CMA CGM- 2015 3rd quarter results

CMA CGM announced their 3rd quarter 2015 results.  The operating profit for 3rd quarter 2015 is
less than the 3rd quarter of 2014.   Here are some details from their web-site.

MD&A 30th of September 2015 versus 30th of September 2014 

 Operating revenue General:

Consolidated operating revenue decreased by USD 408.5 million, or 3.3% from USD 12,509.1 million in the first 9 months of 2014 to USD 12,100.6 million in the first 9 months of 2015 primarily due to a 3.9% decrease in shipping revenue and a 5.3% increase in other activities. Transported volumes increased by 6.5% or 593 thousand TEU, from 9,110 thousand TEU in the first 9 months of 2014 to 9,703 thousand TEU in the first 9 months of 2015. 

click here for link to complete summary

And, from the finance report

OPERATING PROFIT BEFORE GAINS ON DISPOSAL OF PROPERTY AND EQUIPMENT AND SUBSIDIARIES, DEPRECIATION & AMORTIZATION, etc.

            For the nine-month period ended                            For the three-month period ended
                 2015                          2014                             2015                       2014

                1,137.8                      876.4                             243.7                      325.1

As you can see, the first 9 months the profit increased, but for the 3rd quarter is decreased compared\
to 2014.  This does not bode well for end year 2015 results.

click here for link to finance report

CMA CGM - did they really increase profit?

The initial headlines hitting the press today are claiming  (as reports the JOC)  " CMA CGM's Net Profit Soars on sale of Port Unit Stake".   But is this true?

The Loadstar takes a much closer look at the reports, and concludes this

However, excluding the asset sale, CMA CGM’s underlying profit tanked by 26.9% against the previous year, to an earnings before interest and tax [EBIT] result of $756m.

click here for link to complete article which is worthwhile

CMA CGM posts Third Quarter Financial Results

It looks good on paper.  Note the comment " persistently volatile environment".  
Which is true for all companies in international shipping.  Rough waters ahead.

2013 third quarter financial results

Friday, November 22, 2013

Improvement in operating margin to 6.6%; Record high volumes carried; An effective operating model in a persistently volatile environment

The Board of Directors of CMA CGM Group, the world’s third largest container shipping group, met under the chairmanship of Jacques R. Saadé, Chairman and Chief Executive Officer, to review the financial statements for the third quarter 2013.

During the period, consolidated revenue amounted to $4.1 billion, up 1.4% over the second quarter and down 2.1% year-on-year. Volumes carried rose by 11.0% year-on-year to 3.0 million twenty-foot equivalent units (TEUs), a new historical record for the Group. The average revenue per TEU declined by 11.8% year on year, when Asia-Northern Europe market rates, as measured by the SCFI, contracted by more than 45% over the quarter.

This performance in terms of volumes and price resistance illustrates CMA CGM’s resilience in a market that remains extremely volatile. The Group is evidencing the benefits derived from its size and global presence, which are enabling it to diversify its activities by geography, customer category and service solution, particularly in its onshore operations.

During the third quarter, CMA CGM reported:

- $238 million in consolidated EBIT, versus $541 million in the third-quarter 2012. Excluding non-recurring items, core EBIT stood at $271 million for the period.

- A 6.6% EBIT margin before non-recurring items, one of the highest in the industry.

- $70 million in consolidated net profit for the period, bringing the total to $434 million for the first nine months of the year.

Business in the third quarter contributed to maintaining consolidated cash and cash equivalents at nearly $1.1 billion. Net debt amounted to $3.7 billion as of 30 September, for a gearing ratio of 0.77.

Significant events during the quarter

As part of their future P3 operational alliance, CMA CGM, Maersk Line and MSC Mediterranean Shipping Company SA finalized their operating agreements on the Asia-Europe, Transatlantic and Transpacific trades. As announced, subject to the approval by the various regulatory authorities, these services will be deployed in second-quarter 2014.

CMA CGM has signed a strategic contract with SAP to implement a new information system dedicated to container shipping that will be deployed starting late 2015. This investment will enable the Group to improve its operating performance.

Outlook for 2013

To further strengthen the Group’s liquidity position, an additional $200 million securitization programme was set up in October 2013.

Lastly, Moody’s has upgraded the Group’s rating to B2 with a stable outlook.

Given the usual year-end seasonal variations and currently prevailing freight rates, performance in the final three months of the year will likely see a decline compared with the third quarter 2013.

