Thank you.
The next question from Ric Back from Danske Bank. Please go ahead.
Yes. Hello Vincent. Patrick, uh, just a question on, on your guidance. Could you please provide some some color on what you have assumed for the open and lower end of of the updated guidance? In terms of the container rate and and furthermore, you now expect Global volume growth of 2 to 4% for the full year and given that you delivered 2% for the first half of the guidance and price that you should grow ocean volumes by 2 to 6% in in the second half and 4% for the midpoint.
Just other companies who have already reported Q2 figures talk about.
An absent, ocean peak season and that, that has been very muted this year. And, uh, and we also have very strong comes from, from last year. So, um, at least in terms of the market. Uh, so, so 6% for the, for the upper end seems very, very ambitious. So, so, what are you basing? Those assumptions on to rate them, volume 6,
Yeah. So I think, uh, um, what what we, what we have put in the volume, uh, in the volume guidance when we have the 224% is, uh,
The lower end reflects? So, basically, both assume a fairly continued sluggish US market for the rest of the year.
And then the question is the strength of exports from China to the rest of the world. How long and hard is this going to continue it? It stayed through, uh, through the uh, the full year last year and continued well into this year and is actually the engine behind stronger demand growth. And there is a question here for me. Whether we are in a process of rebalancing of global trade, where USA basically goes a certain way with a, a tariff regime and China continues to to gain market, share. And if they do that on the back of the industrial successes that they're having, and they're over capacity that there is in China, this could actually carry stronger market growth than anticipated for, for a few years that that's 1 of the thing. I think that is
1 part of the story of what's happening right now. That is not necessarily super well understood if this continues a strong as as it is right now and at least uh we're a good chunk into the third quarter and it's it it shows no signs of abating. Uh then you you uh you would need basically the third quarter to continue in the vein of the the second quarter. And then the big question is whether the fourth quarter uh softens a lot or the
Form is the fact that, um, we mentioned before the increase in asset intensity that Gemini does. Gemini does not increase the size of the fleet, but it increases the amount of capacity that we can offer every week.
And that, that's the big part of the business case: the way we lower the unit cost is by being able to load more volumes on the same size of fleet.
And so that's uh, that that's why um uh for with the market that will grow between 2 and 4%, we fully expect that our own performance uh, will be uh, you know, within a few uh, decimals of what the market does up or down, depending on uh, on how things play out. And and we have obviously modeled this and this, this would not be possible actually without the capacity that Gemini is creating for us. So capacity, discipline or investment, discipline, helps us
Uh, through Gemini Wealth, through Gemini with that, and we get a bit more capacity at a very cheap price.
And the rate assumption, please.
Yeah, so the rate assumption reflects. Also the the volume view which is uh, I think uh uh we mentioned that the, the spot rate was 37% higher at the end of the second quarter than it was, at the end of the first quarter, which basically also means that it's it's it was quite High coming into the third quarter. So we have a fairly support.
Rate environment, and as long as demand holds somewhat, then you will see maybe a slow erosion, but you will still see fairly...
Fairly good, uh, fairly good rate levels for for the quarter. I think the big question for for me is, uh, Q4 if this holds, you know, we can still have a, a decent, uh, Q4, if you see certainly a sharp, deceleration following the normal Peak or, or a bit less a bit of weakness from China, to, to the rest of the world, then you could see, uh, more of an adjustment during the fourth quarter of of, uh, spot rates, especially and that leading into contracts, of course, is, is not necessarily great news, but, uh, but at least for now is is very much. It's very much ambiguous to see if, if we're going to continue strong, or if we're going to see a weakening in the fourth quarter,
Thank you so much.
From Jacob: Blacks was a research. Please go ahead.
Hey, thanks for your time.
So uh even with the returns here today, you're still at a net cash balance. Uh can you discuss what you think of what right leverages for the business with uh continued risk of an over Supply environment and with Logistics margins? Getting it back towards your 6% Target. Do you expect to work increasingly at m&a again?
Yeah, hi. So um, we do have quite a um, a good balance sheet. Have you seen? We have 19.9 billion cash. The, The Leverage is, is, is good. I think when you look at our cash generation, we are where we want it to be. We have a plan for start cash erosion. Uh, this year given the fact that we continue to invest the 5.5, uh, billion on average that we have guided for. So, from the cash generation, we had a bit of a negative effects affect, uh, in the, in the first uh half.
But overall, we are on track, which means that we do have the capability to leverage up, which we have said we will do. First, we will continue the share buybacks and the return to shareholders.
