APM Terminals chart route to the top
Terminals in the right locations, competitive pricing and better customer relationships will create market recognition for APM Terminals as the leading port operator in the world within five years, vows CEO Kim Fejfer. The company will invest and strive to have a much more cost conscious approach to managing ports and terminals going forward, reports www.megafishnet.com with reference to Maersk.
"The world has changed," says Kim Fejfer, chief executive officer of APM Terminals, a year and a half after the worst economic crisis since the 1930's hit the world. The financial crisis has changed the market, and APM Terminals is adjusting with the global market to become the top dog among the four leading terminal operators in the world.
"In the future we have to get used to lower global growth rates of 0-5 percent annually, compared to the 10-15 percent we were used to before the crisis. In the coming 3-5 years some markets will grow more than 5 percent and some won't grow at all," Kim Fejfer says.
The lives of the customers - the shipping lines - have also changed. They face much stiffer competition, and they will focus a lot more on price, where they in the past looked at the capacity of the terminal and the berth productivity (the speed of loading and offloading the ship, ed.).
The changed market also affect the competitors.
"In the past we, and our competitors, focused on building capacity ahead of the demand. It will be much more competitive going forward. Now, terminal operators try to win customers from competitors." It is in this more competitive market, where APM Terminals has to move ahead of the pack.
"It is what we call ‘the New Normal'," Kim Fejfer says.
Goal: best within 5 years
In order to achieve its ambition to become the best - not necessarily the biggest - terminal operator in 5 years, APM Terminals will focus on adding more value to the customer, bringing the cost base at par with competition, driving performance in the individual terminals and simplifying the way the company conducts business.
"We have to develop better and more differentiated commercial solutions. We have to drive towards cost-consciousness as a lifestyle, reward top performers better and leverage synergies through more standardization in our terminal network," Kim Fejfer says.
APM Terminals operates a network of 50 terminals around the world. Since 2008 the company has cut costs significantly, positions have been cut and all proposed investments have been under review and postponed where possible and relevant.
Fast and effective actions have resulted in APM Terminals emerging stronger out of the crisis. The company is still not where it wants to be, however.
"Although we have improved performance, we are still far behind our main competitors in terms of profitability. We can do even better, and it is all in our own hands," Kim Fejfer says, underlining that the port business is fundamentally attractive.
Looking for investment opportunities
Despite a rougher economic environment APM Terminals is still scouting for opportunities to expand and establish new terminals, primarily in emerging markets like Latin America, Africa and India, where you find a higher than average growth.
"We have capital allocated to grow, which is not a given in the ‘New Normal'," Kim Fejfer says. "We will be looking for locations that offer high growth and high returns based on local import and export markets," he continues.
He points out that APM Terminals is looking into expanding the scope of its activities . e.g. by using its expertise to run services related to the terminal, both inside and outside the gate - as the term goes - such as drydock ports and logistics centres.
"We are moving into managing entire ports in emerging markets, and we will experiment with adding non-container terminal operations in locations where we are strong," he says.
An example of this approach is the newly opened terminal in Bahrain, where APM Terminals not only handles the container cargo, but also is involved in ro-ro cargo (mainly cars for the local market), storage, project cargo - such as big construction parts - and even operates a passenger terminal for cruise ships..
Dealing with underperforming terminals
The challenge for APM Terminals is making sure each of the 50 terminals in their portfolio adds value to the company. It is a challenge because each terminal operates under unique conditions - for example geographical, economic and legislative.
"That means we look at the performance of each port and terminal individually," he says and underlines that it is not "the same medicine" that will improve the results for the individual port.
If none of the medicine works, the CEO is not afraid to pull the plug.
"We try to lift the performance at each and every terminal, but if in the end our customers don't appreciate the terminal as part of their network design or value what we can deliver to them, an exit may be the consequence," he says.
In 2009 APM Terminals transferred its lease in the Kaohsiung terminal in Taiwan to Hanjin and exited from terminals in Oakland, California and Savannah, Georgia, both in the U.S.