Financial Highlights

	Q3 2012	Q3 2013	2012 year to date	2013 year to date	Change (%)
Revenue in $ billions	4.2	4.1	11.9	12.0	+0.3%
EBIT in $ billions	+541	+238	+828	+852	+2.9%
Adjusted EBIT* in $ billions	+541	+271	+822	+638	-22.4%
Consolidated net profit in $ millions	+363	+70	+284	+434	+52.6%
Return on invested capital***	8.3%	10.9%	8.3%	10.9%	N/A
Volumes carried in TEU millions**	2.7	3.0	8.0	8.5	+7.0%
Fleet (number of vessels	412	430	412	430	+4,4%
Fleet capacity in TEU thousands*	1,425	1,559	1,425	1,559	+9.4%

* Excluding non-recurring items (asset disposals and impairment losses)

** TEU = twenty-foot equivalent units

*** Calculated over a rolling 12-month period
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CMA CGM announces surcharges, and makes a profit

I guess since they can't get the rate increases to stick, CMA CGM has now resorted to imposing
"surcharges" to get additional revenue. 

From The Journal of Commerce

French ocean carrier CMA CGM plans to implement "rate restoration surcharges" from Asia to Europe and Africa in the run-up to the Chinese New Year in January.
Effective Dec. 15, the carrier will impose a surcharge of $575 per 20-foot-equivalent unit from all Asian ports, including those in Japan, Southeast Asia and Bangladesh to the west Mediterranean, Adriatic, east Mediterranean, Black Sea and North Africa. It plans another $350-per-TEU surcharge on the same routes on Jan. 10.
The carrier also will impose a "Panama Canal surcharge" of 150 euros per TEU on its Panama Direct service linking Europe and the South Pacific Islands, effective Jan. 14.

And...from Reuters

* French container shipping group posts Q3 profit
* Still profitable in Q4 despite easing freight rates
* Expects bank deal in January on new debt terms
PARIS, Nov 20 (Reuters) - CMA CGM, the world's third-largest container shipping group, said on Tuesday it was on course for a full-year profit and expected to finalise a debt restructuring deal with banks in January.
The French family-owned firm has been through a turbulent three years in a freight sector under pressure from a weak global economy and oversupply of ships.
Volatility in freight has also led A.P. Moller-Maersk , owner of the world's largest container shipping firm, to cut its exposure to this business.
CMA CGM, based in the Mediterranean port city of Marseilles, said it was profitable in the fourth quarter after reporting a cumulative net profit of $310 million in the first nine months of the year.
The market was less favourable in the current quarter, however, with freight rates declining in a sign of renewed pressure from overcapacity, Michel Sirat, CMA CGM's finance director, told journalists.
"The fourth quarter won't be as good as the third quarter. It will be positive (in profits) but not as good," he said.
The company has been in talks with its banks over the past year to change its debt terms to take account of earnings volatility.


CMA CGM now expects to sign a deal in January after agreeing an outline for a debt restructuring with its main banks, Sirat said.
The deal would replace some debt covenants linked to core earnings to ones based on its balance sheet, while also rescheduling some repayments, he added.
Sirat said CMA CGM's financial position would be reinforced by an agreement last month under which France's strategic investment fund FSI is to invest $150 million, and Turkish shareholder Yildirim is to invest a further $100 million.
The group is also pursuing asset sales and plans to sell a 49 percent stake in Terminal Link, its container-terminal operator, Sirat said.
The group's previously announced cost-reduction programme had generated $550 million in savings by the end of the third quarter, ahead of a target of $400 million for the full year, the company added.
CMA CGM reported a net profit of $371 million and core earnings of $617 million in the third quarter, it said in a statement. (Reporting by Matthieu Protard and Gus Trompiz. Editing by Jane Merriman)

In my opinion things will continue to be difficult over the next few years, so there should not be too
much cheering over at CMA CGM.

CMA CGM receives some financial support

CMA CGM and FSI made announcements today regarding FSI's investment in CMA CGM.
As far as I call tell FSI is private investment, not from the government, but I am not postitive.
Here are the press releases.

16 Oct 2012
CMA CGM signs of a Memorandum of Agreement with the French Fonds Stratégique d’Investissement (FSI)

October 16th, 2012 – CMA CGM, the world’s third largest container shipping Group, and the Fonds Stratégique d’Investissement (FSI), have announced today that they entered into a Memorandum of Agreement supporting CMA CGM’s future development. The FSI will subscribe to bonds redeemable in shares for an amount of US$150 million giving right to a 6% stake in CMA CGM upon conversion. At the same time, under the terms of the existing agreement, the Yildirim Group will subscribe to bonds redeemable in shares for an amount of US$100 million giving right to a 4% stake in CMA CGM upon conversion. Jacques R. Saadé, CMA CGM’s Chairman and Chief Executive Officer, said: “We are very pleased to have reached an agreement with the FSI and of the Yildirim Group's renewed support. This agreement is an important milestone for our Group and demonstrates FSI and Yildirim’s level of confidence in its future. It coincides with our Group’s return to profitability in the second quarter and the expectation of an even better operating performance in the third quarter, leading to a profit for the full year.” Rodolphe Saadé, CMA CGM’s Executive Officer, said: “This agreement will help to strengthen the Group’s balance sheet and allow us to accelerate the implementation of CMA CGM’s strategy to prepare for an IPO in the coming years. I am delighted that the FSI will invest in our Group and support its on-going development.”