And then, uh, we will obviously have a better view on
The evolution in the ocean. Uh, and as we have always said, uh,
we do have a reserve of cash which is available to reinforce growth in Terminals and in logistics, whether that's uh V acquisition or on um, on the on the organic side. But for now we I think we are very, very disciplined and uh, we focus on generating cash. I think we have probably more potential to generate cash in the second half of the year than within the first half and we focus on that. So I think that is really where where the focus is, right now, it is not on on, on spending the cash but on on, on our end, the cash.
Not very satisfied with the speed of the progress. I think things are working and, and moving in the right direction. But from a pace perspective, I would I would wish for, uh, for for more pace. And I'm certainly spending a bit of time, trying to figure out how we can, how we can accelerate the pace of recovery and, and the pace of of profit in, uh, in that business. Once we feel, I I look at at this being about 6% as an important proxy for having a business that is humming, uh, and that is ready to integrate businesses on and real realize, significant cost synergies and, and cost savings.
So so that's why I think we're going to we're going to stay, uh, quite put until we're there. And then it doesn't mean that the the following quarter. Uh we just throw we just throw ourselves at it. It we need to we need to prove ourselves and then we need to find the right candidate eventually but uh but yes I think having a a more Diversified portfolio in logistics both from a geographical and a vertical perspective. And also from a product perspective makes uh still a lot of sense for us and given also, some of the challenges that our customers are headed into with a more fragmented world and a more, uh, a supply chain that is in need of serious retooling, and re-engineering for us to be able to follow them through that transformation, unlock more value and, and realize more business. It's, uh, it's quite important. And it means that for the, for the next decade, I'm actually quite optimistic for, for what the current direction of travel means because it will open a lot of opportunities for us. But we're going to need to
Uh, we're going to need to expand the footprint that, uh, we have.
Thanks for your time.
question from
UBS, please go ahead.
Hi, thank you very much. Um, can I please ask about the ocean rates for Asia to Europe? The current spot level seems to be around 50% higher than the average Q2 levels.
So could you elaborate a bit on your expectations on Asia Euro rates? The the next few months and and just to come back continuing on this just to come back to your comment earlier do you believe the Q3 Global rates will be higher than what you achieved in Q2? Is this what you're trying to to convey a bit earlier or any any color there? Thank you.
Hi, Christian. So yeah, as we just elaborated, right? If you a few questions, uh, go in in, in, in your speech, we actually have had and as you rightly mentioned higher exit rates into Q3 than we had during uh, uh, Q2. So from from that point of view, we are, we're in a level where we certainly see that Q3 is probably more supportive, both on the volume side, and on the right side, um, than than Q2, which speaks for a good evolution in Ocean in the quarter.
Um, and as Vincent was highlighting earlier on, I think it's probably more the Q4 that brings the viability. In the year, we'll have to see what is the evolution as far as we look. And this is why we also increased our guidance.
I think, uh, first year was solid July. Uh, August, as far as we can see, the notion is it's pretty solid, as well. As you mentioned, the rates are supportive.
um, and then therefore, the
The unknown element shifts into Q4 more than thank you 3. Any Q4, you can certainly see different scenarios playing out, which is the 1 that we try to capture in in, in our guidance. So, we are confident for the year as we also have written in the guidance. And uh, we'll see the exact number will depend on mainly on Ocean, because terminals is on a good run and, and Logistics while being slow at Improvement is improving. Uh, uh. So we'll try to to force that pace. But, overall, those businesses are, you know, steady and gaining ground and the viability will be Q4 in Ocean and will, that will will come back when we have more views. But for now, it looks, uh, uh, pretty good environment.
Thank you very much.
The next question from Sedar. Eggl Morgan Stanley. Please go ahead.
Thanks very much. Just one question on Gemini. Can you talk about the flexibility of the Gemini Network relative to your previous network, to the extent? We get much lower rates as we move into 2026 because of the supply-demand outlook.
Are you able to remove capacity as quickly from the Gemini Network, and how should we think about that in the context of costs? Can costs come out as quickly, or do you need to make a certain level of sort of underlying capacity to keep that 90% utilization rate? Thank you.
Yeah, so I think this is, for me, it's very, very clear that with Gemini we can adjust capacity.
faster.
Uh, Network, we can add it back, also. If the market demands, it faster and in a more agile, way than we could before, which means we can maintain a capacity offered every week, much more in line, um, with with the actual demand that there is then we were able to before and we can do that with less disruption to customer. And that, that's pretty if you think about it, if you have a rotation with 14 different ports and you cancel that rotation, you have to find 14 different solutions. If you if you if you have your shuttles bringing things to to a few hubs you can actually you can actually adjust those uh in in a very easy Manner and and you don't need to disrupt all of your network. So you our customers will fill it a lot less. And we have had actually a test with this uh, during Q2 with the, the just as we were into uh getting into, uh, Gemini. We had suddenly a drop between on the Pacific of of over 35% for for some weeks.
