French container shipping major CMA CGM has confirmed the order for nine 22,000 TEU containerships while releasing results for the second quarter of 2017.
“In order to keep pace with market growth and the group’s needs, the Board of Directors of CMA CGM has approved the order for 9 container ships of 22,000 twenty-foot equivalent (TEU). This order, of which the first ships will come into service from the end of 2019, will further reduce unit transport costs, particularly on the Asia-Europe routes,” the company said.
The announcement comes a month after market rumors on the order emerged.
The contract is estimated to be worth USD 1.2 bn.
To remind, CMA CGM was reported to have signed a letter of intent (LOI) with two Chinese yards on the construction of nine 22,000 TEU megaships, which once completed, will become the world’s largest containerships by TEU capacity.
As stipulated in the LOI, CSSC Hudong-Zhonghua would be in charge of constructing five ships from the batch, while Shanghai Waigaoqiao Shipbuilding (SWS) would be entrusted with building the remaining four units.
However, the company did not provide further details on the ships and their future builders.
For the second quarter, CMA CGM saw positive net income of USD 219 million, a major comeback from USD 129 million loss from the corresponding period last year.
During the period, volumes carried grew by 33.3% in comparison to Q2 2016, which CMA CGM ascribed to the integration of APL, the launch of Ocean Alliance and the industry dynamism.
Furthermore, the increase in freight rates on most of the group’s lines led to a 12.5% increase in average revenues per container in the second quarter of 2017.
This led to a rise by +56.8% in consolidated revenues in comparison with Q2 2016, reaching USD 5.55 billion.
”Once again, CMA CGM outperforms the industry and demonstrates the excellence of its operational management as well as the relevance of its strategy. During the quarter, we also continued to support the group’s growth with the planned acquisition of Mercosul, opening up the Brazilian domestic market.
“The group is also preparing for the future with the order of 9 container ships of 22,000 TEUs which will enable us to continue our development and maintain our competitiveness,” Rodolphe Saadé, the CEO of CMA CGM, said.
At the beginning of July, CMA CGM issued a new bond issue for an amount of EUR 650 million, in order to refinance other bonds maturities. On this occasion, the group also concluded an agreement with its core banking partners for a new revolving credit facility of USD 205 million.
In terms of the outlook, the container carrier said that given the recent trend in freight rates, and excluding a significant change in fuel prices and exchange rates, it expects to continue to improve its operating results in the second semester.