The ISP is ready to strengthen the equity of CMA-CGM October 16, 2012 Release Date: October 16, 2012 FSI announces the signing of an agreement with the majority shareholder of CMA CGM under which it plans to support the group in its development and in its willingness to go public in the medium term. This agreement, which should be confirmed in the coming weeks, is an important step of the process involves an investment of $ 150m in the form of the ISP ORAs simultaneously to obtain an agreement with its bank group on a financial restructuring. CMA-CGM, based in Marseille, is one of the three world leaders in container shipping. The group has experienced tremendous growth since its inception in 1996, allowing it to become a leading player in its market and to be present on all major routes. The Group employs 18,000 people including 4,300 in France and is known for its operational efficiency. The cyclical nature of the shipping business leads CMA-CGM renforcerson to adapt and balance in order to consolidate in the coming years its leading position in this market.

CMA CGM downgraded by S & P

Update - see post CMA CGM- 2015 3rd quarter results

The Journal of Commerce reports

S&P Downgrades CMA CGM Credit Ratings

Peter T. Leach, Senior Editor | Jun 14, 2012 12:50PM GMT

The Journal of Commerce Online - News Story 

|

Issues ratings remain on CreditWatch

Standard & Poor’s Ratings Services on Thursday lowered its long-term corporate credit rating on CMA CGM’s debt to “CCC plus” from “B minus”, saying its liquidity position deteriorated in the first quarter of 2012.
“We expect that it will remain under strain over the coming months in the absence of corrective actions,” S&P said in its announcement.
The French carrier posted a first-quarter loss of $248 million earlier in June but said it expects to make a full-year profit.
S&P also lowered its issue ratings on CMA CGM’s debt to “CCC minus” from “CCC”. The ratings remain on CreditWatch with negative implications, “reflecting the possibility of another downgrade within the next three months.”
“The recovery rating on the debt is ‘6’, indicating our expectation of negligible (0 percent to 10 percent) recovery in the event of a payment default,” S&P said.

CMA CGM has stated they expect to make a full year profit, but in my opinion, this is wishful
thinking.

Press Release - MSC and CMA CGM agreement

Here's the press release which is on the MSC web-site (click here for link)

December 1st, 2011

MSC and CMA CGM sign major partnership agreement


The world’s second and third-largest container shipping companies have announced
the signature of a major agreement. The two family-owned companies, the Swiss-
Italian MSC and France’s CMA CGM, today agreed to form a broad-based operating
partnership spanning several trades, including Asia-Northern Europe, Asia-Southern
Africa and all of the South American markets.

The agreement, which is designed to improve the two partners’ respective
performance, will help to drive extensive operating synergies and enhance quality of
service for all of their customers.

On a certain number of trades, the partnership will also enable the Groups to deploy
the best ships in each of their fleets, while increasing the number of ports of call and frequency of sailings.

Diego Aponte, Vice President of MSC, said: “we are very happy to have signed this
broad-based partnership, which will unite our two family-owned companies in the
years ahead. The agreement offers us new opportunities to optimise the use of our
respective fleets, improve our transit times and increase our performance.”

Rodolphe Saadé, Executive Officer of CMA CGM Group, said: “for more than 30
years, our two companies have followed the same trajectory and for a number of
years we’ve cooperated on a few lines. Based on this experience and our shared
vision of the shipping industry, we have decided to step up our partnerships, which
reflect a commitment to long-term cooperation and will enable us to offer customers
improved solutions and services.”

CMA CGM - will they survive?

I was kinda busy earlier this year with "life", so wasn't paying much
attention to the shipping world for some time.

However, recently noticed lots of readers looking for information on CMA CGM.

I found this article from Sept. 2011 in Bloomberg, which was quite disturbing, especially if you are a CMA CGM shareholder or creditor.

Zero Freight Rates Fueling CMA CGM Default Risk to 90%

By Patricia Kuo and David Goodman - Sep 5, 2011 6:12 AM CT

Bonds and derivatives tied to CMA CGM SA, the third-largest container line, are signaling that the company has a nine in 10 chance of defaulting as the slowing global recovery pushes freight rates to about zero.

Penalized by the U.S. last month for breaching trade sanctions with Iran, Cuba and Sudan, CMA CGM has seen the price of its $475 million of 8.5 percent notes due 2017 plunge to 47.25 cents on the dollar since they were sold April 14, Bloomberg Bond Trader prices show. Credit-default swap prices signal a 90 percent probability of the Marseille-based company being unable to meet its obligations within five years.

Freight charges collapsed on the Asia-to-Europe lines, the world’s second-busiest route, as a capacity glut combines with the slowest growth in trade since 2009. Rates excluding fuel surcharges were “practically” zero in July and little changed last month, the worst run ever, according to Menno Sanderse, an analyst at Morgan Stanley in London.

