A P Møller Mærsk A/S : Maersk Q4 2020 interim report

ALL THE WAY

Q4

2020

A.P. Møller - Mærsk A/S | Interim Report | 10 February 2021

Esplanaden 50, DK-1263 Copenhagen K / Registration no. 22756214

Table of contents

• 3 Directors' Report

  • 3 Message from the CEO

  • 4 Highlights Q4 2020

  • 5 Summary financial information

  • 6 Financial review

  • 8 Full-year guidance for 2021

  • 9 Ocean

  • 10 Logistics & Services

  • 11 Terminals & Towage

  • 13 Manufacturing & Others

  • 14 Statement of the Board of Directors and the Executive Board

• 15 Financials

  • 15 Condensed income statement

  • 15 Condensed statement of comprehensive income

  • 16 Condensed balance sheet at 31 December

  • 17 Condensed cash flow statement

  • 18 Condensed statement of changes in equity

  • 19 Notes

24 Additional information

• 24 Quarterly summary

• 25 Definition of terms

Contacts for further information Søren Skou, CEO

Tel. [phone]

Patrick Jany, CFO Tel. [phone]

Investors

Stig Frederiksen, Head of Investor Relations Tel. [phone]

Media

Signe Wagner, Head of External Relations Tel. [phone]

The Q1 2021 Interim Report is expected to be announced on 5 May 2021.

Webcast and dial-in information

A webcast relating to the Q4 2020 Interim Report and the Annual Report 2020 will be held on 10 February 2021 at 11.00 (CET). Dial-in information on investor.maersk.com.

Presentation material for the webcast will be available on the same page.

The Interim Report for Q4 2020 of

A.P. Møller - Mærsk A/S (further referred to as A.P. Moller - Maersk as the consolidated group of companies) has been prepared in accordance with IAS 34 'Interim Financial Reporting' as issued by the International Accounting Standards Board (IASB) and adopted by the EU and additional Danish disclosure requirements for interim financial reporting of listed companies.

The interim consolidated financial statements have not been subject to audit or review.

Change in presentation and comparative figures From Q1 2020, as part of the refinement of

A.P. Moller - Maersk's segment structure to align with the internal management structure and demarcation between the reportable segment activities, a number of changes have been made, see the Annual Report 2020, note 23 on signifi-cant accounting policies. Comparison figures have been restated.

Unless otherwise stated, all figures in parentheses refer to the corresponding figures for the same period prior year.

Forward-looking statements

The interim report contains forward-looking state-ments. Such statements are subject to risks and uncertainties as numerous factors, many of which are beyond the control of A.P. Moller - Maersk, may cause the actual development and results to differ materially from expectations contained in the interim report.

Message from the CEO

"The fourth quarter was marked on the one hand by a continuous impact of the COVID-19 pandemic but also by some rewarding progress on our strategy to become the integrator of container logistics.

As we continued to manage through the pandemic, we stayed the course on our objec-tives to protect our employees, with crew changes now almost back to normal, to serve our customers by keeping our global network and ports operating despite significant bottlenecks and equipment shortages and thirdly to help societies we are part of.

Despite significant difficulties to keep the flow of goods operating, we managed to post significant milestones in our operations:

• • Logistics & Services achieved a revenue of more than USD 2bn for the first time, with significant improvement in profitability, now close to peers. This was the result of the systematic improvement of operations over the past few years, exemplified by the growth in intermodal and warehousing, new strengthened capabilities in air freight and customhouse brokerage, including our acquisitions of Performance Team and KGH.

• • Ocean performed at record level in the quarter as a consequence of the strong rebound of demand which led to full capacity utilisation but also to bottlenecks, higher costs and difficulties in meeting our customer reliability promises.

• • Terminals & Towage, which showed resilience to lower volumes earlier in the year, could leverage our lower cost position with higher volumes. Terminals in particu-lar performed at record level in the quarter.

Overall, we can be proud of the way we mastered 2020 and the financial performance reflects this advancement with a strong profitability and free cash flow leading to a ROIC of 9.4% and almost no net financial debt.

This evolution is a clear sign of both the strategic progress made in the last years and the agility of managing our operations in difficult conditions. Our continued progress makes us confident that we will continue to grow the earnings of the company as the economic situation normalises in 2021 and beyond."

Søren Skou

Chief Executive Officer A.P. Moller - Maersk

Highlights Q4 2020

Highlights Q4 2020

• • Q4 2020 proved to be an exceptional while challenging quarter. The demand for goods, which had suffered due to COVID-19 in Q2, picked up in Q3 and accelerated its rebound in Q4, which generated disruptions in many parts of the supply chain. As a consequence, volumes in Logistics, Gateways and Ocean strongly progressed in the quarter, leading to both higher costs and rates, with ensuring reliability being the main operational concern in Q4.

• • Revenue increased by 16% to USD 11.3bn (USD 9.7bn), mainly driven by an increase in Ocean of USD 1.1bn or 16% and in Logistics & Services of USD 532m or more than 30% of the total revenue growth in Q4. In Terminals & Towage, revenue increased by USD 68m, while revenue decreased by USD 35m in Manufacturing & Others.

• • EBITDA increased to record levels in all three segments, improving by 85% to USD 2.7bn (USD 1.5bn), and the EBITDA margin increased to 24.1% (15.1%).

• • EBITDA in Ocean increased to USD 2.2bn (USD 1.1bn), driven by a temporary increase in freight rates and bunker cost reductions, mainly from lower fuel prices. The EBITDA margin increased by 11 percentage points to 26.7% (15.7%).

• • In Logistics & Services, EBITDA was USD 158m (USD 31m), implying the best ever quarter for this activity with a record revenue of USD 2bn, with performance mainly driven by intermodal margin improvement, supply chain management and earnings from the acquisitions of Performance Team and KGH. EBIT conversion improved to 18.7%, positively impacted by an optimised cost base.

• • In Terminals & Towage, gateway EBITDA increased to a record of USD 317m (USD 253m), driven by a 4.8% volume increase, the consolidation of Pipavav, India, and the improved cost position. EBITDA in Towage decreased only slightly to USD 47m (USD 51m), given some restructuring costs.

• • Cash flow from operating activities increased to USD 2.6bn (USD 1.5bn), driven by the significant increase in EBITDA, while gross CAPEX decreased to USD 370m (USD 469m), and consequently free cash flow increased to USD 1.7bn (USD 800m).

• • Cash return on invested capital (CROIC), last twelve months, increased to 16.6% (10.0%) due to stronger cash flow from operating activities and lower gross CAPEX. Return on invested capital (ROIC), last twelve months, increased to 9.4% (3.1%), as earnings improved and invested capital declined slightly.

• • Net interest-bearing debt decreased to USD 9.2bn by year-end (USD 11.7bn end of 2019), as free cash flow of USD 4.6bn was partly offset by share buy-back of USD 806m, dividends of USD 520m, and a net increase in lease liabilities of USD 170m. Net interest-bearing debt excluding lease liabilities decreased to USD 485m (USD 3.1bn end of 2019).

• • The guidance for 2021 is impacted by the continuation of the COVID-19 pandemic and the impact on demand patterns. Given the current exceptional situation where demand surge has led to bottlenecks in supply chains and equipment shortage, the first quarter of 2021 is expected to be stronger than the fourth quarter of 2020.