A.P. MØLLER HOLDING A/S
ANNUAL ∙ REPORT 2017
LETTER FROM THE CEO
We tend to describe the journey of A.P. Moller Holding as having three phases: capturing where we are coming from, our current status, and where we are going. The first phase of A.P. Moller Holding’s journey was initiated by A.P. Moller Holding’s acquisition of shares in Danske Bank in 2015 to secure our ownership of 20% in what has now become the second largest bank in the Nordic region (measured by market capitalisation). At the time, A.P. Moller Holding had no liquid funds, so the acquisition of Danske Bank shares was funded by an external loan of DKK 10bn. During 2017, two years earlier than projected, we managed to pay back this loan. The investment in Danske Bank shares has not only proven to yield an attractive return for A.P. Moller Holding, but it has also created a strong foundation and cash flow profile to safeguard our future activities. We appreciate the bold decision taken by A.P. Moller Holding’s Board to acquire the Danske Bank shares, even if we did not have “cash in hand” at the time, and we are grateful to the team of Danske Bank for their performance over the past years.
DEAR READER
OUR JOURNEY: PAST, PRESENT AND FUTURE
As A.P. Moller Holding’s activities have rapidly expanded during 2017, we are pleased to present a more detailed report of our annual accounts.
A.P. Moller Holding was founded at the end of 2013, as the controlling owner of A.P. Moller – Maersk and the investment arm of the A.P. Moller Foundation. For a company, not even five years old, and with a management recruited in 2016 onwards, A.P. Moller Holding is in many ways similar to a start-up, not least in relation to our older parent (the A.P. Moller Foundation) and daughter (A.P. Moller – Maersk).
Mærsk Mc-Kinney Møller often stressed the importance of the principle KISS1, to keep matters concise and simple. I hope that my CEO letter, to complement the more detailed annual report, offers a straightforward explanation of not just our results, but also our direction.
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The second phase of our journey has been focused on supporting A.P. Moller – Maersk in its transformation strategy and simplification of its structure. In this respect, during 2017, A.P. Moller Holding was approached about the possibility to acquire Maersk Tankers. In cooperation with Mitsui & Co. Ltd., we acquired Maersk Tankers in September 2017. Mitsui brings vast experience in shipping and a deep bench of relationships from the energy markets. We have known Mitsui for a long time through different activities in our affiliates and feel honoured that they wanted a partnership with A.P. Moller Holding. Their co-investment also meant that A.P. Moller
Holding’s capital exposure to the product tanker segment did not change significantly - previously we were already exposed to the industry through our ownership in A.P. Moller – Maersk. Now we are exposed to it directly, but in capital terms the difference is fairly marginal. Maersk Tankers operates in a very challenged industry, dependent on the demand for petroleum products, but with a team offering a compelling vision to digitalise parts of the tramp shipping industry. The CEO of Maersk Tankers recently shared a copy with me of Michael Porter’s Harvard Business Case of the tanker industry from 1983. It is a fascinating read, because the industry’s business model and mechanics have stayed largely the same over almost forty years. While we do not expect the product tanker industry to improve shorter term, we believe there is plenty to do to improve Maersk Tanker’s position. In this respect, I am grateful to the Maersk Tankers team for carrying out a swift ownership transition, without missing a beat in executing their strategic plans for 2018. A.P. Moller – Maersk’s transformation is still ongoing almost two years after its announcement to change the structure. This is no surprise given the magnitude of the changes. As we see it, the intended separation of the Energy businesses was justified and required in order to drive agility and establish more focused companies, whereby the Board and Management had more time to go in depth on pressing strategic topics. We are pleased to see the progress made and that good solutions, with strong industrial logic, have been found for Maersk Oil and Maersk Tankers.
“Keep it simple, stupid” or the more polite “keep it simple and straightforward”
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