“Shipping and logistics is a pretty beat-up sector,” said Louis Gargour, who owns the bonds as the chief investment officer at LNG Capital LLP, a London-based hedge fund he co- founded in 2006. “The good side is everybody I know is very interested in this company at 50 cents on the dollar, although it’s a gamble.”

CMA CGM was founded by Jacques Saade in 1978 after he fled to France from Lebanon’s civil war. It employs more than 17,200 people and runs a fleet of 394 vessels, according to its website. The company grew from five employees and a rented boat into a global operator, ranking behind Copenhagen-based A.P. Moeller-Maersk A/S and Mediterranean Shipping Co. SA in Geneva.
Debt, Earnings

The company posted an 8 percent increase in first-half sales to $7.3 billion and had $675 million of cash at the end of July, according to a statement on its website. CMA CGM said it had $5.3 billion of net debt at the end of June and recorded $685 million of earnings before interest, tax, depreciation and amortization in the first half of the year.

That means debt is more than three times Ebitda, compared with a ratio of about less than one time at Maersk, according to that company’s earnings report on Aug. 17.

CMA CGM also issued 325 million euros ($459 million) of 8.875 percent bonds maturing in 2019 in April, which were quoted at 49 percent of face value, Bloomberg Bond Trader prices show.

Default swaps on the company’s debt cost 4.8 million euros upfront and 500,000 euros annually to insure 10 million euros of debt for five years, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. The contracts have risen from 800,000 euros upfront on June 6.
Bonds ‘Whipsawed’

“We are surprised to see the value of the debt drop so much,” said Michel Sirat, the container line’s chief financial officer based in Marseille. “Our bonds are whipsawed because of prevalent fears in financial markets and questions about our liquidity, but we have a strong cash position and are fully compliant with our debt covenants.”

The drop in its bonds prompted the company to issue a statement on Aug. 3, saying it’s taking the “poor performance very seriously,” and that it doesn’t plan major new investments this year and next.

CMA CGM is rated B+ by Standard & Poor’s, which said in a May report that the company’s rankings are constrained by its “high operating risk in the cyclical, capital-intensive, and competitive container-shipping industry.”
Covenants Breached

The container line has about $4 billion of loans, according to data compiled by Bloomberg. Covenants on most of its borrowings were breached in 2009 after a slump in world trade amid the deepest financial crisis since the 1930s.

CMA CGM received $500 million from Turkish family-owned company Yildirim in November in return for a 20 percent stake as it sought to restructure about $5 billion of debt. In May, Yildirim agreed to buy 50 percent of Malta Freeport Terminals from CMA CGM for 200 million euros.

Analysts are increasingly bearish on what slowing trade growth means for shipping company earnings. Maersk, the world’s biggest container-shipping line, will report a 25 percent slump in net income to 19.71 billion kroner ($3.8 billion) this year, the mean of 16 estimates compiled by Bloomberg shows.

The industry may lose $2.5 billion to $3 billion this year, said Philip Damas, director of liner shipping and supply chains at Drewry Shipping Consultants Ltd. in London. Owners and operators lost $20 billion in 2009, when the global container trade contracted for the first time ever, he said.
‘Risk of Default’

“A lot of companies run the risk of default if freight rates remain at such a low level,” said Jacob Pedersen, an analyst at Sydbank A/S, Denmark’s third-largest publicly traded lender. “Companies have been taken by surprise this quarter because just a few months ago they were all sure there would be a lack of capacity and that would be positive for freight rates.”

Risk aversion has wiped out $5 trillion of global equity market value since July and brought high-yield bond sales to a halt. A Labor Department report on Sept. 2 showed the world’s largest economy added no jobs last month while a contraction in European manufacturing and plunging business and consumer confidence suggest the slowdown in growth may continue into the third quarter, members of the so-called shadow European Central Bank council said last week.
Sanctions Violated

Confidence in CMA CGM was also dented after the company’s U.S. unit paid a $374,400 settlement to the Department of Treasury’s Office of Foreign Assets Control last month following allegations it violated sanctions in exporting goods to Sudan and accepted payments for shipping services in connection with Cuba and Iran.

The alleged violations of sanction programs took place between December 2004 and April 2008 and there was no finding of fault, according to a company statement.

CMA CGM’S MV Victoria container ship was seized by the Israeli Navy after the shipper of three containers falsely described cargo contents as lentils when in fact they contained weapons, the company said on June 1. An Iranian company used one of its vessels to illegally transport arms to Lagos after labeling them as “packages of glass wool and pallets of stone,” the company said in October.

CMA CGM isn’t alone in dealing with maritime disputes. China Cosco Holdings Co., the state-controlled sea-cargo group, had at least three vessels arrested in the past two months as shipowners sought overdue payments, according to court filings in the U.S. and Singapore.