And we were able, I think the good volume performance that you see here is in no small part because we were able to.
Uh, whether the volatility in demand between China and the US, where if you look at the weekly numbers, you would not know which week there were tariffs and which week there were no tariffs because we could swing the capacity completely at will. And without disruptions. And actually, we've also got a lot of feedback from customers saying that the way we are able to do it with Gemini is a significant advantage for them because.
Of the less disruption that it costs for the stuff that does need to move.
That's helpful. Thank
Please go ahead.
Hi, good morning. Thanks for taking my question. Uh, my question is on, um, your thoughts around.
Global trade overall and China gaining market share over global trade. So, starting from the Q2 volumes, I mean Q2 volumes were very strong despite us, which is 15% of your volume being, I guess.
Losing single digits down, um, you tell me, but that implies that all the other trade lanes were even stronger than 4% or 5%. So, uh, I'm just curious about any further comment around what's happening there. Is China gaining more market share? So we are actually seeing more globalization rather than de-globalization. And if yes, is China basically gaining market share on domestic production?
Or, uh, actually, you think we are seeing a bit of front-loading on, um, some other trade lines, for example, in Europe. Uh, so how can you actually explain higher volumes to China versus other destinations? Thank you.
Yeah, Marco. I think, uh, the way I see this is with the accession of China to the WTO in the early 2000s. We've seen a big movement of offshoring of production that has driven, uh, demand growth for container trades.
For uh a decade uh or more well above GDP growth, then we've seen a period after the financial crisis uh up until I would say 20212 where uh the demand was mostly in line with consumption because what could be offshore was being offshored? Uh, now we're seeing a different phase and we certainly see an acceleration since 23 of this phase, which is
China is gaining market share on the world stage, not by producing stuff for Western companies, but by having their own companies going global.
And the example of the EVs and the solar panels and the wind turbines. And uh,
Chemical, uh, chemical products, and you know, across all verticals that the examples are well known, and we're seeing more and more Chinese brands across, uh, mobile phones and computers and technology, and so on. More and more are coming through. And this is what is happening right now. And I actually think that the fabric.
Of global trade is changing and and despite the all the talks are diff globalization. If you just look at the numbers, what we are seeing in the last 2 and a half years is an acceleration of globalization, on the back of a huge Commercial Success. From Chinese companies are taking market share on the global stage.
And then the question is, is it something that is going to last another quarter?
Or another 5 years.
Because the market is big enough that they could go for five years, but some countries could also decide that it threatens the industrial base too much and they want to do something about it. And you could see a rise of protectionism as a result, I don't know.
But what I know is that as long...
There is a new driver in container demand, that is.
Adding a lot of upside potential to what we're doing, which is moving those goods.
Uh, and uh, this is not something that I think is well factored into the models going forward in terms of scenarios.
Be clear. Thank you.
The next question comes from Peter Hogan with AVG Sandal. Please go ahead.
Good morning, guys. Uh, quick question on capital distribution going forward. So, we know that the shareholders will be happy with communication for the next six months. But, um, also then in light of the earlier comments made on this conference call about the leveraging, how should we now think about share buybacks going into 2026?
Thank you.
Yeah, thanks for your question. So, really, as we were saying before, right, our focus here is to have a very good operational performance and cash generation.
And return cash to shareholders, right? So when we reinstalled the...
Share back back in in in February uh uh for for the 2 billion of of this year. We also uh say that it's not a, a 1-time element but it's certainly a view that we have that we do have the financial strength. We have the cash capability to both invest in growth.
Uh, because we have, we believe the right strategy, and you see it coming in, in, in, in the results of of the, of the non ocean, uh, uh, Parts. Particularly this quarter for instance. But we also have a commitment to return cash to shareholders, and our balance sheet, can support both and therefore our committed to, to return cash to shareholders. This is a multi-year commitment, uh, which we have taken and we, obviously, renew it every year, depending on circumstances. And, and, and, and so on, but it is certainly a part of our planning.
Thank you so much.
The next question comes from Parish Jane at HSBC. Please go ahead.
Thank you. And my question is is on uh what we have seen uh in the summer with respect to congestion uh in European ports or on or in your portfolio. And how do you see that shipping up in the second half and more importantly in your Gemini cost Network in the in the first few months do you see the phase in phase out from from m?