CMA CGM is counting on routes to emerging markets such as Latin America and Russia to drive growth as Europe stands on the brink of another recession. The company held a conference call with more than 150 bond investors on Aug. 31 to allay their concern about the company’s financial position, Sirat said.

“We see strong trades in Latin America, Russia, the Black Sea region and India, bringing in new avenues for growth besides the traditional routes of Asia to Europe and Asia to the U.S.,” Sirat said. “I hope our bond prices will recover after we explained our position to bondholders, because we intend to continue to access the bond market.”

CMA CGM may get new stockholder

CMA CGM has been looking for an investor for quite some time.

In the beginning they were looking for loans, but as time goes on, appears they may have decided it's necessary to sell some of the company to get some badly needed money.

From The Journal of Commerce

Turkish family owned company may buy 20 percent stake for $500 million

French ocean container carrier CMA CGM is close to agreeing to the sale of a 20 percent stake to Turkish family owned company Yildirim for $500 million, according to French media reports.

An agreement could be signed by the end of this week and CMA CGM would receive payment at the end of November, French financial daily Les Echos reported.

Reports of an imminent deal follow the collapse of negotiations with several potential bidders over the past six months, including Colony Capital, a U.S. investment group, Belgian billionaire Albert Frere and Qatar Holding.

The French government's strategic investment fund, FSI, is expected to invest in CMA CGM after the carrier reaches agreement with Yildirim.

CMA CGM declined to comment on the reports.

CMA CGM gets tough with bondholders

From Bloomberg

Dec. 18 (Bloomberg) -- CMA CGM SA, the world’s third- biggest container shipping company, told bondholders it faces bankruptcy unless they approve a plan to raise more debt.

CMA CGM is asking holders of $570 million of senior bonds to change the terms of the notes to allow prospective lenders to have first claim on the company’s assets in the event of a default, said Paris-based spokeswoman Anne-France Malrieu. Otherwise CMA CGM may be “forced to commence bankruptcy proceedings” and the investors may lose their money, the company said in a Dec. 16 notice to bondholders.

Marseille-based CMA CGM is seeking changes to the terms of its bonds in dollars and euros due 2012 and 2013 as part of an effort to restructure $5.6 billion of debt and raise new money, according to the notice, which Malrieu confirmed is authentic. The company is in breach of conditions on most of its debt after suffering from a slump in world trade amid the deepest financial crisis since the 1930s.

CMA CGM needs a majority of the bondholders to agree to the proposed changes in the terms of the notes by Dec. 22, according to the notice. Otherwise it said it “may be forced to file for bankruptcy proceedings in the near term, in which case there would be no assurance that CMA CGM would be able to repay” the senior notes.

click here for complete article

CMA CGM gets credit line

The bankers for CMA CGM have extended a credit line so operations will not be disrupted, as talks with creditors continue.

Apparently, part of the deal was for the founder and CEO Jacques Saadé, to step down, which he has now done, following two missed deadlines for refinancing agreements.

The French Government said they would assist CMA CGM if necessary, but only if they came to terms with their creditors for refinancing.

The creditors had said part of the requirement for refinancing was for Mr. Saadé to step down. He had resisted doing so, which is certainly understandable as he founded the company.

This paves the way for new investors, which are believed to be

Louis Dreyfus Armateurs, a French bulk ship owner, French private equity group Butler Capital Partners, and Los Angeles-based Apollo Management, the owner of CEVA Logistics of the Netherlands.

click here for article from JOC

CMA CGM still in talks on debt

CMA CGM has missed, for the second time, their targeted date for refinancing debt.

From Lloyd's List

No debt deal for CMA CGM yet

Andrew Spurrier and Janet Porter - Tuesday 15 December 2009

FRENCH container shipping group CMA CGM has again overshot its target date for completing talks with its banks on a restructuring of its $5.6bn debt.
The group, which had originally signalled a mid-November date, told its employees last month that it needed to get agreement on certain key measures by December 15.
Today, however, the group admitted ...

The rest of the article is available only to subscribers.

Back on Dec. 2nd I said I didn't expect them to meet the deadline (I had calculated mid-Dec to be latest Dec.18)

Now that we are into the Holiday season, it will be more difficult for them to achieve the restructuring. I guess it will have to wait until after Jan 1. I hope they have enough cash to get them through until then.

Global Ship Lease regulatory filing Dec. 9, 2009

Here's the regulatory filing referred to in the Fairplay article.

GLOBAL SHIP LEASE, INC. filed this 20-F/A on 12/09/2009

This is the part about conflict of interest.

CMA CGM is Global Ship Lease’s initial sole Charterer and its wholly owned subsidiary, CMA Ships, is Global Ship Lease’s initial Ship Manager. CMA CGM’s ability to continue to pay charterhire and CMA Ships’ ability to render ship management services will depend in part on their own financial strength. CMA CGM has guaranteed the performance of CMA Ships under the ship management agreements. As described above, the container shipping sector is suffering a severe cyclical downturn and has been incurring substantial losses. Furthermore, many containership operators, including CMA CGM, have commitments to purchase newbuildings for delivery over the next three to four years which may not be fully funded with committed financing.

Circumstances beyond their control could impair CMA CGM’s and CMA Ships’ financial strength, and because they are privately held companies, information about their financial strength is not publicly available. As a result, Global Ship Lease and an investor in its securities might have little advance warning of financial or other problems affecting CMA CGM or their wholly owned subsidiaries even though their financial or other problems could have a material adverse effect on Global Ship Lease.

CMA CGM and Global Ship Lease’s Ship Manager have conflicts of interest with Global Ship Lease and limited contractual duties, which may make them favor their own interests to Global Ship Lease’s detriment.

Conflicts of interest may arise between Global Ship Lease, on the one hand, and CMA CGM, Global Ship Lease’s initial Charterer, and CMA Ships, its Ship Manager, on the other hand. As a result of these conflicts, Global Ship Lease’s Ship Manager may favor its own or its parent company’s interests over Global Ship Lease’s interests. These conflicts may have unfavorable consequences for Global Ship Lease. For example, Global Ship Lease’s Ship Manager could be encouraged to incur unnecessary costs, for which it would seek reimbursement from Global Ship Lease. Although Global Ship Lease’s ship management agreements expressly prohibit its Ship Manager from giving preferential treatment when performing any of its ship management services to any other vessel that is affiliated with it, or otherwise controlled by CMA CGM, conflicts of interest may arise between Global Ship Lease, and its Ship Manager and its initial Charterer.

Global Ship Lease’s financial reporting is dependent on CMA CGM.

Under the ship management agreement with CMA Ships, the Ship Manager is obligated to provide Global Ship Lease with requisite financial information on a timely basis so that Global Ship Lease can meet its own reporting obligations under U.S. securities laws. CMA Ships and its parent company CMA CGM are privately held French corporations with financial reporting schedules different from Global Ship Lease. If CMA Ships or any of its affiliates is delayed in providing Global Ship Lease with key financial information, Global Ship Lease could fail to meet its financial reporting deadlines.

CMA CGM could compete with Global Ship Lease.

Along with many other vessel-owning companies, CMA CGM, currently Global Ship Lease’s sole Charterer and largest holder of its common shares, could compete with Global Ship Lease in its search to purchase newbuildings and secondhand vessels. Further, CMA CGM is not precluded from acting as an owner in the direct chartering market. While Global Ship Lease understands that CMA CGM currently has no intention of doing so, competition from CMA CGM may potentially harm Global Ship Lease’s ability to grow the business and may decrease its results of operations.

Certain terms in Global Ship Lease’s agreements with CMA CGM and its affiliates may be the result of negotiations that were not conducted at arms-length and may not reflect market standard terms. In addition, they may include terms that may not be obtained from future negotiations with unaffiliated third parties.

The asset purchase agreement, the charters, the ship management agreements and the other contractual agreements Global Ship Lease entered into with CMA CGM and its wholly owned subsidiaries were made in the context of an affiliated relationship and were negotiated in the overall context of the previously contemplated public offering of its Class A common shares in 2007, the Merger in August 2008 and other related transactions. Global Ship Lease’s agreements with CMA CGM may include terms that could not have been obtained from arms-length negotiations with unaffiliated third parties for similar services and assets. As a result, its future operating results may be negatively affected if Global Ship Lease does not receive terms as favorable in future negotiations with unaffiliated third parties or has to enter into lengthy and costly negotiations with third parties in connection with entering into such agreements.

Global Ship Lease’s growth depends on its ability to purchase further vessels, obtain new charters and maintain and potentially expand its relationship with CMA CGM. Global Ship Lease will require additional financing to be able to grow and will face substantial competition.

One of Global Ship Lease’s objectives is to grow by acquiring additional vessels and chartering them out to container shipping companies including potentially CMA CGM. This will be particularly challenging since Global Ship Lease will need to obtain additional financing in order to acquire vessels. Due to the global banking crisis and the severe cyclical downturn in the containership

So, if you are investing in Global Ship Lease stock (which I am not), please keep this in mind.

French Government might help CMA CGM

From The Journal of Commerce

The French government said Dec. 2 it is willing to help CMA CGM, but the troubled ocean container carrier must first sign a debt restructuring deal with its creditors.

The government "does not exclude intervention" in CMA CGM "but it must first resolve its debt problem with the banks," said Transport Secretary Dominique Bussereau.

"We would intervene in a second phase," Bussereau said without giving details.

The government's statement of support for CMA CGM came as the carrier entered a third month of talks with its 63 European and Asian banks over restructuring its $5.6 billion debt, much of which is linked to orders for 60 containerships.

click here for link

CMA CGM said they expect to have the restructuring with the banks accomplished by mid-Dec, a month later than anticipated. I will be surprised if they make that date.
Let's give them until Dec. 18, (the Friday before Christmas week) which is 16 days from now.