To see your different services was one of the drivers behind your, uh, increase in the unit cost. And if that's the case, do we see a normalization of cost based on the second half? And how are you seeing the increased?
Uh, vessels that probably you'll have to Charter to fulfill. Your freedom Network are, are these contracts on longer term are these uh, basically your DNA run rate, current DNA run rate, shall we expect that to continue in the foreseeable future? Thank you. Let me try to give you some color on uh, on those questions are. Um, so on the port,
So, there is in general.
I think today, given the growth that there has been.
uh,
There is a general undercapacity in terms of ports in Europe.
Uh, we're starting to feel more and more points of congestion that are impeding the networks.
This is the result of basically capacity, terminal capacity, being added over the last 15 to 20 years at a slower pace than the market has been growing. And then at some point, you know,
Something, uh, something is bound to, to happen. Uh, and, and I think it's starting to happen now and I think congestions in, uh, in Europe, which is something that is likely to be with us, for, for a while, in some shape or form. So for a few years, there is, uh, projects. We are in the process of, uh, significantly expanding our capacity in Rotterdam. We are about to open. Uh uh
Terminal down in, uh, in Croatia. Uh, so, so, so there's definite some definite points where we, where we're looking at the expanding and others are doing, uh, other players are doing something, uh, something similar.
Uh, but but it will take time for all of that to come online and and so, I think for the next few years, we are likely to see, uh, markets that has have periodical flares of uh, congestions across uh across Europe.
It, it is something that uh we had also to trigger, we had to announce recently that 1 of the services we intended to transship into Scandinavia. Uh, we will have to reinstate as a direct to just make sure that we keep our operation fluid. Uh, something we announced a couple of weeks ago and that, that, that uh, that will get us in in a good position, but that will stay with us. I think, for a while, it's good news for for terminals, obviously for terminal, operators across Europe. Because it means that capacity comes at a premium. And and, uh, and some of the inflationary pressures they are, uh, submitted to under, from from labor. They're able to pass on to to the lines.
And we will be able to pass them on to the line for the coming years. So, uh,
Not a bad news for for terminal operators, and an opportunity for them to to, uh, to invest and and to, to grow profitably. Uh, something that needs to be closely managed. And certainly, if you don't have a terminal arm, uh, with strong presence in Europe, that could be something that uh, causes a bit of a bit of worry. With respect to Gemini, I must say, I don't have a very strong data that can quantify
The phase in phase out period, is there like, is there any cost or how much cost would there be? It's likely that there is a little something in the in the quarter number uh of having the 2 networks, uh, changing that. That but I I don't have a good way because it's a bit separating call and cold and hot water.
For uh, and, and, and trying to quantify this would not be very scientific. What I can tell you is the reason why we feel already...
Pretty confident, talking about. Um, the fact that the cost savings that we want to see out of Gemini, we're, we're seeing them, um, and even maybe a bit more is because we can see that normalization that you talked about, and that when the data when, when the network is fully save sailing on, uh,
on Gemini then we are uh, we are saying the, the lower unit cost that uh that that we were targeting and then on feeders, we we don't need to uh to take a lot of actions to um,
To Charter ships or make long-term contracts, we have Partnerships with feder operators, uh, those are fairly short in in nature. Uh, you have like a backbone that is more or less long term that you're sure you're going to need and then uh some Flex around this. So I think this adds further to our flexibility, both in Asia and in Europe to cope with swings in demand. Should any of those uh occur.
Perfect.
Thank you so much, and have a good day.
Good. I think. Uh, thank you again for joining us today. To summarize, we have just navigated through a quarter in which the macro and operating environment have been historically uncertain.
Nevertheless, as demonstrated, we are well prepared to manage these ongoing challenges and to carry on with our priorities for 2025.
We pulled off a very successful transition into the new Gemini Network in ocean with reliability targets, already met and sustained since the first month of operation likewise cost benefits are on track. Uh, and on which we will have a lot more to say in the next quarter. And I could gather there is a lot of interest from your side also in uh, in seeing what this looks like.
In terminals, we saw record high, volumes supported by Gemini, which is another Synergy from from it, which confirms, uh, that the ocean business and the terminal business, uh, can create a lot of value. When operating when operated close together,
Meanwhile, we achieved margin improvements in logistics and services, confirming the strength of our business portfolio and the relevance that it will have in the current environment. For our customers, both in the short and long run, the strong performance we saw in the first half, together with a more resilient market demand, allows us to increase our financial guidance despite uncertainty in the external environment.
We remain steadfast in delivering solid results in the coming quarters.
We look forward to seeing many of you at our upcoming roadshows and investor conferences. Thank you for your attention, and see you soon. Bye-bye.