I'll keep you posted if I see anything.

CMA CGM looks to cancel newbuildings

Well finally, CMA CGM has figured out they really don't need to be spending their money buying new ships.

They need to be saving every penny they can scrape together to survive this long downturn in international container shipping.

I don't subscribe to Lloyd's List, but this is the beginning of their article (the free part)

CMA CGM is seeking the cancellation of 15 small containerships as part of a much wider restructuring of its huge orderbook.
South Korean shipbuilders are now considering a series of proposals from the French line that is stepping up the pressure on yards to delay deliveries of the much bigger ships it has on order.

I'm not sure what they mean by "small containerships". The last vessel CMA CGM took delivery of was 13,300 TEUS. That is huge. I guess "small" is around 6000-8000 TEUS.

From The Journal of Commerce, Nov. 10, 2009

CMA CGM, facing economic troubles that threaten the carrier's financial stability, took delivery Tuesday of one of the world's largest container ships, a 13,300-TEU behemoth that will become the company's flagship.

The CMA CGM Christophe Colomb is an energy-efficient vessel coming in at 1,198 feet long, 168 feet wide, and with a draft of 51 feet, among the largest of a new generation of ships that were ordered in boom times and now are arriving amid steep decline in shipping demand.

I haven't seen any mention recently as to the demand by creditors that the Chairman resign.

Perhaps he got the message.

CMA CGM chairman living in a dream world

Creditors want the CMA CGM chairman out, before they agree to refinancing.

From Bloomberg News

Oct. 29 (Bloomberg) -- CMA CGM SA creditors have told the French container-shipping operator to replace founding Chief Executive Officer Jacques Saade before they restructure its $5.6 billion debt, three people with knowledge of the matter said.

And this was the response by the chairman

In an e-mailed statement to Bloomberg News, Saade said CMA “needs the expertise of its entire management team” to recover from the economic crisis.

“I can’t imagine that any of our financial partners would try to take advantage of this period,” he said, adding that the company expects a return to breakeven “in coming months.”

What's his definition of "coming months". I would like to see those calculations.

Must be that French math.

Maybe something got lost in the translation.

click here for link to article

CMA CMG delays ship deliveries

CMA CGM is delaying ship deliveries

From the Journal of Commerce

CMA CGM wants to delay the delivery of 49 ships it has ordered and is scheduled to receive within the next three years, its CEO Rodolphe Saade said Monday.

"Our first objective is to obtain the delay of the delivery of those ships" and an agreement on a payment schedule, Saade said in an interview in Les Echos, according to Agence France Presse.

I don't know why they aren't just trying to cancel them.

After all, there are so many containerships available sitting idle, one would think they should just bite the bullet and cancel the orders.

Of course, the shipyards have not been very easy to deal with, and who knows what it will cost to cancel the orders.

The heavily-indebted French company now owes $5.6 billion. A steering committee including banks and financial institutions is drafting a plan to return the company to profitability next year and secure its long-term future.

The French carrier has 60 large new container ships on order that are scheduled for delivery through 2012. As part of an effort to conserve cash, CMA CGM said it will continue to try to renegotiate and in some cases cancel “certain ship deliveries.”

CMA CGM has a fleet of 91 owned and 272 chartered ships with a combined capacity of more than 1 billion 20-foot equivalent units.

For anyone holding stock in Global Ship Lease, beware.

Infighting amongst European carriers

This is quite amusing. Maersk thinks the other European carriers (Hapag-Lloyd and CMA CGM) should be forced to reduce their capacity, because they are receiving government monies.

Well, that's a nice way to try and kill off your competition.

But, what if they just found a way to reduce their expenses, without reducing capacity?
Wouldn't that be a better idea for the monies given to them by the government?
Oh, but then, they might survive?
And, Maersk doesn't want that.
Anyway, here's the article from Lloyd's List.
Judge for yourself.

Danish owners call for CMA CGM and Hapag Lloyd capacity cuts

Richard Meade - Wednesday 14 October 2009

HAPAG Lloyd and CMA CGM should be forced to cut their fleet capacity in return for government financial support, Danish shipowners have told the European Commission.

The suggestion to directly link state support with fleet reductions was put forward during a meeting between Brussels competition officials and the Danish Shipowners’ Association last week.

According to association executive vice president Jan Fritz Hansen, proposed moves by France and Germany to support CMA CGM and Hapag Lloyd risk creating significant market distortions.

“What we said to the commission was that they need to look carefully at these plans,” Mr Hansen told Lloyd’s List. “We want to be the early birds here saying that this should not turn into a subsidy race.”

The Danish Shipowners’ Association, which counts AP Moller-Maersk as its largest member, raised specific concerns during the meeting regarding Germany’s approval of a €1.2bn ($1.8bn) package for Hamburg-based Hapag-Lloyd and a potential French government equity stake in Marseille-based CMA CGM.

While the meeting was said to be informal and no official proposals were put forward, the commission is understood to have taken the association’s comments “on board”.

“If you get that kind of assistance we suggest that it is only fair that you participate in the solution,” Mr Hansen said. “If you get guarantees, or subsidies or if the government buys into the company there should be strings attached. One of these strings should be that the company has to adjust its capacity.”

According to Mr Hansen internal discussions within the association had considered whether a legal case to stop the Hapag Lloyd aid could be launched, however the plans were dismissed because a challenge would be unlikely to solve any wider problems.

Plans to enforce fleet reductions on any owners receiving state support, however, would helpcompanies avoid bankruptcy wile simultaneously addressing the urgent concerns of fleet overcapacity, he said.

“It is not good that one year into the crisis these companies are asking for subsidies,” said Mr Hansen. “What are they going to be asking for in two years time? From our point of view it is worrying.”

Despite forecasting losses of $2bn this year, Denmark’s biggest shipowner AP Moller-Maersk has repeatedly shunned any suggestion that it would look for government support. As Mr Hansen pointed out there is also little chance that the Danish government would be financial able or willing to offer it.

“We are a small country but a big shipping nation and our state finances could never afford to subsidise the industry. For France and Germany as big countries with smaller shipping industries, perhaps it is easier for them,” Mr Hansen said.

“We could never compete on state aid. We want to compete on fair, commercial free competition.”

Wake-up call for CMA CGM

I guess CMA CGM has finally figured out things aren't getting better any time soon.

Pity is, they only figured this out when they have almost run out of cash.

Now, they will ask creditors for a moratorium on debt, and consider canceling and/or delaying ship orders. They better do more than just consider.

Note to the Management of CMA CGM -
Wake up! If you don't cancel the ship orders, start cutting costs like crazy, you will be filing for bankruptcy reorganization.

From the Journal of Commerce

Carrier unable to meet payments on $5 billion debt

CMA CGM reached agreement to establish a committee of French, European and international banks that will help it restructure its troubled balance sheet, the company said Tuesday.

The French carrier, the world’s third-largest container line by capacity, met with its creditors in Paris on Sept. 25 to ask for a moratorium on its debt. The group of banks, which includes major financial institutions from Asia and the Republic of Korea, discussed measures that CMA CGM said will ensure its “continuing development.”

The shipping line, which is owned by Jacques Saade and his family, said the bank committee will propose measures to resolve the carrier’s short and medium term financing requirements and strengthen its capital structure.
....................
The French carrier has 60 large new container ships on order that are scheduled for delivery through 2012 and accumulated a debt of $5 billion on which it is no longer able to meet payments, according to the French journalists’ Web site econostrum.info, which said CMA CGM is asking its creditors to freeze the repayments for one year.

As part of an effort to conserve cash, CMA CGM said it will continue to try to renegotiate and in some cases cancel “certain ship deliveries.”

CMA CGM has a fleet of 91 owned and 272 chartered ships with a combined capacity of 1,024 million 20-foot equivalent units.

click here for link

CMA CGM to charge "reefer consumption surcharge"

This is the explanation from CMA CGM as to their new "reefer consumption surcharge".

“One of the main differences between dry containers and reefer containers is the energy consumption needed to maintain the temperature during transportation, as well as to properly ventilate containers carrying perishable commodities. The electricity used for reefers aboard container vessels means extra fuel consumption, thus extra cost for both Shippers and Carriers. With this Reefer Consumption Surcharge, CMA CGM and affiliates provide customers with a more transparent and balanced segregation of costs.” , explains Claus P. Ellemann-Jensen, Vice President Reefer, CMA CGM Group.

Well, what's wrong with the logic is firstly, the reefer (as in refrigerated) rates are (or should be) higher, because they do require the extra energy. Unless CMA CGM messed up and agreed to contract rates including the bunker surcharge, they will be getting more money in the bunker surcharge whenever the fuel costs increase.

Now, having said that, and re-reading their press release, perhaps they were charging a flat bunker surcharge per container, rather than a percentage, which was always the norm. But if that is true, all they need to do is change the bunker surcharge to have a new category for reefers. I trust there is a different charge for 20ft or 40ft drys, and they should have a different (and much higher) charge for reefers.

My guess is they got into some contract rates for reefer cargo which really didn't cover their true costs. Now, when money is tight, everyone is taking a close look at how much money they make (or lose) on each container.

Because they can't increase the rates, they devised a "new" surcharge, which will apply to all rates and contracts, even if someone signed a contract valid for a year.
The only way a customer can be exempt is if they managed to get a contract specifically stipulating "no other new charges or surcharges can be applied during this contract period".

I suspect there will be some very unhappy customers. A carrier can only get away with doing this one time. The next round of contract talks, you can bet the customers will insist on the above mentioned wording.

Here's the link to the CMA CGM web-site with the press release.